Roxana Tiron has broken the story, confirmed by a Pentagon spokesman, that DoD now believes war funding would be included in a sequester. This reverses its position from November and is based on a consultation it apparently had with OMB.
That's pretty big news. The sequester cut is fixed at $54 billion a year, per a formula written into the Budget Control Act, so this would ease its effect in some ways because the cut will come from a bigger pie. If the President's FY13 request were enacted, it would mean a uniform percentage reduction of only 8.5% from every account rather than the 9.9% if the cut was taken from only the base budget.*
Of course, in another way, it makes sequester way worse. Now sequester would affect not just the base budget, which after all is funding to prepare for events that haven't happened, but the war budget, which is nominally paying for the event happening right now--the war in Afghanistan--with our troops lives at risk every day.
Including war funding is surprising because it’s explicitly exempted in other parts of the BCA, but we'd said before that OMB is the ultimate adjudicator of these questions. And the effect is really just more of the same: pressure from the administration for the House to cut a deal in the lame duck.
* Not including mandatory, although even if it did it would mean a reduction of less than $1B, and not exempting military personnel costs as the President is allowed to do.