Unnecessary and reckless fiscal fiasco

Tuesday March 26, 2013

The good news is that last week the House of Representatives passed a continuing budget resolution to keep the government from shutting down completely this Wednesday. Moreover, the bill does shift some money around to blunt the effect of sequestration cuts on such programs as Head Start and cancer research.

The bad news is multifaceted and increasingly depressing. First, the stopgap spending bill underfinances the Obama healthcare law, the Affordable Care Act. Nor does the bill reduce the $85 billion total in sequestration cuts that went into effect on March 1 for the remainder of the fiscal year.

Moreover, as spring turns to summer Americans can look forward to House Republicans again using the need to raise the federal debt ceiling as budget blackmail to ensure budget cuts without any attempt to also increase tax revenues in a balanced plan.

All this is happening as the pain of the sequestration cuts begins to mount. Much has been made on the Right of President Obama supposedly playing Chicken Little in warning about the dire effects of the 8 percent cuts in defense discretionary spending and 5 to 6 percent cuts in non-defense spending. While the president may have overplayed the immediate effect of sequestration, the cumulative effect will be bad enough.

The current going estimate of job losses by the end of the year is between 300,000 to 350,000. Washington D.C. -- "inside the beltway" -- may not be feeling the sequestration cuts, other than the absence of White House tours -- but Main Street is feeling them more and more.

For instance, last week the Federal Aviation Administration released a final list of 149 air traffic control towers that will close at small airports around the country because of the cuts.

U.S. Attorney General Eric Holder, according to an AP story, worries about "the impact the sequester will have on the (Justice Department’s) capacity to prevent terrorism, combat violent crime, partner with states and local law enforcement agencies and protect the judiciary and our most vulnerable citizens."

Not surprisingly, the most severe impact of the sequester is hitting the poor. A 10 percent cut for federal public defenders -- those who represent the poor in federal court -- is certain.

According to the AP, "Public defenders in eastern Virginia will be furloughed for six weeks without pay between April 1 and Sept. 30. In Connecticut, it will be nearly that long -- 28 days. In Arizona, 10 people have been laid off and the remaining staff will be furloughed for nine days. In Massachusetts, Rhode Island and New Hampshire, it will be more than three weeks."

Though several programs such as Medicare, Food Stamps and others for those in need for been exempted from sequestration, one that has not is Indian Health Services, which serves some of the poorest people in the U.S. and will be cut 5 percent this year and even more in coming years if sequestration continues.

Elsewhere on the budget front, last week the House and Senate both passed proposed budgets for 2014. The versions passed by the Republican-controlled House and the Democrat-controlled Senate are vastly different.

The former, yet another budget from House Budget Committee chairman and failed 2012 vice-presidential candidate Paul Ryan, is a radical-right wish list with absolutely no chance of passage. It would turn Medicare into a voucher program, repeal the Affordable Care Act, make the tax code more regressive, and for good measure also repeal the modest Wall Street regulatory reforms adopted during Obama’s first term.

The Senate plan, which also will not be passed as is, includes $100 billion in immediate infrastructure spending to boost the economy, would trim government spending modestly, provide rules for a tax code overhaul, and raise $975 billion in new revenue.

Whether the light-years-apart House and Senate 2014 budgets can be reconciled when Congress comes back from a two-week recess is doubtful.

Our ongoing fiscal fiasco, with crisis deadline after depressing crisis deadline, has two major causes. The main cause is GOP tea party fanaticism in the House majority, a mixture of hatred of government and taxes, new-found dedication to deficit reduction, reflexive revulsion toward anything proposed by President Obama, and most of all fear of challenges in Republican primaries back home.

The second cause is the parade of Democrats who have joined the deficit and austerity bandwagon, with the result that the vast majority of Americans are unaware that cutting government spending sharply during the economic downturn has been a failure in nation after nation in Europe.

In addition, the myths that the budget deficit is an immediate crisis and that federal government spending is out of control are also held by way too many people for fiscal sanity to be restored any time soon.

In fact, however, the Congressional Budget Office reported on Feb. 5 -- before the sequester took effect -- that "If current laws that govern federal taxes and spending do not change, the budget deficit will shrink this year to $845 billion, or 5.3 percent of gross domestic product (GDP), its smallest size since 2008." The CBO’s baseline projections, in fact, show deficits continuring to shrink over the next few years, falling to 2.4 percent of GDP by 2015.

The result of the deliberate obstruction and malfeasance, aided by wrongheaded prevailing wisdom, now raging in Washington is that our fragile but promising economic recovery is at risk. In February, the economy added more jobs than expected, 236,000. Job losses from sequestration cuts and the depressive effects of less money circulating in the country could send the economy back into a tailspin.

The most infuriating thing is that all of this turmoil is unnecessary.

~ Mark E. Rondeau


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