Government Spending

Why the Sequestration Cuts Shouldn't Be Part of Any Larger Fiscal Cliff Deal-Making.

So we're facing a "fiscal cliff," Ben Bernanke's term for the following things scheduled to take place on January 1, 2013.

|

So we're facing a "fiscal cliff," Ben Bernanke's term for the following things scheduled to take place on January 1, 2013:

…the expiration of a payroll-tax cut, the expiration of the Bush-era tax cuts, and the advent of mandatory spending cuts known as "sequestration."

That succinct summary is courtesy of Temple Law's Jan C. Ting, who also lays out the mechanics of sequestration with equal concision in the Philadelphia Inquirer:

…as part of last year's agreement to raise the federal debt ceiling, Congress pledged to cut spending by $1.2 trillion over 10 years. It agreed that if neither a congressional "supercommittee" nor Congress itself could designate the cuts by the end of 2012, they would happen automatically, divided evenly between defense and non-defense spending. These automatic cuts are known as sequestration.

As every tradesman, businessman, cook, and student knows, it's helpful to break complex tasks down to smaller, complex chunks that are easier to handle. When you apply that thinking to the fiscal cliff, one thing immediately becomes apparent: Other than coincidental timing, the sequestration cuts have nothing to do with the payroll tax cut and the Bush tax rates.

In fact, all three major components to the cliff are clearly self-contained and should be treated on their own, rather than as some sort of an OMG FML situation that seems to be overwhelming a federal government that hasn't passed a budget since 2009.

Back to sequestration: The cuts that will kick in in 2013 are the result of an agreement brokered only a year-plus-change ago to goose up the credit limit of the U.S. government. Back in 2011, the feds got the right to put another $2 trillion on the nation's Discover card in exchange for making $900 billion in immediate cuts and another $1.2 trillion in cuts from expected spending over the next decade.

There should be absolutely no room for negotiating away the pathetically small amount of spending reduction the government imposed on itself to raise the debt-ceiling by $2 trillion. For god's sake, we're talking about trims of around $110 billion annually. The 2013 budget alone will spend about $3.8 trillion and using constant dollars, federal spending has increased 50 percent over the last decade (see table 1.3, center column, page 27). The simple fact—amply illustrated by the chart somewhere to the right—is that sequestration cuts, split between defense and non-defense discretionary spending, amount to very little in terms of total federal spending. If such tiny, wafer-thin cuts cannot in fact be enforced, then we should simply give up now and really max out the credit cards and party like there's no tomorrow. Seriously, go ahead and just finish the whole tub of ice cream already.

The one good argument against the mechanics of sequestration is that it enforces across-the-board cuts that take indiscriminately from the overall budget in each affected area. That's not smart but fear of that sort of jagged-saw approach to budgets was supposed to be one of the spurs to get the so-called Super Committee to really roll up its shirtsleeves and reach an agreement. It didn't work, of course, which is a testament to fecklessness of the people involved.

In view of the fact that the holiday season is upon us, Congress might make one slight alteration to the way in which the cuts would be imposed: allow the affected units of government to decide how to make the cuts. This would let Defense Secretary Leon Panetta— last seen hyperventilating into a paper bag over how any real and imagined cuts to the military would be "devastating"—to take a knee and figure out which less-than-defensible outlays he would prefer to cut. According to the Office of Management and Budget (OMB), Panetta needs to come up with about $55 billion in cuts from a base amount of $550 billion (see page 7; note that the total Defense budget is much higher than that amount, but some military spending in not subject to sequester). If he can't do that in a single day, he should be stripped of his office and sent back to the CIA, which I understand is looking for new leadership.

The OMB has helpfully prepared an encyclopedic guide to what other government functions are either exempt or open to sequestration, with relevant dollar amounts listed. 

