It is not enough that the country is limping through the weakest recovery in history, that unemployment is stubbornly high, we have had four years in a row of trillion dollar deficits and our debt is at unprecedented levels. We now have a president traveling across the country and scaring Americans with the threat of the sequester.
Because of his disdain of Republicans and the effort it would take to find a bipartisan solution, President Obama has chosen to do an end run around Congress and take his argument directly to the people.
With an assist from the mainstream media, the president is campaigning across the country like Chicken Little, misleading Americans about the origin and impact of the sequester.
Before we look at the absurdity of its impact, let's examine how it came about. In the summer of 2011, the federal government was about to reach its legal limit of borrowing, or debt ceiling. At that time, the debt limit was $14.3 trillion and the government was going to default if it was not allowed to borrow more. In July the Democrats and Republicans reached an agreement known as the Budget Control Act of 2011. The agreement was to raise the debt ceiling as long as there were spending cuts to offset the debt increase.
The sequester was part of the act. It was intended to serve as an incentive for the Joint Select Committee on Deficit Reduction to reach a deal to cut $1.5 trillion in spending over 10 years. The act stipulated that the sequester cuts would take effect at the beginning of 2013, along with the expiration of the Bush tax cuts and the payroll tax cut. Together these policies were known as the fiscal cliff. The president and Congress had 18 months to reach an agreement and failed.
At the 12th hour, a deal was reached to avert the fiscal cliff. The Bush tax cuts were extended for individuals making less than $400,000 (households less than $450,000). For individuals and families above those levels, taxes were raised, expecting to generate about $600 billion in new revenues over 10 years. The deal also raised capital gains taxes and estate taxes. The sequester-mandated budget cuts, required to go into effect on Jan. 1, were postponed for two months, which brings us to where we are today.
While most people agree that the sequester is a bad idea, there is a difference of opinion regarding who's idea it was.
On Nov. 21, 2011, President Obama stated, "Already, some in Congress are trying to undo these automatic spending cuts. My message to them is simple: No. I will veto any effort to get rid of these automatic spending cuts to domestic and defense spending." That statement appeared to be a tacit approval of the terms of the sequester.
Then, on Oct. 22, 2012, during a debate with Mitt Romney, he said "First of all, the sequester is not something that I proposed, it's something that Congress has proposed. It will not happen."
As the date of implementation got closer, President Obama wanted to distance himself from the process by blaming others. His desire to disclaim responsibility has been refuted by several sources.
Author Bob Woodward documents dates and times that show it was the president and budget director Jack Lew's idea. Democratic Sen. Max Baucus said it was Obama's idea and Obama's own press secretary, Jay Carney, confirmed that fact.
So the sequester was President Obama's idea; he threatened to veto any effort to replace the automatic cuts (the House passed two bills to deal with the spending cuts in a more sensible way, which the Senate refused to take up); and now, using the bully pulpit, he is scaring Americans regarding the impact of the spending cuts.
While he blames Republicans for a sequester that was his own idea, he travels the country utilizing more scare tactics then a Lon Chaney-Boris Karloff movie. He claims the draconian and indiscriminate spending cuts across every government department and agency will result in 800,000 job losses, unsafe food, weakened military, fewer first responders, less healthcare, criminals released, airport delays .... You get the idea.
The president is America's CEO. He has produced four consecutive years of trillion dollar deficits, spent $3.6 trillion last year, yet seems incapable of managing a 2.4 percent reduction in incremental spending. He simply can't manage a government with spending levels that are 97.6 percent of current spending. Millions of families and tens of thousands of businesses have had to cut back much more, thanks to the policies of the last four years.
If the sequester-mandated cuts are stupid, unfair and will hurt the economy, can anything be done? Yes!
According to former CBO Director Douglas Holtz-Eakin, "The federal budget is divided into thousands of different accounts, each account gets cut by the same amount regardless of what's in it. So, some accounts are payroll, some accounts that are conferences, travel, whatever it may be. There's no ability to ship money to high-priority projects. Everybody gets cut regardless."
Congress appropriates the money and the executive branch prioritizes spending. The president can request "transfer authority" that would allow all departments and agencies to prioritize the spending cuts in an intelligent and responsible way. Why won't the president make that request? Politics.
If we find that smart budget cuts can be accomplished without destroying the economy, and they can, it would change the dialogue in Washington. If you own the language, you own the argument.
In spite of all the talk and propaganda, with or without transfer authority, the sequester cuts should not be a big deal. Unless there are conscious, strategic reasons to make this look as bad as the president is portraying it, it is doubtful a recession would result.
We are talking about $85 billion in cuts to a $3.6 trillion budget (2.4 percent) and a $16 trillion economy (0.5 percent). The economic significance is about the same as throwing a cocktail party without peanuts. If we can't cut 2.4 percent from our budget, how will we ever make a dent in $1 trillion deficit and $16 trillion of debt?