Spinning Sequestration: Both Sides Are Doing It

GOP Braces For Automatic Budget Cuts
GOP Braces For Automatic Budget Cuts

To hear President Barack Obama and members of his cabinet tell it, the mandatory budget cuts known as the sequester will be disastrous.

"The sequester will weaken America's economic recovery," Obama said at a Virginia shipyard this week. "It will weaken our military readiness. And it will weaken the basic services that the American people depend on every single day."

But House Budget Committee Chairman Paul Ryan, appearing on CNBC's "Squawk Box" on Thursday, said the president is playing one of the oldest political tricks in the book.

"This reminds me of when your local school board is saying we need this new tax increase and if we don't get it, we're going to cut the high school band and the football team first," the 2012 GOP vice presidential candidate said. "We call it the Washington Monument effect here."

After all, in a $3.8 trillion federal budget, how painful can $85 billion in cuts—the amount mandated under sequestration—really be?

(Read More: Sequestration - CNBC Explains)

The answer: probably not as painful as the Obama administration is making them out to be, but not as painless as many conservatives are suggesting.

Crafted as part of a 2011 budget agreement between the White House and Congress, sequestration is harsh by design. The idea was to create an incentive for the two sides to reach an agreement on deficit reduction, because the alternative—across-the-board budget cuts—would be so distasteful.

But even at the outset, negotiators appear to have allowed for the possibility that no deal would be reached. The Congressional Research Service said dozens of programs are exempt from cuts under the law. They include Social Security benefits and Medicaid, as well as child nutrition programs, Pell Grants for higher education, and family support programs. The law also allows the president to exempt military personnel accounts from the cuts, which Obama has said he will do.

(Read More: Why You May Suffer From the 'Sequester Blahs')

Administration officials said the exemptions give them even less flexibility in carrying out the required cuts under the law, and they have been laying out dire scenarios in the days leading up to the deadline.

"To act like there's some magical thing that I could do or a superintendent or principal could do—you can't," Education Secretary Arne Duncan said at a White House press briefing Wednesday. "Kids are going to get hurt. That's just the reality."

Duncan said the cuts would lead to more than 17,000 teacher layoffs—10,000 teachers and teachers' aides in K-12 and another 7,200 in special education. But that number, frightening as it may sound, is imprecise at best.

The administration said it arrived at the figure by dividing the amount of required cuts by an average yearly salary and benefits of $70,000 per teacher. But officials admit that does not mean the teaching positions would vanish overnight, because most school funding is already locked in for this academic year, and federal funding makes up 8 to 10 percent of most local school budgets.

(Read More: Sequestration: How the President and the GOP Blew It - Morici)

The sequester will present some tough decisions for local school districts. "Over the next month or two you'll see lots of pink slips go out," Duncan claimed, but school districts so far appear to be holding off.

A spokesman for the Los Angeles public school district—the nation's second largest—said sequestration would be a $37 million hit to next year's budget, which will be presented to the board of education later this month.

"We haven't determined where the cuts will come from yet," Thomas Walden said. "We do know that if the sequestration goes through it will hit our federally funded schools, that's the schools with the highest poverty, and our English learners."

In the nation's fourth-largest district, Miami-Dade, Deputy Chief Financial Officer Judith Marte estimated the sequester would cost the district $19 million. Marte said the district is fine for this school year, but next year would be a problem.

"It would impact up to 300 teaching positions going forward," Marte said in a telephone interview. "While we were good stewards this year, as it continues to go forward we don't have other $19 million to cover next year. We need to know by May or June of 2013 when we apply for our federal funds."

Officials in New York and Chicago, the nation's largest and third largest school systems, did not respond to our requests for information about their sequester plans.

Duncan claimed layoff notices are already going out in the Kanawha County School System in West Virginia.

An official there confirmed to NBC News that "reduction in force" notices had gone out to teachers and staff in the county's Head Start program, but said the pink slips were not entirely sequester-related. Head Start Director Karen Williams said she was waiting for a decision on grant applications that was supposed to have been come in December. Without it, state law required the notices now, even if layoffs do not go forward.

"I can't get anyone to make a decision," Williams said.

Meanwhile at the Department of Justice, Attorney General Eric Holder issued a different but equally dire warning.

"The reality is there will be harm, there will be pain and the American people will be less safe," Holder told a gathering of state attorneys general. "That's a fundamental reality the American people have got to get their heads around."

(Read More: Americans Call Sequester a 'Bad Idea': NBC/WSJ Poll)

Rep. Paul Ryan
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All DOJ employees with the exception of the inspector general's office are receiving furlough notices this week, which would allow the department to require them to take up to 14 days off without pay for the remainder of the fiscal year.

"The reductions to DOJ would delay or deny access to justice for millions of Americans," Holder wrote in a Feb. 1 letter to Senate Budget Committee Chairwoman Barbara Mikulski, D-Maryland.

"The Justice Department anticipates U.S. Attorneys' Offices will handle 1,600 fewer cases and 1,000 fewer criminal cases," the department said in a statement.

But once again, the calculation is imprecise and assumes the worst case—that the cuts remain in place for the remainder of the fiscal year that ends this fall.

In his letter to Mikulski, Holder said the figure is based on $100 million in mandatory cuts to U.S. Attorneys' Offices, and the average number of cases handled per attorney last fiscal year. The letter noted that civil and criminal prosecutions generated nearly $14 billion in fines, restitutions and other payments last year.

"Criminals that should be held accountable for their actions will not be held accountable," Holder wrote, "and violators of our civil laws may go unpunished."

But a Justice Department spokeswoman could not say how officials might decide which cases to forgo, or whether cases in progress might be dropped if the furloughs occur.

-By CNBC's Scott Cohn; Follow him on Twitter: