Behind the sequester hype

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The Democrats and Republicans are respectively exaggerating and downplaying the impact of budget sequestration. The situation for US public services is serious, but there is no cause for panic 

In the weeks leading up to the US budget sequester, the public was being told two very different stories about what impact it would have. The White House and some Democrats painted a picture so grim that it seemed the sequester was going to have catastrophic consequences.

On the other hand, Republicans acted as if the sequester was nothing to be worried about and would not have any significant, real world effects.

As is typically the case, the actual effects of the sequester lie between these two extremes. It’s time to set the facts straight.

The sequester was a complete failure as an enforcement mechanism. While it is necessary for something to be done in regards to our fiscal challenge, this is not the best way to go about it. Sequestration takes a one size fits all approach, but not all spending cuts are equal.

In addition, sequestration is focused on defence and other discretionary spending, which is only 34 per cent of the budget.

President Obama warned of immediate impacts from the sequester that would affect emergency responders, federal prosecutors, teachers and educators. On February 19, he remarked, ‘Tens of thousands of parents will have to scramble to find childcare for their kids.’

However, under law, notice of furloughs must be given 30 days prior to when they would begin. This means there is a window of opportunity in which Congress and the White House can sit down and negotiate to try and reach a deal.

Additionally, the continuing resolution, which funds government operations, is set to expire on March 27 so legislation must be passed to avoid a government shutdown. This legislation could include adjustments to the automatic budget cuts, including their amounts, allocations, and timeline.

Meanwhile, Republicans said that the cuts outlined by the sequester are not a large percentage of the total spending projected for fiscal year 2013. Total spending for this fiscal year is projected to be about $3.6 trillion and $85 billion will be cut under sequestration, which is less than 3 percent. But that is not the full picture.

The breakdown of federal spending for fiscal year 2013 is $2.1 trillion in projected mandatory spending and $1.2 trillion in projected discretionary spending, with about $224 billion projected in interest. Most of the cuts will come from discretionary spending, about $68.4 billion, from $1.2 trillion, which is actually a 5.7 percent cut.

Therefore, the sequester cuts are not as minor as Republicans claim. Moreover, all numbers are based on a full fiscal year, but over five months of fiscal year 2013 have already passed so all cuts will be applied in a shorter time frame.

Sequestration should be taken seriously, but it is no cause for panic. The sequester was irresponsible because it was a manufactured crisis, but its occurrence is not all bad.

The American people are tired of promises in connection with spending cuts. There is still a chance that Congress and the President will realise that their inaction is unacceptable, and work to avoid future fiscal ‘cliffs.’ A ‘Grand Bargain’ is needed in 2013, but is unlikely based on the past performance of Washington and President Obama’s approach to date.

Importantly, Washington policymakers are not addressing the three key drivers of the US’s structural deficits: known demographic trends, rising health care costs, and an outdated tax system.

A ‘Grand Bargain’ must address all three of these drivers. We need real leadership from Washington, and we need it soon!

About David M Walker

David M. Walker is the founder and chief executive officer of the Comeback America Initiative and was comptroller general of the United States from 1998 to 2008

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