March 4, 2012

It turns out that “budget sequestration,” portrayed as an evenhanded way to spur bipartisan negotiations over budget deficits, is actually a dagger aimed at defense spending. The president and other top administration officials have said the automatic spending cuts required by sequestration are “bad policy.” But they still support “sequestration” as a political tool instead of proposing needed changes that might fulfill its original purpose: pushing Democrats and Republicans into realistic budget negotiations.

The whole sequestration process is something of a sham. Here’s background for the 99.99 percent of Americans who aren’t budget wonks.

Last summer, Congress passed the Budget Control Act (BCA), raising the federal debt ceiling and pledging to cut budget deficits by at least $2.1 trillion from 2012 to 2021. Of that, cuts of $900 billion were included in the BCA — with half from defense. Congress then created a “supercommittee” of 12 of its members to achieve the remaining $1.2 trillion of deficit reduction through more spending cuts or tax increases.

Sequestration aimed to promote agreement by creating an alternative that seemed worse: automatic cuts in defense and non-defense spending. The theory was that the fear of sequester would so upset Republicans (against deep defense cuts) and Democrats (against domestic cuts) that they would negotiate a more acceptable package. By the same logic, Congress would then approve the supercommittee’s plan.

Wrong. The supercommittee didn’t agree, and Congress didn’t vote. With hindsight, this is unsurprising, because the sequester is not neutral. Though defense spending represents 19 percent of the budget in 2012, it would absorb half the cuts. Moreover, many entitlements (Social Security, Medicaid) were excluded from cuts. As supporters of domestic spending, Democrats had less reason to fear sequester. Similarly, the sequestration imposed no automatic tax increases; this appealed to Republicans. And because sequestration itself wouldn’t start until 2013, failing to agree in late 2011 had little political fallout.

So: The sequestration now scheduled for next January means about another $500 billion in military cuts over the decade. These are in addition to the $487 billion in defense reductions already in the BCA and billions of earlier cuts ordered by former defense secretary Robert Gates, who ended some major programs including the F-22 stealth fighter. Nor do these cuts count the automatic reductions occurring from withdrawals from Iraq and Afghanistan. Even without sequester, defense spending is estimated to fall to 13 percent of the budget in 2017.

Defense Secretary Leon Panetta has repeatedly denounced the sequester. In a letter in November to Republican Sens. John McCain of Arizona and Lindsey Graham of South Carolina, he called the prospective cuts “devastating.” After a decade, they would result in “the smallest ground force since 1940, the smallest number of ships since 1915, and the smallest Air Force in its history.” Testifying Feb. 16 before Congress, he said sequestration “would . . . inflict severe damage on our national defense.”

Even the threatened sequester has bad effects, argue defense analysts Michael O’Hanlon of the Brookings Institution and Mackenzie Eaglen of the American Enterprise Institute. It weakens the president’s ability “to signal Iran, North Korea and China that the United States remains as firmly committed to our interests and allies as ever.”

Panetta talks as if sequester won’t occur because the consequences would be so dreadful. Somehow after the election, Congress will reach a better budget agreement. Perhaps. But this smacks of wishful thinking that (wrongly) justifies continuing the sequester in its current form.

Fast forward to November. One party and perhaps both will be embittered by the election’s outcome. Congress will face two and possibly three highly contentious issues: the expiration of the Bush tax cuts of 2001 and 2003 at year-end; the looming start of the sequester; and, possibly, the need to raise the federal debt ceiling (the Bipartisan Policy Center estimates this could occur in November).

The confluence of so many big issues — with timetables — could inspire a grand compromise. It also could produce chaos. The sequester could take effect by default and confusion. The Obama administration’s continuing embrace of the sequester as a political lever, when it clearly hasn’t worked, makes this outcome more, not less, likely.

I have before suggested an alternative: Change the sequester. Don’t use it to gut defense. Instead, split the $1.2 trillion in automatic savings between across-the-board tax increases and automatic cuts in “entitlements,” including Social Security and Medicare. These consequences would truly frighten Republicans and Democrats. They might actually bargain in good faith. Also, advance the sequester’s start to late summer, so that bargaining would precede the election.

This would force the president, Democrats and their Republican opponents to debate long-term budget choices that ought to be at the center of the campaign. It’s unlikely, because our “leaders” are more interested in one-upmanship than governing.