Ability to Shift Money From One Account to Another Could Minimize Sequester Pain

February 21, 2013 - 9:23 AM
'Transfer Authority' Suggested As a Way to Minimize Sequester Pain

Holtz-Eakin

Former Congressional Budget Office Director Douglas Holtz-Eakin (AP file photo)

(CNSNews.com) - Conservative pundit Charles Krauthammer says President Obama could easily reduce the fear and panic engendered by the looming sequester if he would simply push Congress to pass a bill allowing a transfer of funds from less important federal accounts to more important federal accounts.

"And the president is the one who ought to propose it," Krauthammer told Fox News on Wednesday. "He won't, of course, because he is looking for a fight, and not a solution."

White House spokesman Jay Carney, echoing his boss, said on Wednesday that "the effect of the sequester would be severe, and it would go right to American families." Carney bluntly blamed Republicans, as Obama has done: "Americans will lose their jobs because Republicans made a choice for that to happen," Carney said.

Obama is pressuring Republicans to replace the sequester with a combination of higher tax revenue and spending reductions.  Republicans say Democrats got their tax hike on wealthy Americans just last month, and they say now it's time to address runaway federal spending.

Douglas Holtz-Eakin, the former head of the Congressional Budget Office, said unless Congress gives federal agencies transfer authority -- and lawmakers could pass a bill to do that -- layoffs may happen, because agencies won't be able to shift money from less important accounts to more important accounts.

Holtz-Eakin told Fox New's Brett Baier on Wednesday that the sequester requires indiscriminate, across-the-board reductions in the growth of spending, half of them affecting the Defense budget and half affecting non-defense spending.

"But when you get underneath the surface, the federal budget is divided into thousands of different accounts," Holtz-Eakin explained. "Each account gets cut by the same amount, regardless of what's in it. So, we have some accounts that are payroll, some accounts that are conferences, travel, whatever it may be. They'll get the same cut, regardless of what's in there."

Without transfer authority, "you can't shift the money around...There's no ability to ship money to high priority projects, and you know, low priority takes the cut. Everybody gets a cut regardless."

Using the example of the Defense Department, Holtz-Eaken said DOD has "thousands" of "budget buckets...each with money in them. As I said, some might be payroll. So, just all people in that one. Another one might be conferences. That's all just traveling and attending professional conferences. They get cut the same."

The prudent thing to do would be to move money from the "conference bucket into the payroll bucket so that no one gets laid off," he said. But under the sequester, "you can't do that. So, we cut it, regardless whether it's a good or a bad idea.

"It seems crazy because it is crazy," Holtz-Eakin added. "If you were doing rational...management of anything, you'd say, all right, what's important? People are important. Let's make sure they get paid and then we'll take the cut somewhere else. They don't have the ability to do that. So, the people will get furloughed."

Holtz Eakin said Congress could give every federal agency transfer authority, but it won't -- "because it likes to control where money gets spent."

"The president could call for it (transfer authority), Congress could do it tomorrow," Baier said.

"Yes," Holtz-Eakin agreed. "And like many of the other ways to avoid the sequester, the president hasn't called for it. There are no proposals passing the Senate. There's nothing going on but the sequester."

Despite talk of how much the sequester will hurt ordinary Americans, Holtz-Eakin said the reality will be very different: "The day after the sequester starts, people will get up and go to work at federal agencies. You'll see very minimal impacts, the kinds of things you hear about, you know, the sequester causing a recession."

The former CBO chief noted that the sequester calls for an $85-billion reduction in spending in the current fiscal year -- out of a $3.6-trillion budget. "It's going to come and go without much notice. It's a $16 trillion economy. This isn't going to crater the economy."

But Holtz-Eaken added that the current budget fight makes it "more and more apparent" that something has to be done about the big-money entitlement programs -- Medicare, Medicaid, and social Security. "That's where the problem is," he said.