At the brink: Washington prepares for cliff

In yet another discouraging sign about the impending fiscal cliff, the Office of Management and Budget sent guidance to agencies on Dec. 20 outlining the potential impact of across-the-board budget cuts that could slash billions from federal spending.

Although leaders in Washington say they are still committed to closing the divide between Democrats and Republicans on a deficit reduction plan, sequestration is scheduled to take effect on Jan. 2, 2013, and lawmakers are now ajourning for a short break over the Christmas holiday, which leaves only a matter of days to resolve their differences.

In a Dec. 20 press conference, White House spokesman Jay Carney sought to offer reassurance about OMB’s motives for releasing the text, which agencies have used as a template for updating their employees on the negotiations and the potential impact if talks fail.

“What’s happening is part of good governance, and it is the responsibility of OMB to give these notifications,” Carney said. “We remain, as I’ve been discussing, focused on reaching agreement on a balanced deficit reduction plan that prevents us from going over the fiscal cliff and avoids sequestration. And we believe even now that that agreement is within reach. OMB is taking further steps with just two weeks left to ensure that the administration is ready to issue such an order should Congress fail to act. So this is simply the responsible thing to do. It should not be read as predictive of any outcome. If we were five minutes away from achieving a deal, it would still be the responsible thing to do.”

The Pentagon released a memo from Defense Secretary Leon Panetta that is similar to those other agencies reportedly furnished to their employees while addressing issues specific to the military.

“Sequestration was never intended to be implemented, and there is no reason why both sides should not be able to come together and prevent this scenario,” Panetta wrote in the DOD memo. “Nevertheless, with only a couple of weeks left before sequestration could occur should a deal not be reached, it is important to clarify the potential implications.”

If sequestration does occur, it will reduce agencies’ budgetary resources for the remainder of the fiscal year, which runs through Sept. 30, 2013. Although sequestration is significant and harmful overall, it would not require immediate spending cuts; therefore, daily operations would not change dramatically on Jan. 2, Panetta said.

But if operations continue under reduced spending levels for an extended period of time, civilian personnel actions, including possible furloughs, might have to be considered, he added, vowing that affected employees would be given “the requisite advanced notice.”

According to a source who spoke on background, OMB’s document indicates that the agency is taking steps to ensure the Obama administration is ready to act should negotiations fail, and it should not be considered a change in commitment to reaching an agreement.

“OMB has instructed agencies to begin communications with their employees about what to expect if a sequestration order is issued and about potential personnel actions, such as furloughs, that might be necessary in the months ahead,” the source said. “OMB is simply ensuring that the administration is prepared.” The memos and other guidance come as House Majority Leader John Boehner’s Plan B for tax cuts failed on the evening of Dec. 20, and President Barack Obama is now forced to come up with other alternatives.