Sequester battle hits new furlough

The president warned about sequester last night in his State of the Union. The service chiefs are marching around Capitol Hill crying doom and gloom. The defense industry is once again decrying the impact of sequester on employment and the economy (well, their part of the economy). As we approach March 1, the cacophony on sequester is growing. And, after more than a month of being asked by the White House to keep silent, the domestic agencies, which are actually seriously affected, have begun to speak out.

Last week, the White House released a "fact sheet" about the impact of sequester on jobs, families, and the economy, which, rightly, made absolutely no mention of the impact on defense. The domestic impacts would be severe: For a time the FBI would lose the equivalent of 1,000 agents; the Justice Department would lose lawyers; the Food and Drug Administration would lose staff who approve new drugs and ensure food safety; the International Trade Administration would lose export promoters; the IRS would lose tax responders during tax season; the Occupational Safety and Health Administration would pull inspectors for a time. You get the idea.

These consequences are the result of anticipated furloughs of federal employees. Asked if he could give a precise number of federal employees and contractors who would be affected, the controller of the Office of Management and Budget said he could not: "I just know it’s high; it’s in the hundreds of thousands of employees, but I don’t have a specific estimate."

These are serious impacts and they hit domestic agencies particularly hard because non-defense agencies are personnel heavy. Non-defense agencies employ roughly 2 million civilians, and buy about 25 percent of what the entire federal government buys. The Department of Defense, on the other hand, employs only 800,000 civilians, and consumes the other three-fourths of total government buying. Yes, DOD has a lot of people, but the wages and benefits of the 1.5 million people in uniform are exempt from sequester. Nearly a third of the defense budget is tied up in contracts for research and production performed in the private sector. While sequester would reduce future funds for contracts, the automatic cuts will not affect dollars that are already obligated.

For DOD, this means sequester hits civilian personnel and services contractors, who often work on so-called Indefinite Delivery/Indefinite Quantity (IDIQ) contracts. (That means the agency buying the service has the capacity to ask the contractor to do work, but it is never clear when or for how much, making IDIQ contracts a likely target for sequester.) At the Pentagon, this will mean reduced funding for operations and maintenance.

That account includes the DOD "back office," which is both large and filled with duplicative efforts. Defense officials can do things like eliminating separate surgeons-general and administrative stovepipes for health programs before making dramatic flag-waving decisions like delaying the deployment of a second carrier to the Gulf. And the sequester rules make such a choice entirely possible; the building has known it for months.

For the domestic agencies, it is tougher sledding. While Social Security and Medicare are exempt from sequester — so benefits will continue — the staff providing programs and benefits will be spending an unpaid series of Fridays at home. The things Americans have become used to getting from their government — services, for the most part — are also likely to slow down.

Until last week, we only heard the complaints from DOD, the agency with the largest exemption and the greatest flexibility in managing sequester. As I suggested last week, the administration seemed to figure that the squealing from DOD will get Republican attention and end the sequester sideshow. Perhaps now they are broadening the focus to areas of more severe consequence, to help focus Congress on negotiating a budget solution.