Tough budget cuts ahead as sequestration looms

A man transports emergency supplies with a forklift at one of the U.S. Agency for International Development's shipping and logistics facilities. A series of mandatory cuts could make USAID lose up to $110 million from its operating budget. Photo by: Lance Cheung / USDA / CC BY

The U.S. Agency for International Development could lose up to $110 million from its operating budget to a series of mandatory cuts set to take effect Jan. 2, 2013, unless the U.S. Congress agrees on a way to stop them.

This figure was among preliminary estimates detailed in a report submitted Friday (Sept. 14) by the White House’s Office of Management and Budget to the U.S. Congress. The report provides an insight into how U.S. federal agencies and programs will be affected by the mandatory budget cuts — or sequestration as they are known in Washington, D.C.

Sequestration was passed as part of the Budget Control Act of 2011, which raises the federal debt ceiling and seeks at least $1.2 trillion in deficit reduction. It remains in force after a bipartisan Congressional panel failed to agree last year on a deficit reduction plan.

The U.S. Congress can still stop the sequestration if it changes the law or otherwise finds ways to save money by the end of the year. The White House budget office itself emphasized that the enactment of a plan to avoid sequestration is essential. Any plan, however, may still include budget cuts and would likely be influenced by the results of the elections in November.

In its report, OMB details how some $109 billion worth of mandatory cuts would be shared by more than 1,200 federal agencies and programs in 2013. Aside from the $110 million reduction to its operating budget, USAID is set to suffer a $207 million cut to its Development Assistance Program budget and an $80 million reduction from its international disaster assistance budget.

These cuts would likely force tough decisions at USAID. Donald Steinberg, the agency’s deputy administrator, identified to Devex in August what programs USAID might put on the chopping block should sequestration take place.

Tough cuts also appear to be in order at the Department of State, which could lose $1.084 billion from its operating budget for diplomatic and consular programs, according to OMB’s estimates. A separate $129 million would be cut automatically from funds for embassy security, construction and maintenance.

OMB’s report identifies $74 million in cuts to the 2013 budget of the Millennium Challenge Corp. Contributions to international organizations like the United Nations, meanwhile, are set to be slashed by $127 million.

Here are OMB estimates on how much other U.S. international affairs programs and budget accounts could lose to mandatory cuts:

  • Economic Support Fund: $464 million.

  • Contributions to the World Bank’s International Development Association: $122 million.

  • Contribution to the Asian Development Bank: $17 million.

  • Global health programs: $670 million.

  • Assistance to Europe, Eurasia and Central Asia: $51 million.

  • Peace Corps: $31 million.

  • Pakistan Counterinsurgency Capability Fund: $70 million.

  • Migration and refugee assistance: $154 million.

Read more on U.S. aid reform online, and subscribe to The Development Newswire to receive top international development headlines from the world’s leading donors, news sources and opinion leaders — emailed to you FREE every business day.

About the author

  • Ivy mungcal 400x400

    Ivy Mungcal

    As senior staff writer, Ivy Mungcal contributes to several Devex publications. Her focus is on breaking news, and in particular on global aid reform and trends in the United States, Europe, the Caribbean and the Americas. Before joining Devex in 2009, Ivy produced specialized content for U.S. and U.K.-based business websites.