President Barack Obama called on Congress on Tuesday to delay substantial automatic spending reductions slated to go into effect March 1, including cuts that could dent the Securities and Exchange Commission's budget by more than $100 million.
Last September, the Office of Management and Budget reported that the budgets of the SEC and other federal agencies would be cut 8.2% as part of the roughly $110 billion slice in current fiscal year domestic and defense spending. That would mean $117 million for the SEC.
On Tuesday, the Congressional Budget Office released a report saying that if sequestration went into effect, it would trigger $85 billion in federal spending reductions and cuts of between 5% and 6% in non-defense spending.
The sequestration was supposed to be effective Jan. 1, but Congress delayed it two months under legislation that averted the fiscal cliff, or hundreds of billions of automatic tax increases and spending cuts. The fiscal-cliff measure reduced the sequester amount by $24 billion, according to CBO.
An SEC spokesman referred a sequestration question to the OMB, which did not respond to a request for an update to its September analysis.
A $117 million reduction would not cripple the SEC but would hamper an agency that's already stretched, according to analysts.
“When faced with cuts of this magnitude, the agency would have to practice triage,” said Jay Baris, a partner and chair of the investment management practice at Morrison & Foerster LLP. “Sequestration won't mean that the commission's work will grind to a halt, but it certainly would slow things down.”
In a letter to fellow lawmakers last October, former ranking member of the House Appropriations Committee, now-retired Rep. Norm Dicks, D-Wash., said that SEC cuts would result in a reduction to the agency's workforce of about 235 full-time staffers, forcing “major cutbacks in every corner of the SEC.”
Neither the Republican nor Democratic staffs of the appropriations panel have done updated sequestration calculations. Like the SEC, they defer to the OMB on the question.
Depending on how long sequestration is in effect, the SEC could put certain employees on unpaid leave for a couple of weeks, according to Peter Chepucavage, general counsel at Plexus Consulting Group LLC.
“I have a feeling they would select people who are only on longer-term projects,” Mr. Chepucavage said. “If [sequestration] were to go beyond a month, it could begin to have an impact.”
The political standoff crystallized Tuesday, with Mr. Obama appealing for a package of spending cuts and tax reforms — closing loopholes and other breaks that benefit the wealthy — that would delay sequestration for a few more months. He argued that his plan would give Congress time to work out a permanent budget to replace the sequester, which totals $1.2 trillion over 10 years.
“Our economy right now is headed in the right direction, and it will stay that way as long as there aren't any more self-inflicted wounds coming out of Washington,” Mr. Obama told reporters at the White House.
Capitol Hill Republicans immediately dismissed his proposal, saying that Mr. Obama was seeking more tax increases and avoiding tough choices on spending cuts.
House Speaker John Boehner blamed the president for originally championing sequester during 2011 budget negotiations that resulted in the law that put sequestration into place.
“We believe there is a better way to reduce the deficit, but Americans do not support sacrificing real spending cuts for more tax hikes,” Mr. Boehner said in a statement. “The president's sequester should be replaced with spending cuts and reforms that will start us on the path to balancing the budget in 10 years.”
Like the fiscal cliff, the fight over sequestration may not be resolved until the 11th hour — or even after March 1. Alternatively, lawmakers could decide to let the automatic spending cuts become permanent.
“It's something we're trying very hard to avert because it will result in negative economic growth, job loss, and the loss of services and investments that are critical to middle-class families,” said Matthew Dennis, a spokesman for Rep. Nita Lowey, D-N.Y., ranking member of the House Appropriations Committee.