Fiscal doomsday machine

Tuesday February 26, 2013

On Friday, unless an unexpected political miracle occurs, $85 billion in across-the-board automatic budget cuts known as the "sequester" will go into effect. Right now the two parties are far apart on how to prevent the cuts to both domestic and defense programs that likely would lead to the loss of 700,000 jobs.

These cuts will go into effect for the remainder of this fiscal year, March to September. Because they would come almost halfway through the fiscal year, the White House Office of Management and Budget estimates the impact of the cuts would be around 9 percent for domestic programs and 13 percent for defense programs.

According to figures released Sunday by the White House, Vermont could lose $1.1 million in funding for primary and secondary education; $1.4 million for about 30 teachers, aides and staff who help children with disabilities; $101,000 for job search, assistance, referral, and placement; $331,000 to help improve Vermont's response to public health threats including infectious disease and natural disasters; $270,000 to help prevent and treat substance abuse; and $52,000 for vaccinations. On defense, 1,000 civilian Department of Defense workers would be furloughed and $1 million cut from Army base operation funding. On the environment, the sequester would cut $1 million for water and air quality and $359,000 in grants for fish and wildlife protection.

So how did we get here? The answer goes back to 2011, when, in the words of Nobel Prize winning economist and columnist Paul Krugman, "Republicans engaged in unprecedented hostage-taking, threatening to push America into default by refusing to raise the debt ceiling unless President Barack Obama agreed to a grand bargain on their terms." The president did not hold firm and so both parties signed onto the Budget Control Act, which created a Joint Select Committee on Deficit Reduction -- the "Supercommittee" -- to reach a deal to cut $1.5 trillion in spending over 10 years. To serve as an incentive for this committee to get the job done, the law put in place what Krugman aptly calls a "fiscal doomsday machine" -- 10 years of across-the-board cuts so severe that both sides would have ample incentive to avoid them. Still, with over a year to do so the Supercommittee did not reach an agreement.

The deal between the president and Congress averting the so-called "fiscal cliff" at the end of last year reduced the size of the looming cuts from $109 billion to $84 billion and put off their deadline to March 1. The cuts are ham-handed, not eliminating any wasteful programs like the infamous "bridge to nowhere in Alaska" but cutting the good and the bad by the same percentage.

The New York Times notes that by March 7 those receiving unemployment benefits will see a 9.4 percent reduction in their checks, payments to doctors and others who care for Medicare patients will be reduced, and by April layoffs of civilian defense workers and furloughs of federal air traffic controllers, meat inspectors and others will begin.

At least the sequester will not affect programs such as Medicaid, Social Security, Temporary Assistance for Needy Families (welfare) and the Supplemental Nutritional Assistance Program (food stamps).

President Obama wants to replace the sequester with a balanced plan that increases tax revenues through closing loopholes and raising rates on the wealthy, with spending cuts coming equally from military and domestic programs. Republicans are refusing to consider any tax increases at all, and want to shift some of the burden onto the poorest with cuts to food stamps, children's health insurance and Medicaid spread out over 10 years.

The means of softening the sequester's impact cannot be to increase the already unacceptable level of income inequality in the U.S. A poll last week by USA Today indicates that the public continues to support a balanced mix of tax increases and spending cuts to reduce the deficit.

Beyond this, the time has come to smash the reigning political orthodoxy that the deficit is an immediate threat to our economic recovery. The fact is that the deficit is not an immediate problem; jobs and growth are much more urgent and spending, within limits, is still needed to stimulate the economy. Previous Republican presidents had the sense to actually add government jobs during downturns but such common sense has fled the GOP, and the U.S. now stands on the verge losing several hundred thousand more such jobs. This may or may not derail the fragile economic recovery but undoubtedly will cause much unnecessary pain and leave important tasks undone or done poorly.

Funny how deficit orthodoxy didn't apply when President George W. Bush was funding two wars and an unfunded new prescription drug program while cutting taxes. Indeed, after the 2002 mid-term elections, then-Vice President Dick Cheney famously said "deficits don't matter" to a cabinet secretary when arguing for tax cuts for the wealthy.

For all their strengths, Americans these days don't get around to taking decisive action until a real crisis comes along, and a real crisis -- manufactured and unnecessary as it is -- is about to begin on Friday. When the pain of these cuts take hold, it will be important to remember which party has been holding the country hostage periodically for two years, and is now forcing vastly unpopular across-the-board cuts down the nation's collective throat. The pain this crisis causes may create a national seismic revolt away from tea party orthdoxy and back to economic common sense.

This year is bad enough. Can we afford nine more years of this nonsense?

~ Mark E. Rondeau


If you'd like to leave a comment (or a tip or a question) about this story with the editors, please email us. We also welcome letters to the editor for publication; you can do that by filling out our letters form and submitting it to the newsroom.

Powered by Creative Circle Media Solutions