Sequestration At Issue

     From Jonathan Karl at ABC:

Democrats are still willing to accept a short-term deal to reopen the government at sequester spending levels (the Senate, of course, passed a 6-week extension on those terms), but now that talks are centered on funding the government into 2014, they are insisting on undoing some of sequester cuts. To Republicans, this is a non-starter, unless the sequester spending cuts are replaced with cuts to entitlement programs — and that is a non-starter for Democrats.   

     Note that a likely result at this time is a short term continuing resolution that would fund the government for a few weeks leading to a threat of a later shutdown over sequestration.  A Huffington Post article quotes a Democratic aide as saying that Democrats are trying to "break the will" of Congressional Republicans so that the Republicans would have no leverage in future negotiations over sequestration.
     Social Security desperately needs to get out from under sequestration.

More Info On Sequestration From AFGE

     A message to members of the American Federation of Government Employees (AFGE) working for Social Security:

AFGE NATIONAL COUNCIL OF SSA FIELD OPERATIONS LOCALS, AFL–CIO 

SSA Budget Cuts Furlough Update 

Yesterday, Acting SSA Commissioner, Carolyn Colvin met with SSA’s [Social Security Administration's] AFGE General Committee Officers to brief the Union on sequestration.  [After one initial meeting, former Commissioner Astrue had refused to meet with AFGE leaders. This meeting is one sign that things have changed at least a little since Astrue left.]

AC [Acting Commissioner] Colvin informed AFGE that under the current budget continuing resolution (CR), she believes SSA will not have to furlough employees if sequestration is implemented. However, she is clear that if the budget changes, furlough may have to be revisited. 

There are two current situations that may change SSA’s current budget: 

1. The CR expires at the end of March. Congress is working on a new CR for the remainder of the year. Some Members of Congress want to see cuts to the CR in place of sequestration, as stated in the Budget Control Act of 2012. 
2. Legislation to override sequestration. Current discussions in the House and Senate may lead to fewer cuts in the Department of Defense cuts and shift to additional discretionary spending cuts. SSA’s budget is included in the discretionary spending. 

AC Colvin also informed AFGE that to avoid furloughs, there will be cuts to SSA’s budget in other areas. Some of those areas are expected to include a freeze on all overtime, hiring and travel; and release of all temporary hires and reemployed annuitants. As employees leave the agency for retirement or other reasons, their positions will not be replaced. 

All of this will lead to fewer employees to do the work. Backlogs will grow; waiting times will rise; reception areas will become and/or remain full; calendars will back up; more calls will be in cue; and busy rates will increase. AFGE is very concerned that the adverse impact on public service will result in more complaints and hostility from the public. 

AFGE will be providing you with information during this difficult, confusing period of budget discussions. 

If SSA dodges the bullet of furloughs, many of our fellow Federal employees who work in our communities and cities, may not. AFGE will be planning a number of events in the next month to address the impact of budget cuts for all federal agencies, including SSA.

Acting Commissioner Hopes To Avoid Furloughs

A Message To All SSA Employees

Subject: Budget Update

     I want to share with you the latest information we have regarding our operating budget. I know sequestration is on all of our minds.
     Clearly, this is a challenging time for us all. I want you to know that, here at SSA, we will work to minimize the risk of furloughs that would further harm services and program integrity efforts in the event of a sequester. This includes making some very difficult decisions and taking necessary steps to mitigate our budget risks this fiscal year—including steps such as restricting hiring, limiting overtime availability, delaying purchases, and limiting agency travel. We will also be restricting our spending to mission critical activities. By taking these actions, we are hopeful the funds available to us will allow us to operate without furloughs.
     On March 1, we will continue to serve the American public. I recognize and appreciate all you do to keep service to the American public our number one priority. Thank you for your continued commitment. I will keep you informed of developments.

Carolyn W. Colvin
Acting Commissioner

What Happens With Sequestration?

     Sequestration, the odd term for automatic budget cuts, seems almost certain to take effect on March 1 unless there is a last minute "Come to Jesus" moment. Thank goodness the furloughs don't start instantly. From Government Executive:

Federal employees will not feel the immediate impact of sequestration, should automatic budget cuts set to go into effect March 1 take place, an Obama administration official said Thursday.

Office of Management and Budget Controller Danny Werfel told the Senate Appropriations Committee that union negotiations would start on March 1, if sequestration hasn’t been averted, and most federal employees would not receive furlough notices until mid-March.

