Sequester Hits: Doom and Gloom, or Ho Hum?

by John Lawrence


Dawn will break on March 1, and with it, the most earthshaking event on that date since the great avalanche of 1910 in Washington State that killed 96 people.  One of two results will almost certainly occur, each with significant political ramifications for both parties in Congress and for President Obama as well.

 One result is the cataclysm that many in the House, and the Obama Administration, have been warning of: 700,000 jobs lost, according to Democratic Leader Nancy Pelosi who cites the findings of the Congressional Budget Office, including layoffs of teachers, TSA agents, and meat inspectors; an anchor dropped on the fiscal foot of a tentative recovery; a gaping wound in the national defense capability.  And without doubt, there will be impacts on these and other programs since $85 billion dollars will be sliced out of the budget, across the board, with little regard for need, waste or merit.

 But the other possibility is that not very much happens, at least, not right away.  Many believe the Administration has unspecified capability to maneuver around the sweeping nature of the cuts and soften the blow temporarily until a longer term solution is reached at the end of March, when for good measure, the authority for all federal spending expires.  Many could be left wondering why there was such caterwauling, such predictions of dire gloom, should the sequester take effect.  Some will be quick to assert that the absence of a cataclysmic reaction proves the extent of wasteful spending in the federal budget.

There is no way to take $85 billion out of federal programs without there being an impact.  And in one respect, a painful outcome, one affecting an array of federal programs, state and local governments, urban and rural constituencies, as well as the Defense Department, could be educational since voters will realize  that welfare and foreign aid –perennially the only federal programs voters want cut – do not constitute a significant component of federal spending. 

 It is reasonable to have believed that Congress would sail into the sequestration storm with sails at full mast.  The impact, while far from insignificant, is unlikely to be immediate and devastating  either to individuals or to the economy.  Sequestration will not have the instantaneous dire consequences of recently confronted, and therefore avoided, crises like the Fiscal Cliff, the Debt Ceiling, or Government Shutdown.  In each of those cases, markets were trembling, the economic reputation of the country was at stake, and the frail recovery was jeopardized by the failure to enact some type of stand-by measure.

But sequestration does not stir comparable fears.  Witness the stock market – not a failsafe bellweather to be sure, but if we were facing the downgrading of our bond rating or a new recession, it is unlikely the Dow Jones would be parked around 14,000.  Part of the lack of panic is due to the lack of surprise – after all, we have known for over a year and a half this day could (and likely would) arrive.  And in part, the lack of panic is the result of most serious observers knowing that the cuts are unlikely to be devastating in the short run, and that if their impact is greater than might be anticipated, then Congress will likely respond as it has with other imminent crises and devise an alternative

Congress’ unwillingness to work with the Obama Administration to find an alternative to sequestration lies predominantly with House Republicans who have two major reasons for their well-documented ambivalence.  First, sequestration means securing spending cuts without having to accept the tax increases that the President and congressional Democrats have rightly insisted be components of all deficit reduction efforts.  Republicans live to cut taxes, especially for the rich, and have demonstrated repeatedly over the past two years that there is almost nothing they will not sacrifice to realize that goal, including the country’s bond rating and the post-recession economic recovery.

A second reason Republicans do not fear embracing sequestration is that like going over the Fiscal Cliff, defaulting on the debt, or shutting down the government (all avoided in the 112th Congress only because House Democrats provided the votes when Boehner couldn’t), sequestration “proves” that government does not work. And nothing is closer to the Tea Party’s heart than demonstrating the inability of the federal government to avoid a manufactured crisis.  So employing an Orwellian motif, failure equals success, by heightening public disgust and cynicism, thereby undermining the credibility of those who favor greater government action, be that spending, raising revenues, regulation or whatever. 

Congress always likes to play close to the edge.  The most exciting period in any session is the last night or two when increasingly angry, determined or frantic legislators clash with their colleagues to construct the passable compromise before the clock runs out.  And in the past, usually they found that middle ground (or that set of trade-offs), because that is the nature of the process: the cliff heightened the game, but no sane person wanted to plunge over.   Not so the lemming-like Tea Party Republicans. For them, running close to the edge is not a maneuver, it is warming up.  Plunging over the cliff, with whatever consequences, is an accomplishment because they know few critics will distinguish between those with their lead foot on the accelerator and those frantically grabbing or the wheel to steer back towards reason.

While Democrats have been nearly uniform in their desire to avoid sequestration, some may be willing to take a wait and see attitude for two reasons.  First, many low-income programs are protected from sequestration and will not have to absorb punishing cuts.  (Yes, Social Security Administration salaries will be impacted, but not benefits, and seniors do not typically rise up in arms because the pay of office workers is docked.) Second, sequestration imposes cuts in military spending that many liberals have advocated for a half century.  And sequestration does not require liberals to give up a dime in entitlement benefits or risk low-income programs to secure tens of billions in Defense Department cuts. 

So is the impact of sequestration being hyped for political benefit? No, there are genuine reasons for concern, though the massive impact might take a while to manifest itself.  And that is why despite all the finger-pointing and rhetoric, it is more likely that we will live with sequestration for a while and assess its real impacts before rushing to fix it.  Polling suggests President Obama and congressional Democrats have won the message war; the public is likely to blame Republicans by an 18 point margin if damaging effects are felt from unleashing sequestration.  Now what remains to be seen how damaging the impacts are after Friday and whether Republicans are motivated to revisit their opposition to a balanced alternative to indiscriminate across-the-board cuts.