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Sequester Hits – Compromise Not in Sight

President Obama and Congress are still trapped in the web they wove  for themselves in 2011 while trying to arrive at a solution to the national debt and deficit explosion.  Republicans and Democrats failed again this week to reach agreement on an alternative to the automatic holds on funding established in that 2011 deal. The full brunt of the $85 billion belt tightening, known in Washington as “sequestration,” will take effect over seven months so it is not clear if there will be an immediate disruption to public services.  The overall cuts scheduled for ten years will be nearly $1 trillion. In most cases, these cuts are actually reductions in planned increases in spending.

Both sides remain unwilling to compromise, blaming each other for the cuts, or threatening calamity if the cuts took place.  Some suggested that the worst case scenario might actually be that the cuts remain in effect and the impact is far less than assumed.
The President and Democrats insist revenue increases be part of a solution to ending the automatic cuts, an idea Republicans reject.  Senate Republican leader Mitch McConnell said they would not support a last minute backroom deal and “absolutely” would not agree to increase taxes.  The President campaigned last week projecting tens of thousands of layoffs, mass confusion at airports, and worse if the Democrats don’t’ get additional revenue while working to reduce the still-growing deficit.

Since Friday, the White House has been reaching out to Republican Senators in hopes of breaking their ranks on revenue increases.  House Speaker John Boehner said the Republicans already agreed to $650 billion in tax increases in January during the fiscal cliff negotiations, and that the House will pass a continuing resolution to keep the government operating this week.  Boehner said he still  hopes that an agreement can eventually be reached to lower the deficit, overhaul the tax code and undo automatic spending cuts.  (Congress can stop the cuts at any time after they start if agreement can be reached.)

The effects on energy are varied.  According to several analyses, sequestering would delay leasing activity on public lands for everything from oil and gas (as many as 300 onshore and 550 offshore leases), with a significant loss of revenue in the process. It would also cut funding for training for solar jobs, home weatherization, and energy research, according to the White House.

The Department of the Interior says state and local governments could stand to lose some $200 million in revenue generated from mineral leasing on federal lands, and delays in coal leasing would defer as much as $50 million to $60 million per sale. The permitting of solar and wind installations on federal lands may also decelerate.

Energy Secretary Chu averred concern “for the Department of Energy’s ability in the face of such cuts to make the investments needed to grow our economy through basic scientific research and advances in clean energy technology.”

The Energy Department said that cuts would delay research and development investments, and perhaps shut down a Manufacturing Demonstration Facility for 6-8 months. That translates to a slowdown in the nation’s production of cleaner and more efficient vehicles, the DOE says.

The joint EPA-DOE Energy Star energy efficiency program for household products would be impacted with reductions in product specifications and sectors the Department would work with, as reported in the Christian Science Monitor.