For starters, Congress could zero out the salary and support staff for Sen. Kent Conrad (D-N.D.), who more than any single person in the country is the reason Congress hasn't passed a federal budget in so long. Conrad—inevitably described as a "budget hawk" and a "deficit hawk"—remains the chairman of the Senate Budget Committee until he retires next year. He has not produced a document to be voted on in years and, in a charateristically delayed bid to join the crew of the Scooby-Doo All-Star Laff-A-Lympics, he explained his decision not to seek re-election by saying he would rather "spend my time and energy trying to focus on solving the nation's budget woes than be distracted by another campaign." That's comedy gold and if I'd be worried about my starting position on the Yogi Yahooeys if I were Huckleberry Hound or Grape Ape.

To be sure, zeroing out Conrad's last few paychecks and firing his staff would only amount to loose change and be purely symbolic. But then again, that's all the sequestration cuts amount to. So it seems like a good start. Given the spade work that OMB has already done, Congress might impose a deadline for any discretion-based sequestration-related trims to be announced by December 1, thereby giving maximum time for those affected to figure out their next moves. That would also give Congress more time to deal with the other fiscal cliff components before year's end. If it wants to.

Advertisement

NEXT: A.M. Links: Charter Schools Outperforming Public Schools, Rand Paul Says GOP At Risk of Extinction, Chinese Daily Reports Onion's Kim Jong Un Sexiest Man Alive Story

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. “Fiscal Cliff” means something different to Senators than it does to you and me.

  2. I assume there will be an all-out push to make the GOP own the payroll tax increase.

    1. The Democrats are far more adept at politics than the stupid party. They give out the free stuff and leave it to the dummies to figure out how to pay for it.

      1. We’re still trying to pay for NCLB, the Iraq War, Medicare Part D, TSA and Homeland Security, and TARP.

        GOP free stuff costs the most.

        1. Again, isn’t there some GOP website where you could discuss your problems with the GOP with actual Republicans instead of coming here and harassing people who didn’t vote for them?

          1. No, because they’d ban his dumbass. My guess is that he and Tony are still able to post because Nick and Matt hate us.

            1. They do? (runs out sobbing)

              1. Actually Nick said that he was pretty cool with everyone else, but that he hated you, so everyone had to be punished.

                1. Well, I did start the whole “The Jacket is a parasitic lifeform from beyond space and time” running joke, so I guess that’s fair.

                  1. It was a joke?

                  2. Parasitic? How dare you?!

          2. He’s got a point this time, though. There was an article yesterday showing that per capita spending tends to grow under Republican presidents and then hold steady under Democrat presidents.

            The real problem is that neither party is willing to tackle entitlements. A generation from now those are the only programs that are going to matter fiscally. Everything else will be lost in the noise.

            1. I’m just a simple caveman Objectivist, and your new math confuses and scares me, but the budget under President Bush went up roughly 1 trillion in eight years, and the budget under President Obama has gone up 1 trillion in five.

              1. https://reason.com/blog/2012/09…..eral-spend

                There was a big jump in real, per capita spending at the beginning of Obama’s term, that was partly Bush’s responsibility. Since then, real per capita spending has been relatively stable. Granted, you could give credit for the 90’s to the Republican Congress, but Clinton still had to sign everything.

                Now it looks like Obama will follow in those footsteps. He’ll lock in the spending gains that came under Bush II.

                1. I think the main thing to take away is that Republicans are good at controlling Democrat spending increases, while Democrats don’t care one whit about spending increases.

                2. that was partly Bush’s responsibility

                  Bush was president for 19 days in 2009. BO was totally capable of preventing virtually every spending increase that occurred that year.

                  1. That’s my whole point, Tulpa. Bush (R) set the spending in motion and Obama (D) refused to kill it.

                    I’m not saying Obama is without fault.

                3. Since then, real per capita spending has been relatively stable

                  If you include the two “one time” stimulus packages in baseline spending, sure.

                  1. That the stimuli were supposed to be “one-time” is irrelevant. The fact is that they are now on the budget (if you can call a bunch of continuing resolutions a “budget”.)

              2. The trickery that “some guy” is using is that BO’s spending increases came on top of a bigger baseline, so if you look at percentage increases, he’s not much higher than Bush, even though in absolute terms he’s much worse.

