If sequestration goes into effect on January 2, 2013, defense programs would be “devastated,” the health and safety of American’s would be jeopardized, law enforcement would be adversely affected, and tens of thousands of federal and contractors employees would be furloughed or lose jobs outright.  This is how two senior government officials described the potential effects of implementing $109 billion in across-the-board cuts to the FY2013 budget unless Congress comes up with an alternative to avert sequestration.

Jeffrey Zients, Acting Director of the Office of Management and Budget (OMB) and Ashton Carter, Deputy Secretary of Defense, testified before the House Armed Services Committee (HASC) last week on the effect of sequestration and how it might be implemented.

Zients warned that sequestration will have “devastating effects” on both defense and non-defense programs.  Speaking primarily on non-defense, Zients listed examples of the harmful effects of sequestration:  16,000 teachers and teacher aides would lose jobs; 700,000 women and children would lose nutrition assistance; 100,000 children would lose places in the Head Start program; operations for the Federal Aviation Administration would be cut; and FBI agents and Border Patrol Agents would lose jobs.

Zients told the committee that the administration cannot give Congress details of reductions for agencies’ programs, projects, and activities (PPAs) until Congress passes and the president signs FY2013 appropriations acts.  He pointed to a Congressional Budget Office (CBO) report that estimated the defense budget would be cut by 10 percent (assuming an exemption for military personnel funding) and nondefense budgets by 8 percent.  OMB has little flexibility in implementing sequestration.  Zients said the law “requires that the same percentage reduction equally to all PPAs within a budget account.”  Because one-quarter of the fiscal year would complete by January 2, the effect of the reductions will be even greater.

However, sequestration is more complicated for agencies than merely applying percentage cuts to programs, Zients said.  Agencies might have to revise operating plans given the reduced funding levels.  Scarce resources will have to be reallocated to enable agencies to provide important and high priority services.  And, Zients said, the federal employees and contractors could face widespread furloughs or separations.

Carter testified on the effects of sequestration on defense and how it might be implemented. He told the committee national defense programs would have to be reduced by almost $55 billion as a result of sequestration, of which 95 percent would come from DoD programs.

Speaking to the effect of sequestration on defense operations, Carter told the committee that training, flying and steaming hours would be cut and readiness would be lowered.  Because funding for civilian personnel would be reduced, he said it may be necessary to “impose a partial hiring freeze or unpaid furloughs.”  This would mean, according to Carter, “fewer people to fix weapons including those damaged in war, less expert time and attention available to enter into well-crafted contracts and handle financial transactions, and less support for critical day-to-day operations.”

Carter said sequestration would result in a ”disruption of DoD’s investment programs.”  Project managers would be forced to buy fewer weapons.  Specifically, Carter cited as examples four fewer F-35s, one less P-8, and 12 fewer Stryker vehicles than the president requested.  As a result, lower buy sizes will yield higher unit costs, which could lead to project delays.  “Some military construction projects could be rendered unexecutable,” Carter said

Carter also reminded the committee that DOD’s contractors face many of the same management difficulties as DoD.  He said he had heard from many companies who expressed “alarm at such a wasteful and disruptive way of managing the taxpayers’ money and the talents of their employees.”

Under the rules, Carter said the across-the-board cuts would be applied to FY2013 appropriations and prior year unobligated balances.  Sequestration would apply to all parts of the defense budget, including Overseas Contingency Operations, with a possible exemption for military personnel funding, he said.  Initially DOD thought that war funding would be exempt, but OMB subsequently ruled that it would not. 

Carter told the committee across-the-board cuts to Operations and Maintenance (O&M) budgets would be applied to each budget account (for example Army O&M, Army National Guard O&M, etc).  DoD would have discretion on how to allocate cuts within each O&M account.  To protect wartime operating budgets and support warfighters in combat (DoD’s highest priority), Carter said base budget O&M accounts would have to be cut disproportionately.  Base budget and OCO budget accounts are merged during execution.

For investment accounts, across-the board cuts would be applied to each program, project, and activity (PPA).  Therefore, some 2,500 PPAs would be reduced by the same percentage, Carter said.  Within each PPA, the Military Services and Defense Components would have discretion on how to make the cuts.

Both Zients and Carter pressed members to work with their colleagues to find a way to avert the implementation of the across-the-board cuts required by sequestration.  They urged Congress to pass a “comprehensive and balanced deficit reduction package” that the president can sign to avert the devastating effects of sequestration.