Tomorrow, March 1st, is not only the deadline for the dreaded Sophomore Plan, but also the deadline for Congress to act, if it so desires, to avoid a trillion-dollar slate of automatic spending cuts. The “sequestration,” as it is called, was set up by Congress as part of the “fiscal cliff” deal at the beginning of this year as an incentive to find places where the federal budget could be trimmed in order to reduce the deficit. If Congress proves itself incapable of finding such cuts (surprise), the sequester will kick in and reduce spending automatically.
What is the sequester?
The idea that the sequester will impact all government programs equally is a misconception. To start, the sequester will only impact discretionary spending, not mandatory spending. The difference between the two types of federal spending is in the name. Mandatory spending, such as spending on Social Security and Medicare, is spending that the government does automatically. For instance, my grandmother is guaranteed receipt of her Social Security check every month. Unless Congress changes the way in which mandatory spending is allocated (known colloquially as “entitlement reform”), Grandma will continue to receive her monthly Social Security check for a certain amount of money. The sequester will not change that.
Discretionary spending is more complicated. This is spending that Congress may adjust from year to year in its annual budget. Defense is the major driver of discretionary spending, but this category also includes other institutions and programs such as the FBI and the Environmental Protection Agency. All of the spending cuts mandated by the sequester will fall on discretionary spending, half on defense and half on other programs.
The total value of spending cuts mandated by the sequester is $1.2 trillion, spread over the next ten years. While the $120 billion per year that these numbers work out to does not seem like a huge proportion of the $3.5 trillion annual federal budget, many are concerned about the disproportionate way that the cuts will fall on the Pentagon and other programs. The 64% of federal spending that is mandatory will not be affected, leaving the $120 billion in annual sequestration cuts to fall on just $1.3 trillion of the federal budget. This amounts to a nearly 10% reduction in spending on these programs over the next ten years – something that has people in Congress and beyond worried.
Who will be hit?
Defense and other discretionary spending account for roughly equal parts of the federal budget – 19% and 17%, respectively. The Budget Control Act of 2011, which set up the sequester, stated that half of the sequestration cuts should go to defense and half should be spread equally among other discretionary programs. However, the Act was silent on which spending the Pentagon and other programs should actually cut, meaning that the exact effect of the sequestration cuts remains uncertain.
Recently, a number of Congressional Republicans have proposed legislation that would shift the responsibility for determining defense cuts onto President Obama, which would in theory reduce their impact, by enabling the President to pick and choose which programs are worthy of being kept intact, rather than letting the cuts happen indiscriminately. But in the eleventh hour, this plan stands little chance of passing Congress.
Because the cuts will happen to discretionary spending and not mandatory spending, many states where the federal government has a strong presence will feel the impact of the cuts more heavily than others. In the Washington Beltway area, for instance, 20% of GDP is dependent on government spending. Given the high number of military installations in Virginia, that part of the capital area is particularly vulnerable to cuts in defense spending.
Who stands where?
Senator Tim Kaine, Democrat of Virginia, has adamantly opposed the sequester, citing potential hiring freezes and furloughs in the Defense Department that would hurt his state’s economy. “There’s no reason that this has to happen,” Kaine, who sits on the Senate Budget Committee that sets fiscal policy, said this weekend. “We just need to find a balanced approach.”
The “balanced approach” Kaine is referring to is a hypothetical compromise plan, a combination of new revenues and spending cuts, that has eluded Congress for so many months. Many members of Congress have endorsed such a plan, but leaders have been silent on which new revenues they would raise and which government programs they would cut in order to reduce the deficit.
In reality, the sequester was never supposed to happen. The authors of the Budget Control Act of 2011 intended to use the threat of it to spur Congress into action on deficit reduction, instead of allowing the cuts to go into effect in the indiscriminate way they will should Congress fail to reach an agreement to avert the sequester before tomorrow.
Some lawmakers, though, believe the sequester is a painful but necessary evil. In order to achieve meaningful deficit reduction, they say, some unpopular cuts must go into effect. This sentiment has become particularly prominent among House Republicans, a group dominated by Tea Party supporters who remain persistent in their pursuit of deficit reduction. Leaders such as Eric Cantor (R-Va.) and Michele Bachmann (R-Minn.) have taken to Twitter to promote their goal of spending reduction with the hashtag of #CutWaste.
Not all Republicans agree, however. In the Senate, many older, more establishment Republicans have decried the cuts, especially to the military, as unconscionable. John McCain (R-AZ), a senior member of the Senate and Vietnam War veteran, has spoken passionately about the need to avert the cuts to the Pentagon and other vital institutions such as the National Institutes of Health, on the grounds that the sequester would devastate America’s national security.
The debate between deficit and defense highlights the difficult political position that sequestration puts Republicans in. A party defined by its emphases on national security and balanced budgets suddenly finds that pursuit of those two goals would lead it down divergent paths. Should the sequester go into effect, the deficit would go down, but military spending would take a hit. Should Congress avert the sequester, the Pentagon budget would remain intact, but the government deficit would be wider. It’s a tradeoff, and different members of the Republican Party often find themselves on different sides of the debate.
Some conservatives, though, dismiss the effect of sequestration on the deficit as negligible. The Heritage Foundation, a conservative think tank, has argued that the sequester does not make any long-term structural changes to the federal budget. After all, the sequester will only affect discretionary spending, but most of the explosive growth in the federal budget expected over the next few years will come from entitlement programs such as Medicare and Social Security that fall under the mandatory spending category. Long-term, therefore, the deficit will still go up to astronomical levels, regardless of whether the sequester goes into effect or not.
Perhaps that reality reveals what the sequester truly is – just pure politics.
