The Ticker Quick Views on Politics, Economics and Finance
What Obama Isn’t Telling You About Sequestration
We find ourselves today on the brink of yet another manufactured crisis in Washington. By now, almost everyone has heard of the automatic spending cuts, or sequestration, set to go into effect tomorrow.
The Barack Obama administration has spent the past few days describing the doomsday scenarios that will play out if an agreement isn't reached to avoid the cuts -- and it seems as if Republicans and Democrats alike want to find a way to avoid them. Only neither side has been able to reach a compromise that would actually satisfy all parties involved.
There are two fundamental issues at play: One is the magnitude of the cuts imposed by sequestration; the other is the manner in which those cuts are applied.
As I said yesterday on Bloomberg TV, the cuts are best described as much ado about nothing. The Heritage Foundation recently concluded that, in total, sequestration over the next 10 years reduces spending by just 2.4 percent. Consider that the president’s fiscal year 2013 tax increases are about twice the size ($150 billion) of the scheduled cuts (about $85 billion).
Furthermore, Washington has a spending problem, and sequestration plays a (very small) role in helping to address it. The truth is that it has never been politically easy to cut spending. In the end then, sequestration is doing exactly what it was designed to do. It is forcing both Republicans and Democrats to give a little bit on their spending priorities to further the important cause of fiscal discipline.
The other issue -- how the cuts are applied -- is trickier. And this is where the accusation that the Obama administration is merely playing politics rings true. Both Democrats and Republicans have decried the indiscriminate, across-the-board cuts. And there’s no denying that the sequestration mechanism is bad policy. But the cuts don’t have to happen that way.
First, the administration probably has the authority to reduce spending in more intelligent ways. This makes its doomsday scenarios completely disingenuous. Jim Capretta and Tevi Troy conclude in a piece published yesterday by the National Review Online that the administration “has the capacity to adjust some, although certainly not all, of the ways in which the sequester is applied.” That means the president could reduce spending that is nonessential and administrative in nature rather than cutting services or other more significant government functions. Additionally, as Capretta and Troy note, Congress has given federal agencies the ability to transfer appropriated money between accounts, which offers the administration yet another way to ensure that cuts are applied more thoughtfully.
Second, negotiators in both the House and Senate have come up with alternatives to give the president the ability to make the spending cuts with a scalpel rather than a meat cleaver. Unfortunately, these alternatives have met with resistance from Democrats. A Senate proposal that was defeated today, for example, would have given the president and his administration a week to reallocate the cuts while keeping the top-line spending reduction the same. Congress would then have had the ability to reject the president’s plan (and restore the cuts as applied by sequestration) through a resolution of disapproval, which would eventually require a two-thirds majority to uphold.
Naturally, some Republicans were worried -- and probably for good reason -- that this flexibility would have given the administration carte blanche to cut Republican priorities while leaving Democratic ones alone. Although this would have been an unfortunate outcome, the move to give the administration greater authority may actually provide Republicans a political advantage in the long run. They’ll be able to say that they did everything they could to mitigate the impact of sequestration on the American people: Not only have House Republicans twice passed bills to replace sequestration with specific cuts of the same magnitude, but they also were actually willing to cede greater authority to President Obama to ensure that the cuts were applied as gently as possible.
Maybe that’s why Senate Majority Leader Harry Reid killed the effort, and why the administration refuses to relent in its insistence that additional tax increases be part of the deal. It seems typical of Washington these days. And so the bickering continues, and the American people are left to wonder whether we’ll ever have a functional federal government again.
(Lanhee Chen, a research fellow at the Hoover Institution who also teaches public policy at Stanford University, was the policy director of Mitt Romney's 2012 presidential campaign. He is a Bloomberg View columnist.)