Unless Congress reaches a deal before January, the budget is slated to be cut with a blunt axe. Here's how the cuts will work.
It's one of those classic pieces of Washington jargon everyone uses but few really understand: the sequester.
Let's start at the beginning. As part of a deal to raise the debt ceiling in August 2011, congressional leaders agreed to increase the ceiling on borrowing on condition that the deficit be reduced. Democrats wanted to shrink it by increasing taxes on high earners (a revenue solution), while Republicans wanted to cut it by lowering spending. Both parties appointed members to a "supercommittee" charged with meeting in the middle to find a way to reduce the deficit by $1.2 billion.
As an incentive to reach a deal, the committee agreed that failure would lead to automatic budgets cuts of $600 billion starting in January -- half from defense*, and half from discretionary spending (basically, everything else, minus Social Security and Medicaid). The discretionary cuts would be taken proportionately from everything but Pell Grants, veterans' care, and Medicare. The idea was to endanger things that were widely popular with the public and dear to each party (defense for Republicans, other programs for Democrats). These automatic cuts are the "sequester," because the money is set aside for mandatory use.