Our political system was not designed to be efficient, but it wasn't supposed to be self-destructive, either. After a near-default on the public debt and a fiscal cliff that threatened a new recession, we are facing another man-made crisis: the sequester, across-the-board cuts in discretionary domestic and defense spending that are set to begin Friday and extend over a decade. Let's separate fact from fiction about the sequester and its impact.
1. Blame Obama — the sequester was his White House's idea.
Identifying the origins of the sequester has become a major Washington fight. Bob Woodward weighed in recently with a Washington Post op-ed making the case that the idea began in the White House. He’s right in a narrow sense, mainly because he focuses on the middle of the 2011 negotiations between Obama and Republican lawmakers. If you look before and after, a different picture emerges.
In our view, what happened is quite straightforward: In 2011, House Republican leaders used their new majority to force their priorities on the Democratically controlled Senate and the president by holding the debt limit hostage to demands for deep and immediate spending cuts. After negotiations between Obama and House Speaker John A. Boehner failed (Eric Cantor recently took credit for scuttling a deal), the parties at the eleventh hour settled on a two-part solution: immediate discretionary spending caps that would result in cuts of almost $1 trillion over 10 years; and the creation of a "supercommittee" tasked with reducing the 2012-2021 deficit by another $1.2 trillion to $1.5 trillion. If the supercommittee didn't broker a deal, automatic spending cuts of $1.2 trillion over the next decade—the sequester—would go into effect. The sequester was designed to be so potentially destructive that the supercommittee would surely reach a deal to avert it.
The sequester's origins can't be blamed on one person—or one party. Republicans insisted on a trigger for automatic cuts; Jack Lew, then the White House budget director, suggested the specifics, modeled after a sequester-like mechanism Congress used in the 1980s, but with automatic tax increases added. Republicans rejected the latter but, at the time, took credit for the rest. Obama took the deal to get a debt-ceiling increase. But the president never accepted the prospect that the sequester would occur, nor did he ever agree to take tax increases off the table.
2. At least the automatic cuts will reduce runaway spending and begin to control the deficit.
What runaway spending? The $787 billion stimulus was a one-time expenditure that has come and gone. Under current law not including the sequester, non-defense discretionary spending as a share of the economy will shrink to a level not seen in 50 years. Defense spending grew substantially over the past decade, but that pattern has slowed and will soon end. Additional reductions must be achieved intelligently, tied to legitimate national security needs.
Across-the-board cuts can have perverse effects on deficits; as services are cut, the fees users pay for those services are lost. For example, sequester-driven furloughs of air-traffic controllers will lead to the number of flights being reduced.
The annual budget deficit is projected to fall by almost 50 percent in 2013 compared with the height of the recession. Reducing the deficit over the long term requires going where the money is—boosting economic growth, controlling health-care costs and increasing revenue to handle the expense of an aging population. Deeper discretionary-spending cuts are counterproductive; immediate cuts, as Europe has made recently, could lead to a recession and bigger deficits.
3. The amounts are so small, they won’t hurt much.
The size of the automatic cuts this fiscal year, $85 billion, looks trivial compared with our $3.7 trillion federal budget. As Post columnist George F. Will has written: "Head for the storm cellar—spending will be cut 2.3 percent! Or: Washington chain-saw massacre—we must scrape by on 97.7 percent of current spending!"
It seems like 2.3 percent of savings can be found without inflicting harm. But that 2.3 percent is applied to only a small part of the budget. And seven months, not 12, remain in this fiscal year to make the cuts. With little discretion about trimming areas such as aviation and food safety, layoffs and furloughs will interrupt services vital to the economy and public health. As disruptive as the first year of the sequester would be, imagine what a decade of automatic cuts would produce.
4. The cuts are so large, they will be catastrophic.
The administration has released state-by-state estimates of the sequester and highlighted the cutbacks most likely to harm or inconvenience the public. The reality is not so immediate or dramatic. The damage will accumulate in less visible ways, as irrational reductions in public spending impede economic growth and job creation; reduce investments in education, infrastructure and scientific research; and further disrupt the routines of a modern democracy. The longer the sequester remains in place, the more harm is inflicted.
5. This fight is all about money.
Those who relish using a sequester—some House Republicans, along with a gaggle of radio talk-show hosts, editorial writers and cable television commentators—say this is one small step toward reducing U.S. deficits and debt. But if the goal were really debt reduction, it would be easy to get a bipartisan deal that would lower the debt enough to meet the original target set by the Simpson-Bowles fiscal commission, with roughly a third coming from revenue. The insistence on deep discretionary-spending reductions while calling for even deeper tax cuts shows that the sequester is not about money but about taking a meat ax to government as we know it.
The tactics to achieve that goal—from the sequester to the threat to shut down the government in late March to the next confrontation over the debt limit—have made basic governance a huge challenge for the executives managing programs and agencies, nearly all of whom lack a clear sense of how much money they will have from one day to the next. Planning, recruiting personnel and drafting long-term contracts have become impossible in areas from cybersecurity to embassy security to medical research to homeland security, damaging not industries rife with waste, fraud and abuse but critical services. If only it were all about money!