                1. What trickery? I never talked about percentages. I referenced an article FROM REASON. If I’m being tricky then so is Nick Gillespie.

        2. Who are the democrats that voted against all of those things? Do you have a list?

          1. Ron Paul… oh wait.

        3. In fairness, a lot of that crap had bipartisan support.

        4. Surely no Democrat, pure as the freshly fallen snow, would have voted for any of this shit.

          Is the Democrat controlled Senate ready to pass a bill repealing it all?

        5. I’m still scratching my head at the notion that “TSA and Homeland Security” is (a) “free stuff” and (b) “costs more”.

          I think the budget for DHS is like 90 billion. What’s HHS’s budget going to look like when PPACA gets into full swing?

          1. TSA is free breast and testicular exams!

        6. We’re still trying to pay for NCLB, the Iraq War, Medicare Part D, TSA and Homeland Security, and TARP.

          Maybe you should be lobbying your guys to get rid of all that stuff.

        7. Were Social Security and Medicare Republican ideas? Because they cost the most.

  3. Why do they call it “sequestration”? We vote men to do it. The men don’t do it… they should call it menstruation. That’s gold, Jerry! GOLD!

    1. They should call it Roundtine.

      I know, I’m huge.

  4. Defense Secretary Leon Panetta – last seen hyperventilating into a paper bag over how any real and imagined cuts to the military would be “devastating”

    Most excellent.

    1. I never could figure that out – he has no idea what end of a rifle the bullet comes out of, so I thought he was brought in to do one thing, and one thing only – cut.

      1. It’s easier for an ignoramus to cheerlead bloat than trying to cut it back

  5. Political theater. There will be a last minute compromise. There always is.

    1. And the compromise will just push off the decisions for a couple years.

      1. Will it involve the formation of a super-duper extra special committee to do the work the super committee couldn’t? NEEDS MOAR COMMITTEEZ

        1. If I were a betting man, that is the way I would wager. BLUE RIBBON COMMITTEE!

          1. They’ll bumb it up to a purple ribbon committee.

      2. And will raise taxes, reduce deductions, and protect spending.

  6. …it’s helpful to break complex tasks down to smaller, complex chunks that are easier to handle.

    WRONG. As the passing of PPACA reinforced to Congress, you cobble together every random thought your lobbyists have and ram through a huge piece of legislation that nobody could understand even if they bothered to read it before voting for it.

    1. You forgot to mention that while ramming it through you make sure that it’s done so quickly no one has time to read it (if they wanted to).

      1. Oh, also, make sure to remove any severability clauses.

        1. Why would you need severability clauses when everything is so obviously constitutional?

          1. Exactly. And by removing them, you save on printing. Thus reducing the deficit.

  7. all three major components to the cliff are clearly self-contained and should be treated on their own

    But that would complicate the all-important blame shifting exercises.
    The only way truly important legislation can be achieved in the twentifirst century is if a lot of uncoordinated pieces are randomly jumbled together into an incoherent monstrosity which can only be contemplated in its totality after passage.

    You know, “We won’t/can’t/don’wanna know what’s in it until we pass it!”

  8. [Conrad] explained his decision not to seek re-election by saying he would rather “spend my time and energy trying to focus on solving the nation’s budget woes than be distracted by another campaign.”

    It’s awfully hard to produce a budget when your mind is on the next election as soon as 3 years away.

    1. Yep, it’s all about who’s in power to grab what spoils remain of the crumbling empire.

    2. To be fair he is only “trying” to focus on the budget, not actually create and pass one.

  9. I have been sayin it in response to a couple of articles here about the Eurotardzone crisis and what we are learning from it.

    What we have learned is that we can teeter on the very edge of the fiscal cliff for infinity and our great leaders can do excellent theatrical posturing by getting together every so often to ‘save us from the brink’ by doing some last minute deal that consists basically of pandering to special interests and raising taxes through some means, basically same ol same ol dressed up as salvation, while we continue to expand the federal government and pile on debt.

