Not long ago, the nation was transfixed by $85 billion of looming, across the board cuts in federal spending that President Obama and many others predicted would tank the economy, undermine defense and force drastic cuts in government programs and personnel.
Those automatic cuts or sequestration are still chipping away at the government’s discretionary spending on defense and domestic programs, but they have been largely eclipsed by the government shutdown and threat of a first-ever default on the U.S. debt.
The cuts forced widespread furloughs of federal workers before the shutdown, prompted billions of dollars in cuts in Defense Department weapons contracts, and sharply curtailed government services and programs to average Americans. Americans reliant upon federally funded programs like Head Start, Meals on Wheels and housing assistance all have felt the bite of sequestration.
Just last month, the Department of Health and Human Services announced that the Head Start program, which provides services like meals, transportation and medical care for low-income pre-school aged children, had cut services for more than 57,000 children. The $8 billion budget for Head Start has already been slashed by 5.27 percent, and it’s likely to absorb even more cuts if the second wave of sequestration takes effect.
While the cuts pose increased hardships for the poor earning less than $30,000 a year, 74 percent of Americans recently surveyed by the United Technologies/National Journal Congressional Connection Poll said they have not noticed any effects of the sequester cuts that took effect in March.
THE BACK STORY
The sequester was designed during the 2011 debt-ceiling negotiations as a poison pill that no one thought would ever take effect. The idea was that mindless, across the board cuts would be so unappealing that Washington lawmakers would be motivated to replace them with new and less-disruptive reductions. The goal of the 2011 Budget Control Act was to achieve about $2.5 trillion of savings over the coming decade by meeting strict spending caps that would gradually constrict the budget.
But when a “super committee” of House and Senate Republican and Democratic leaders subsequently failed to agree on about $1.5 trillion of those overall savings, the first installment of the automatic cuts began to kick in last March.
The early assessments of the first-year impact of these automatic cuts have been highly mixed. Many conservatives who once opposed sequestration because of its adverse impact on defense programs now are singing its praises because of its enforced savings.
There are some indications that the sequester reigns as the only real budget discipline in Washington. Total federal outlays are down from a high of $3.6 trillion in fiscal 2011 to an estimated $3.45 trillion in the 2013 fiscal year that ends on September 30. Assuming no recession and adherence to the caps, federal expenditures will continue to shrink as a share of the economy over the remainder of the Obama presidency.
“Sequester is the best political leverage Republicans have to gain a concession from Democrats—on Obamacare or anything else,” the Wall Street Journal’s conservative editorial page wrote recently. “The ever-tighter spending caps on domestic discretionary spending are squeezing the liberal constituencies that live off government. As the likes of Planned Parenthood and welfare and other transfer payments get squeezed, the political pressure increases on Democrats to give up something tangible in return for easing the caps.
The federal government tightened its belt to the tune of $85.5 billion in the fiscal year that ended Sept. 30, and will cut another $100 billion in the coming year unless Republicans and Democrats agree to blunt or alter the impact of the sequester as part of a larger budget deal to end the government shutdown and debt crisis.
Many Democrats and budget policy groups argue that whatever benefits might have been derived from the spending caps were undercut by the effects of mindless, across the board cuts under the sequester. Congress allowed some changes in the law that granted the Defense Department and other agencies more flexibility in prioritizing cuts and furloughing workers. And lawmakers prevented FAA furloughs that would have led to long lines and delays at the nation’s airports. But many agencies struggled to keep their doors open.
Joseph Minarik, a former Clinton administration budget official who is now senior vice president of the Committee for Economic Development, acknowledges that the sequester has had a “marginal” adverse impact on the economy so far. He said, “The issue I think is much more serious in the ability of the federal government to do its job. In practice, I don’t see a silver lining to the sequester, and if I were a critic of government to the extent I wanted to see significant spending reductions implemented, I would not be satisfied with the way it’s being done.”
Other budget experts take an even dimmer view of the sequester, warning that it is having a highly corrosive effect on national security and economic growth.
In a new study entitled “From Merely Stupid to Dangerous,” the Bipartisan Policy Center warns that essential government services, especially in defense, are not being performed, and will not be if sequester continues. The effects of sequester might not be noticed by many people yet, the report states, but that's because most of the cuts have not yet been implemented.
“While there is still plenty of money for personnel, operations and weapons systems, the hardest hit portions of the defense budget include funding for research and development, procurement and operations and maintenance,” the study states.
The study was co-chaired by former Sens. Pete V. Domenici (R-NM) and Charles Robb (D-VA), and businessman Mort Zuckerman.
According to the report, it isn’t the size of either the federal budget or the defense budget that poses problems, but the dramatic change in the composition of those budgets over the decade.
“Entitlements are pushing out investments,” the study said. “And sequester worsens that trend.”
While gradually eating away at crucial government activities, the report says, sequestration is barely reducing the debt; it exacerbates budget structure problems, diminishes national security and hampers economic recovery.
“Effectively, sequester is a partial government shutdown lasting eight more years,” the study says.