OMB Warns Of Sequestration Fallout For Economy

The Office of Management and Budget (OMB) has issued a report on sequestration. According to the congressionally mandated report, sequestration is a terrible means for achieving deficit reduction that will result in significant economic damage.

The report explains the purpose of sequestration was to act as a threat that would force both congressional parties to work together. In other words, sequestration was never meant to actually be implemented. The OMB report clearly states that, according to the administration, sequestration is “bad policy.” OMB says, “Sequestration would be deeply destructive to national security, domestic investments and core government functions,” and that sequestration should be avoided by passing a comprehensive and balanced deficit reduction plan.

Sequestration will result not only in a cut of 2% to Medicare, but also major cuts to both nonexempt mandatory programs and discretionary spending. Because these across-the-board cuts will be widely destructive, OMB maintains that sequestration is irresponsible and must be avoided. Furthermore, OMB’s report shifts the blame off of the administration and onto Congress.

The President has already issued two proposals for balanced and comprehensive deficit reduction, but Congress has yet to adopt either of them. If Congress fails to reach a fair and responsible compromise, the administration will have no choice but to carry out the budget cuts.

The OMB report could change the impact of sequestration on the upcoming presidential election because it stresses that the President is not solely responsible for the budget cuts. The report states that the President has done his part in attempting to avoid sequestration, and implies that Congress is the reason the budget law remains on the books. The new report will undoubtedly become fodder for both sides in the run-up to Election Day, with Democrats arguing that Republican intransigence is the real cause of the sequestration impasse.

Kimberly Suttle, Research Analyst