Weekly Briefing

The absurdity of “sequestration”

Why a balanced approach is a much better way to tackle the federal budget deficit

If ever there was a lame and bureaucratic word that symbolizes the Washington gridlock, sequestration is it.

Seriously, who thinks up these terms? Who could possibly think that the use of such a word is the best way to convey to the American public what’s going to happen to the essential public structures and services upon which they rely if lawmakers can’t come up with a logical deficit reduction plan?

Nonetheless, that is the word that has been chosen. Under the terms of a 2011 law known as the Budget Control Act, Congress must reach a deal by the end of this year on an alternative plan to reduce the federal deficit or “sequestration” will be implemented.

Now, here’s what sequestration means in this real-world context: “Cut the hell out of.”

Absent an alternative agreement, the government will start imposing clumsy, crude, across-the-board cuts next January to defense and non-defense spending in the amount of $1 trillion over the next 10 years. Add to this the expiration of across-the-board Bush-era tax cuts that is also scheduled to take place in January of 2013 and it’s easy to understand why analysts are using the term “fiscal cliff” to describe what the economy is facing absent strong action.

So what’s wrong with that?

Of course, at first blush, such dramatic action might not sound so bad to some people. Though not nearly as dire as it’s often portrayed, it’s true that the federal deficit is a major problem that needs to be addressed. Moreover, it’s important not to get too carried away with the “fiscal cliff” talk.

Here, however, is the big problem with the kind of cuts under consideration: they would literally devastate all kinds of basic and essential public structures and services – including the military. In a state like North Carolina with its huge military presence, this would be especially disastrous. A region like the Fayetteville area – home to Fort Bragg—would be particularly hard hit.

This is from a fact sheet prepared by the experts at the N.C. Budget and Tax Center:

Sequestration affects both defense and non-defense programs. If triggered, many non-defense programs vital to North Carolina residents would be slashed including childcare, pre-school, K-12 education programs, Pell grants and job training programs that help prepare our children for the workforce, including military service. Medical research, food inspection, safe drinking water, border patrol, and federal support for first responders would also see automatic cuts if sequestration goes into effect.

While cuts in defense spending would certainly have negative effects throughout the state, the non-defense cuts would also have a harmful impact on the economy. For example, if the current levels of sequestration takes effect, 447 Head Start jobs across the state will be lost, leaving 2,146 fewer children served at a time when the legislature has already cut pre-K programs by 40%. Other impacts include: 4,000 parents will lose child-care subsidies and thereby see their jobs put at-risk; 6,000 teachers will lose their jobs and 51,000 fewer students will be served; and the state will train 11,000 fewer workers. Click here to read more details in a Senate Appropriations Subcommittee report – North Carolina is highlighted on page 146).

And while eliminating the defense cuts might be a tempting alternative, replacing them with additional non-defense cuts (as has been proposed in some circles) would almost certainly eliminate any overall benefit. A July 2012 study commissioned by the Aerospace Industries Association found that sequestration’s cuts to nondefense spending would reduce the U.S. gross domestic product during fiscal years 2012-21 by a greater amount ($77.3 billion) than cuts to defense spending ($72.1 billion). The study estimates that the jobs impact for both defense and non-defense cuts would be equal; one-million jobs will be affected by cuts to each area.

Put simply, taking hundreds of billions of dollars out of the American economy via spending reductions will not only be bad for the public systems and structures directly impacted, it is likely to wreak havoc on the overall economy itself.

Cause for optimism

Fortunately, there are indications that the hard truths behind these data are starting to sink in to leaders of both major political parties in Washington.

Last week, the Washington news site Roll Call reported that a bipartisan group was starting to talk about a “balanced” approach to avoiding the devastating sequestration cuts:

“A new group of six Senators committed Monday to working on a ‘balanced’ package to avert the year-end budget cuts required by sequestration.

Senate Armed Services Chairman Carl Levin (D-Mich.) and ranking member John McCain (R-Ariz.) led the letter to Senate Majority Leader Harry Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.).

‘Failure to act to address the debt would result in sequestration taking effect in January 2013 with significant detrimental impact on our fragile economic recovery,’ the Senators wrote….

‘We are committed to working together to help forge a balanced bipartisan deficit reduction package to avoid damage to our national security, important domestic priorities, and our economy,’ the Senators wrote.”

The story went on:

“It is not insignificant that the group used the ‘balanced’ to describe their goal because that has been the term of choice for Democrats who want to see targeted tax increases as part of any deficit reduction deal. Of course, Republicans have been more open to raising taxes by eliminating certain tax loopholes and deductions rather than changing income tax rates on the wealthy, as Democrats would do.”

The gist of the Roll Call story was reiterated in a New York Times story from Monday of this week:

“Senate leaders are closing in on a path for dealing with the ‘fiscal cliff’ facing the country in January, opting to try to use a postelection session of Congress to reach agreement on a comprehensive deficit reduction deal rather than a short-term solution.”

When these ideas are combined with common sense proposals to extend Bush tax cuts for all but the very rich (ending the tax cuts for upper-income households would reduce the federal deficit by more than $1 trillion over 10 years) it’s clear that a reasonable path toward fiscal stability is in sight.

Going forward with a balanced approach

Let’s hope that the optimistic tone of these news stories accurately reflects what’s really happening on Capitol Hill. With hard work, cooperation and compromise, there is no reason that Americans can’t craft a balanced solution that reduces the deficit, limits cuts that would harm the economy and avoids tax increases for the vast majority of Americans. It’s time to get to work.

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