“Will the furloughs take place on March 1st?” Werfel asked himself rhetorically. “No, because of legal requirements,” referring to the need to bargain with unions and provide 30 days notice to employees.

OMB clarified on Friday that Werfel was referring specifically to Defense Department civilians when setting April as the earliest possible start date for sequestration furloughs. The Obama administration is leaving open the possibility furlough notices could be sent out to non-Defense feds before March 1.

     Below is a letter that then Commissioner Michael Astrue sent to Senator Mikulski concerning the sequester. You can click twice on each page to view at full size. It appears to me that Astrue was understating the effects of sequestration on Social Security. I don't see how the agency avoids widespread furloughs. We won't have to wait long to find out. If furloughs are coming, Social Security will have to notify the employee unions and begin negotiating with them pretty much immediately after sequestration begins on March 1.

     Update: Let me respond to a persistent misunderstanding. Social Security benefits are exempt from sequestration. Social Security's administrative budget, the budget that pays employee salaries and that pays for rent and electricity and paper clips and all the other goods and services needed to keep the Social Security Administration operating, is very much subject to sequestration

Sequestration Threat Having An Effect

     From the Washington Post (emphasis added):

The drastic $85 billion in automatic spending cuts Congress approved in hopes of heading off another deficit showdown may or may not occur, but federal agencies say the threat has been disrupting government for months as officials take costly and inefficient steps to prepare. ... 

Office of Management and Budget spokesman Steven Posner declined to comment on the planning costs. But Jeffrey Zients, the OMB’s acting budget director, warned lawmakers last summer that any planning “would necessarily divert scarce resources” from other important missions and priorities, “to say nothing of the disruptive effects this exercise would have” on federal workers and contractors. Any preparations “could inadvertently trigger some of the negative effects of sequestration even if sequestration never happens,” he said. ...

House Budget Committee Chairman Paul Ryan (R-Wis.) said Sunday that he thinks the cuts are inevitable ...

Some federal projects meant to improve public services have been stopped outright, and others have been abruptly delayed. The concern is that investing money now might be risky if it’s not there in two months. 

Thousands of backlogged cases at the Social Security office in Rochester, N.Y., will remain that way after a long-awaited plan to double the number of judges handling hearings and appeals was put on hold ...

“They came right out and told us, ‘We’d love to do it, but we don’t know if we’re going to have the money,’ ” employee Timothy Flavin recalled of the September decision.

Maybe Republicans Don't Really Want Sequestration

     From The Hill:

House Republican defense hawks are pushing back strongly against Speaker John Boehner’s (R-Ohio) claim that he has GOP support to allow steep automatic budget cuts to take effect if President Obama does not agree to replace them with other reductions. ...

“I don’t support that,” said Rep. Duncan Hunter (R-Calif.), a member of the Armed Services Committee whose district includes one of the nation’s largest military installations. “You get into dangerous territory when you talk about using national security as a bargaining chip with the president.” ...

The Speaker suggested the sequester was a stronger leverage point for Republicans than the upcoming deadline to raise the debt ceiling ...

“In order to get the Republican Conference to pass the debt-limit increase last time, he promised them sequestration would not go in place,” the Republican House member said, speaking on the condition of anonymity. “To be using sequestration and these defense cuts in the next debt-limit talks certainly is pretty bad déjà vu for the Republican Conference.”

Cliffhanger

     The fiscal cliff negotiations drag on. At this point, preventing the sequester is on the table and the chained CPI change for Social Security's Cost Of Living Adjustment (COLA) is off the table. Republicans are even denying that they want chained CPI! 

     If this is not resolved, Social Security employees should soon expect to receive a furlough warning. As an example of what's coming, the Department of Defense is preparing to notify 800,000 civilian employees that they can expect several weeks of unpaid leave. However, the White House has not informed agencies of exactly how sequestration will be administered. According to the Wall Street Journal, the Office of Management and Budget (OMB) was not even returning phone calls on the subject last week!

Sequestration Nearly Inevitable

     The Washington Post reports that sequestration seems all but certain to take effect on January 1. Most likely, it will last a couple of months. Social Security could avoid furloughs if sequestration were only to last a few days but it's hard to imagine such a huge cut in the agency's operating budget over a couple of months not resulting in furloughs.

     I was once a federal employee. I know many federal employees. I know that job security is an extraordinarily important consideration for most federal employees. I feel for the federal employees who may suffer partial or total furlough as a result of sequestration but I feel more for the members of the public who will suffer as a result of sequestration. This is a big deal.

