Tuesday, October 2, 2012

OMB says don’t cut yet—is a deal coming?

by Ethan Handelman, National Housing Conference

Last week, the Office of Management and Budget issued a bulletin to executive branch agencies telling them not to implement the drastic cuts that would be imposed by the sequester yet. The phrasing is careful: “Unless and until the Bulletin is amended, however, agencies should
Illustration: whitehouse.gov
continue normal spending and operations…”

Does that mean that a deal to avert the sequester is coming? Possibly, though there are very few signals to go on. Certainly the sequester would devastate housing programs along with other non-defense discretionary programs serving the most vulnerable Americans. It would also cut deeply into defense spending. And we know that the sequester was designed to be draconian, in part to urge Congress to avert it with a grand bargain. But previous attempts at a grand bargain failed (remember the so-called Super Committee?), so need is hardly a guarantee of success.

When information is scarce, I revert to Occam’s Razor—find the simplest explanation that fits. OMB knows that the sequestration cuts would severely disrupt existing programs and it’s possible agencies won’t need to make those cuts. So, it has told them to wait, in hope, if not necessarily expectation, that Congress will act to avert sequestration. We will likely see more brinksmanship before this is resolved, and in the end OMB may have to amend its Bulletin.

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