    That is our near future, so bend over and welcome your new masters of austerity, comrades.

    1. Maybe it’s okay so long as the rest of the world is teetering on the brink with you?

  10. The Laff-a-Lympics riff is pure solid orphan-mined platinum stuff. Thanks for that, Nick. I always rooted for the Really Rottens myself.

    1. You might enjoy Robot Chicken’s Laff-A-Munich.

  11. The republicans are just looking for a reason to fold. Boner has given up, you can see it. This is all just theatrics, Obama will have his way with them.

    1. I wish the Rs would just get it over with and agree to everything that the Dems want, everything, every tax increase, every energy and job killing regulation, every progressive idea that they can dream up, just bring it on. That way the collapse comes sooner, because there is no way back now, it’s just a matter of how long the disease lasts before it reaches it’s terminal end.

      1. Be happy, because I think you’re getting your wish. The GOP DOES pretty much follow the Dems on spending. The only difference is that they pretend not to.

      2. I had this notion just the other day. Thinking about it I concluded the only way it would work is to clearly state the intentions up front.

        “We the Republican Party are going to give the Dems everything they ask for to prove to the American people, once and for all, that the results of their policies will be economically catastrophic.”

        Let it all come down with no way to shift the blame.

    2. Yes, the republicans need so political Viagra because it is pretty clear their Boner has gone soft.

    3. Damn those people Reason railed against all summer for not doing what Reason wants.

      1. It’s all Reason’s fault.

        Cancel Tulpa’s subscription, and somebody get him a hankie.

      2. Damn those people Reason railed against all summer for not doing what Reason wants.

        Seriously, shouldn’t they be doing what they want?

        And here’s the deal: Reason (presumably) railed against them…because they don’t do anything about spending. And now Reason (presumably) is mad at them because, despite their pledges, they aren’t going to do anything to cut spending.

        It’s completely consistent, Tulpa.

      3. You’re completely right, Tulpa. How dare Reason criticize the people who claim to be in favor of small government but vote to increase spending at every opportunity?!! You really need to find another idiotic talking point, this one is getting old.

    4. Re: Tim,

      The republicans are just looking for a reason to fold.

      I beg to differ – they already caved. They’re looking for an excuse to tell their soon-to-be-pissed constituents, but they acquiesced as quickly as a high school girl that wants to lose her virginity.

  12. “Given the spade work that OMB has already done,”

    Raaaaaaaaacist!

    1. Occupy My Butt?

      1. Office of Muhfuckin Brothas.

  13. …as part of last year’s agreement to raise the federal debt ceiling, Congress pledged to cut spending by $1.2 trillion over 10 years.

    Bullshit. They wouldn’t be cutting spending, they’d be cutting budget numbers. The fact that the GOP isn’t hammering on this distinction is concrete proof that, as repeatedly said above, this kerfuffle is all theatrics.

  14. The reporting on the “fiscal cliff” is sloppy at best. From the Rand Paul article in the AM Lynx: “Paul also weighed in on the fiscal cliff?a series of tax hikes and spending cuts to kick in next year if Congress fails to reach a deficit-reduction deal.”

    The tax hikes are not related to any deficit reduction deal.

  15. No, fuck you, cut spending.

    1. I endorse this position.

      I don’t think massive spending cuts are such a politically impossible task. But even if politicians will suffer electorally, it’s their fucking job to keep the government solvent. Among other responsibilities they also repudiate on a daily basis.

      1. Perhaps if Congressmen were only granted a single term in office, they’d be more apt to make the hard decisions.

  16. it’s their fucking job to keep the government solvent.

    That can’t be right. I thought their job was to go to cocktail parties and shovel money into the boiler of the Ship of State.

    1. If the boss doesn’t keep an eye on things, that’s what happens when he hires unqualified employees.

    2. Wait until thos money bunkers really start taking on water.

  17. Across the board cuts are the only ones that will ever pass. Targeted cuts always gore some special interest pig that will squeal.

Please to post comments

Comments are closed.