     This shouldn't have happened.

No Chained CPI In Fiscal Cliff Deal But No Sequestration Fix Either

     In Social Security terms, the reports about the deal currently being worked out by Senate leaders to avoid the fiscal cliff are remarkable for what's not being discussed -- the chained CPI method of computing Social Security's cost of living adjustment (COLA) and any solution for the sequestration that will dramatically cut Social Security's operating budget on January. Also, the expected deal would do nothing about the debt ceiling problem.

What Follows Plan B?

     When House Speaker's Boehner decided to go ahead with his "Plan B", we started down a track that seems to lead directly over the "fiscal cliff." I'm not sure that the failure of "Plan B" in and of itself made the jump into the abyss more likely but the lack of progress over the past few days and the fact that the House of Representatives is adjourning until after Christmas makes that terrible outcome seem nearly inevitable.

     At this point, I think the "chained CPI", which would reduce the Social Security Cost of Living Adjustment (COLA), is less likely to come to pass than it was last week. It appears that nothing can be passed in the House of Representatives without Democratic votes and the price of those votes is the end of the chained CPI. The current 2% reduction in the F.I.C.A. tax is almost certain to end on December 31. That might be revived later but I wouldn't bet on it. Social Security and other agencies will almost certainly get hit by sequestration on January 1. Sequestration dramatically lowers the agency's budget and will eventually bring about employee furloughs. However, the Office of Management and Budget is telling agencies to send out messages to their employees that do not mention furloughs. I take that to mean that there is enough leeway for Social Security and other agencies to delay furloughs in the expectation that sequestration will not last long.

     Also, I hate to mention it, but we're approaching the statutory cap on the federal debt. Even with everything that happens with the fiscal cliff, we'll still get to that cap sometime in January or early February. The consequences of getting to that cap are almost incalculable. Even shutting down the federal government will probably be inadequate to prevent the country defaulting on its debts. It may take significant reductions in everything including Social Security payments, which, in its own way, would be a default on a federal debt.

Progress On Fiscal Cliff Negotiations And Social Security May Be Greatly Affected

     There is progress in the fiscal cliff negotiations. If the reports are accurate, Social Security will be greatly affected. Ezra Klein (who is about as well plugged into the Obama Administration as it is possible for an outsider to be) reports that the deal would include:

• A shift to the chained CPI method of computing Social Security's Cost of Living Adjustment (COLA). The chained CPI method is a sneaky way of cutting Social Security benefits. Few people understand it but it reduces the COLA. Its effects on a Social Security recipient compound as the years pass. 
• An end for the sequester, which would dramatically cut operating budgets for Social Security and all other agencies on January 1 if it takes effect but there would be another sequester-like device to take effect at some later date.
• There might be "some amount of infrastructure spending" in the deal. Klein does not say how this spending might be directed. The Social Security Administration would be a great place for this spending. The money could be spent quickly and to great effect, both in terms of backlogs at Social Security and program integrity.
• The 2% reduction in the F.I.C.A. tax would end.

     A Washington Post article says that the infrastructure spending could be $50 billion! I would be extremely disappointed if Social Security were not included in infrastructure spending that high. 

     The article relates that"[S]enior Democratic aides said they could probably muster the votes for the [chained CPI] change if it was not applied to disability payments, known as SSI, and if very old seniors were protected through a bump-up in benefits at age 85." I hope this is just confused, that the chained CPI would not be applied to Title II Social Security disability benefits as well as SSI disability benefits. This would make sense because applying the chained CPI to someone who would draw disability benefits and then retirement benefits for 50 years or more would be devastating because of the compounding effect.

Sequestration Would Be A Disaster For Social Security

     While there are reports of some progress in the fiscal cliff negotiations, the parties remain far apart and agreement is uncertain. One of the consequences of failure to reach agreement and the one that is of the most importance for the Social Security Administration is sequestration, a sudden, dramatic cut in the agency's operating budget effective January 1. Sequestration would be far worse for Social Security than a government shutdown. In a government shutdown, most of Social Security continues to operate. A Senate Finance Subcommittee report gives some idea of what sequestration would mean for Social Security:

In fiscal year 2012 SSA’s [Social Security Administration unnecessarily stated in the possessive form] had an administrative budget of $11.45 billion. This represents less than 1.5% of the over $800 billion it will pay in benefits. The sequester would cut SSA’s administrative budget by $890 million in fiscal year 2013. As a result, in fiscal year 2013 SSA would lose 5,000 staff through attrition and the loss of temporary hires. In addition, SSA’s approximately 65,000 employees and 15,000 State Disability Determinations Services employees would face approximately 6 weeks of furloughs.

