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Sequester becomes defining piece of shutdown fight

Even the biggest possible victory on sequestration would have been called a loss when it was first dreamed up back in 2012.
U.S. Senate Majority Leader Harry Reid returns to his office after a news conference at the U.S. Capitol in Washington on Oct. 3, 2013.
U.S. Senate Majority Leader Harry Reid returns to his office after a news conference at the U.S. Capitol in Washington on Oct. 3, 2013.

Democrats are using their upper hand in the shutdown fight to get a better deal from Republicans on across-the-board sequester cuts that took effect last year.

But before Democrats get too excited about getting their way, it’s worth remembering: even the biggest victory on sequestration would have been called a loss when it was first dreamed up.

Back in 2012, when sequestration was passed as a larger debt and deficit deal, it was supposed to be a tool to force Congress to act by the end of the year on a broader agreement. Democrats would suffer from domestic cuts and Republicans from military cuts if they didn’t act.

But the deal never came, and sequestration went through in March.

So now, as Harry Reid is wrangling with Mitch McConnell on sequestration spending levels, the question is whether Reid can use the leverage he’s built up to get what he wanted in the first place: Undoing sequestration and raising discretionary spending levels by $71 billion more than the status quo. 

While it’s too soon to say if Reid will get everything he wants out of a deal, he’s trying to set the stage for the automatic cuts to be unwound. 

Early in the shutdown fight, Democrats positioned themselves as a voice of reason who simply wanted to continue the status quo, continuing 2013's sequestration cuts. Asking for anything more at that point "would have muddied the message about a clean CR," explains Stan Collender, a former Democratic budget aide.

That strategy seems to have paid off as Democrats have stood firm while they watched Republicans bang their heads against the wall while public opinion turned against them. But it's also a reminder of just how little progress Democrats have made in their fight against sequestration—and how much Republicans have succeeded in making spending cuts the new normal.

Having watch the Republican strategy fail, Reid has been emboldened to make headway on a 2014 budget fight that's been eclipsed by the Obamacare shutdown. As of Monday afternoon, the Senate budget deal would require both chambers to work together to agree on new top lines for the 2014 budget by mid-December—and allow agencies more flexibility in enforcing sequestration if the automatic cuts do continue, according to Senate aides.

It's all a reminder that the current budget fight is effectively just a big, noisy prelude to the actual 2014 budget negotiations that are likely to happen in a handful of weeks if and when a deal does happen. Earlier this year Senate Democrats proposed a $1.058 trillion budget for fiscal year 2014 that would undo the part of the 2011 debt ceiling deal that created sequestration in the first place. House Republicans also proposed undoing sequestration by raising defense spending at the expense of domestic programs, but they want to keep the top line, $967 billion level of cuts scheduled to take effect in 2014.

Those differences led to a months-long deadlock when Republicans refused to go to conference with Democrats to work out a deal. But you wouldn't have guessed it from the rhetoric dominating most of a budget fight that hasn't even been about the 2014 budget. Republicans successfully hijacked the entire conversation by shutting down the government over Obamacare. So it wasn't until the third day of the shutdown for Senate Majority Leader Harry Reid to reveal that he had made a concession to House Republicans on sequestration. 

In a private meeting with Speaker Boehner in September, Reid said he conceded to continue the status quo on spending, including sequestration cuts, in a stopgap budget to fund the government. "We negotiated and that was our compromise," he told reporters on October 3. "I didn't twist his arm. He twisted mine."

Some believe that message was too late in coming. "I probably would have made a much bigger deal about the concession that sequestration was," says former White House economist Jared Bernstein. "So much of the Republican strategy has been premised on concessions as normality."

Eyeing the next stage of the budget fight, Republicans are already making it clear that they oppose spending hikes above sequestration levels. On Sunday, Sen. Lindsey Graham warned against going above the $967 billion budget cap for 2014 established by the 2011 debt-ceiling deal. 

“If you break the spending caps, you're not get any Republicans in the Senate,” Graham said on ABC's "This Week."

To be sure, the stakes are likely to be lower, as Democrats are pushing for a debt-ceiling hike that will go through the middle of next year. Chastened Republicans also may be more inclined to deal come mid-December given the cuts coming down the pike.

While sequestration so far has been split 50-50 between defense and non-defense cuts, there will be $20 billion in cuts to the defense side alone due to a technical change in the way the spending is classified—which could increase the pressure on Republicans to deal. GOP leaders like Appropriations Chair Rep. Hal Rogers have also openly rallied against sequestration and admonished his party for being unable to pass its own 2014 budget, which could help Democrats push for hiring funding levels.

Conservatives could also try to use sequestration as a way to squeeze Democrats for concessions they were unable to wrest out of the shutdown fight—"the hammer" that Boehner has given his caucus, as columnist George Will puts it. Either way, if Republicans and Democrats don't manage to work out a 2014 budget in a few weeks, we could face the prospect of—you guessed it—another government shutdown.