For all the talk about whether the Super Colossal Super Committee will reach any sort of consensus to avoid "triggering" "automatic" "cuts" (quotes denote falsehoods here), it's worth pausing to see just how bad the supposedly draconian reductions in spending would be if the mandatory "sequestration" would take place. As you may recall, as part of the debt-ceiling deal reached in August, Congress pulled together a rag-tag group of misfits to come up with some measly cuts spread over a decade to off-set a bump in the debt the government can take on through 2012. The committee is supposed to offer up $1.5 trillion in cuts over the next decade by the end of November, and the government has to sign off on them by year's end. Otherwise, an additional $1.2 trillion bucks will be phased in over 10 years, starting in 2013.
So what would it look like if Congress—the same group that hasn't managed to pass a budget in a historically long period of time—fails this test? What would an additional $1.2 trillion cuts spread over a decade look like compared to projected spending without the trims? Remember that we're spending on the order of $3.5 trillion to $3.8 trillion a year right now.
The sequester is an automatic budget enforcement mechanism triggered when the Joint Select Committee on Deficit Reduction fails to enact legislation to reduce the deficit by $1.2 trillion over ten years. Instead of simply passing appropriated funds to the agencies, the U.S. Treasury "sequesters" the difference between the cap set in the BCA and the amount appropriated.
The whole idea of the sequester threat, of course, is precisely that it is so awful it will compel the committee's participants and warring Democrats and Republicans to work together. The sequester needs to be that outer-space alien invasion that Paul Krugman and others steeped in Watchmen comics envision as the way to bring unity out of dischord.
But it turns out that the sword of Damocles hanging over the heads of such great statesmen as John Kerry, Patty Murray, Fred Upton, and Jon Kyl is about as threatening as an infant's fingernail clipper:
Changes in spending from sequestration result in new budget projections below the CBO's baseline projection of spending based on current law. The federal government would spend $3.62 trillion in the first year with sequestration versus the $3.69 trillion projected by CBO. By 2021, the government would spend $5.26 trillion versus the $5.41 trillion projected. Overall, without a sequester, federal spending would increase $1.7 trillion over those ten years (blue line). With a sequester, federal spending would increase over ten years by $1.6 trillion (red line).
Does anyone seriously wonder why we are so out of money?