Degradation of Basic Services

... The processing time for the 3.2 million Americans who will file disability claims would increase from 111 days in fiscal year 2012 to an estimated 180 days in fiscal year 2013. The number of pending disability claims would increase from 861,000 in fiscal year 2012 to almost 1.5 million by the end of fiscal year 2013. As field offices and telephone-service centers close their doors for 30 days throughout the year, the waiting time for the 45 million field office visitors and 63 million 1-800 number callers would increase dramatically.

Combating Waste, Fraud, and Abuse
This year the SSA will conduct 435,000 continuing disability reviews, to ensure individuals receiving disability benefits are still disabled, and 2.4 million SSI redeterminations, to ensure individuals receiving SSI still meet income and resources limitations. Combined, these two program integrity activities are expected to save $5.9 billion over 10 years, approximately $8 for each $1 spent. Under the sequester, SSA would be able to conduct 35,000 fewer continuing disability reviews and 500,000 fewer SSI redeterminations. This would cost the Federal government $500 million over 10 years from otherwise preventable waste, fraud, and abuse.

Field Offices To Start Closing At Noon On Wednesdays

     Social Security field offices are already closing a half hour early each day due to the agency's inadequate operating budget. The budget problems will just get worse over time even without the sequestration set to begin on January 1, 2013. Sequestration will dramatically cut the budget for Social Security and all other parts of the federal establishment. Now, the Social Security field office in Tuscaloosa is announcing that it will be closing at noon on Wednesdays beginning January 2, 2013. There has been no announcement yet that all Social Security offices will be closing at noon on Wednesdays but it would make sense. I doubt that this is a local thing in Tuscaloosa. I'm pretty sure that much more will be required if sequestration comes to pass.

     Update: And here's confirmation from the AARP that all field offices will be closing at noon on Wednesdays beginning January 2, 2013.

    Further update: And here's the Social Security press release on this. Normally, I receive e-mail notification of these but I either didn't get it yesterday or I missed it somehow. You too can get the press releases by e-mail.

I Hate To Be Gloomy, But ...

     A Republican sweep of the White House, House of Representatives and Senate might have had devastating effects on Social Security but the result we got -- basically the status quo -- leaves Social Security at great risk. Yes, the new Commissioner will be an Obama appointee. Yes, Democrats will have a somewhat increased majority in the Senate. However, the following problems remain:

• I have noted over the decades of following Social Security that the House Social Security Subcommittee seems to have more influence over the Social Security Administration than the White House and Senate combined. Republicans will continue to control the House Social Security Subcommittee. They are not big fans of the concept of social insurance.
• Republicans in the House of Representatives will continue to have a choke hold on Social Security's administrative budget. They have been extraordinarily irresponsible yet they too won re-election. Their irresponsibility is unlikely to change.
• The entire federal establishment, including Social Security, is facing even more dramatic appropriations cuts as a result of sequestration, scheduled to begin on January 1, 2013. That word, "sequestration," may seem foreign to you but you're going to hear it more and more over the next two months or so. Sequestration would cut Social Security's operating budget much further, to the point that furloughs would be inevitable. The only question is how the furloughs would be implemented. While no one expects sequestration to continue though the rest of the fiscal year, it is entirely possible, if not probable, that we will see sequestration for at least part of January and possibly for quite a bit longer.
• The Disability Trust Fund will temporarily run out of money in 2016. This is related to the baby boom population reaching its most disability-prone years. The inevitable solution is to allow borrowing from the Retirement and Survivors Trust Fund. This has been done before.  However, we have all seen Republican hostage-taking over the last two years. Will House Republicans try to take Disability Insurance Benefits hostage? I have seen no sign of a Republican agenda for the Social Security disability programs but they may be working on one. It would be great if inter-fund borrowing was included in the resolution of the "fiscal cliff" negotiations but are Democrats focused on this problem which will not come to a head for another three or four years? One frustrating thing for Republicans has to be the fact that there is report after report showing that large amounts of money are being wasted in the Social Security disability programs but almost all of this waste can be attributed to Republicans starving the agency's administrative budget! At the least, the Disability Trust Fund situation serves as a check on the new Commissioner. He or she will find it difficult to do anything that can be seen as benefiting the disabled since he or she will constantly be reminded that the Disability Trust Fund is going bankrupt.