The sequester was adopted in 2011 in the Budget Control Act that sought to reduce the growth of Federal government spending.  It went into effect this year.  Instead of reducing expenditures on an item by item basis it simply calls for all agencies to reduce increases in their expenditures.  In spite of the sequester gross  Federal expenditures are expected to continue to rise.

The sequester was given to Republican congressmen in order to gain their support for the last increase in the Federal government debt ceiling, the limit on Federal borrowing.  That ceiling will be reached on Oct 17.  In order to continue Federal borrowing the ceiling must once more be raised.  Many erroneously warn that failure to raise the debt ceiling will cause the USA to default on its loans, essentially Treasury bonds, since we will not be able to borrow more to pay our outstanding loans, i.e. we borrow to pay our past borrowing. I say erroneously since paying our past borrowing can be done out of current revenue which is about five times the cost of paying on past debt. 

There is a problem.  Using current revenue to service past debt will of course mean having to cut other spending.  This has led to many warning about paying Chinese debt holders before paying social security benefits or other such dire possibilities. 

There is an easy way to handle the impasse.  Over half of Treasury bonds are held by our Social Security and Medicare systems.  In other words these Federal debts are owed to the Federal Government.  The Feds could issue another IOU to themselves for delayed payment.  Why worry about a debt owed to yourself?

And we could see no agreement on Oct 17 to raise the debt limit.  The Democrats now ask for an end to the sequester when the debt limit is raised,  The Republicans will not yield on this issue.  So the outlook is grim.  But no matter what happens we will not have to default on our Federal debt.