Wednesday, February 27, 2013

The Slowest Train-Wreck of All Time

In a couple of days, the sequester of spending will begin to apply.  This reduction in spending--a percentage of the total, with entitlement areas excluded--had been agreed by Congress and the President in 2011 as a compromise to end the debt ceiling crisis of that time.  The across-the-board reductions were supposed to be replaced by a bipartisan, bicameral Congressional Super-committee's decisions on prudent deficit reduction measures, but they could come to no agreement by the time deadline they were given.  The cuts were postponed, kicked down the road, but there was still no agreement on spending priorities, and so we are come to this.  Two trains heading toward each other on the same track, a game of low-speed chicken.

Both sides have taken similar positions with regard to the impending exposition of mismanagement:  predicting dire consequences, doing nothing to avoid it, blaming the other side.  The Republicans are more focused on the deterioration of military readiness through cuts to Pentagon spending, the Democrats on the loss of jobs that will result, directly and indirectly, from the reductions in domestic spending.

Both have exaggerated the impact, particularly in the short run.  The $85 billion in annual reductions are crowded into a few months for fiscal 2013, so think of it as a 4-5% reduction for a few months in the affected programs, then moving to a lower rate of reduction for future years, if necessary.  A fairly high level of reduction, and its indiscriminate nature will be unfortunate, but the effects will barely be noticeable for a month or two--there is that much slack in the Federal government's work effort.  When the TSA lines at the airports get longer (spring break, maybe?), when the checks to beneficiaries, veterans, military contractors are not processed in a timely manner, then the public will begin to notice.

And, it appears, a majority of them will blame the Congressional Republicans for the lack of legislative effectiveness.  In the longer run, there is much risk for the Democrats, as they will ultimately be blamed if the economy stalls.  Also, in the long run, governmental ineptness, if it happens, may work for the Republicans' benefit; the one thing that they can all agree upon is the superior effectiveness of the private sector over the public sector in all activities, so the argument that "government isn't working, so let there be less of it" is right in their wheelhouse.

The Democrats, led by President Obama's White House, are well aware of this.  The negotiation plan is to let the sequestering begin on March 1, and work toward agreement on broad outlines of spending, with cuts of about this size built in, as part of a budgetary agreement to replace the continuing resolution, under which Federal spending has been operating for the last two years, and which is scheduled to end in late March.  Apparently there could be general agreement on where those cuts should fall and where they shouldn't.

The hangup is not where to cut the spending, but around the issues of closing tax loopholes and infrastructure investment.  I feel that Obama would give a green light to agreement on the cuts, if there is a second agreement that infrastructure would be funded to the extent that tax reform savings can be identified.  That will be a tough one to sell to the Republicans, though.

The Republicans also seem aware that they are, so far, being played.  They remind me of a pit bull trained never to release the hold of what's in its teeth, even when what is in its mouth is its own tail.

1 comment:

Anonymous said...

Mar. 3: According to President Obama, the cuts required for fiscal 2013 are 9% on the affected domestic programs and 13% for the affected defense programs. I acept the calculation; I based mine on a different denominator. The rest of the argument remains.