Just a few weeks ago, as part of the fiscal-cliff deal, Congress approved $620 billion in tax hikes over ten years with no spending cuts. That means that to meet the 3-to-1 ratio, we should have a corresponding $1.86 trillion in spending cuts. But the sequester cuts just $1.72 trillion in spending over 10 years, according to Portman’s office. That is a ratio of just 2.78-to-1. We would need to cut an additional $138 billion, Portman calculates, in order to meet the 3-to-1 ratio recommended by Simpson-Bowles.
If anything, the spending cuts Congress enacted in the sequester are not too deep — they are not deep enough.
There is nothing wrong with cutting $1.72 trillion from the federal budget. The problem with the sequester is that the cuts were not targeted — hitting vital programs (like national defense) and wasteful ones with equal force. For weeks, Obama tried to use the indiscriminate nature of the sequester to bludgeon Republicans into replacing some of the cuts with new tax revenues. But his dire warnings that criminals would be set free, teachers laid off, meat inspectors thrown off the job, air traffic controllers forced to abandon their posts backfired. It turned out most of his claims were exaggerated or flat untrue. And the false threats failed to deter Republicans from holding the line and demanding that the spending cuts be enacted in their entirety.
Now it appears Obama has backed down. After issuing apocalyptic warnings of the plagues and pestilence would descend upon the land if the sequester took effect, on Friday he declared, “This is not going to be [an] apocalypse, as some people have said.” (Some people, Mr. President?) Instead of the end of the world, the sequester is now “just dumb.”
Well the “dumbness” of the sequester can easily be fixed — and it looks like Obama and Congressional Republicans are going to do that. The New York Times reports that “the president and his Republican adversaries said they would not carry the fight over the cuts into a coming legislative effort to finance the government through Sept. 30, essentially declaring a cease-fire in the budget wars that have dominated Washington since 2011.” Instead of using the threat of a government shut down on March 27 to force Republicans to replace the sequester with more spending and higher taxes, Obama has apparently agreed to sign a continuing resolution that locks in the sequester levels of spending and gives him flexibility to choose how and where to cut, so that vital programs are not adversely impacted.
What this means is that, by sticking to their guns in the sequester showdown, Republicans have actually forced Obama into the “balanced approach” he called for but did not actually pursue. We are now almost at the Simpson-Bowles 3-to-1 ratio. Unfortunately, Washington is not doing it in a way that promotes growth. The cuts come from discretionary programs, when it is entitlement spending that is driving our long-term debt and deficits. And the revenues come from raising tax rates on small businesses and the wealthy, rather than lowering tax rates, eliminating preferences and simplifying the tax code.
Still, keep in mind where Obama wanted to take the country. His original demand in the fiscal cliff negotiations last year was a $1.6 trillion tax paired with a $50 billion spending increase. Instead, a few months later, he got a $620 billion tax increase paired with a $1.72 trillion spending cut.
From a conservative standpoint, that may be less than ideal. But for a party that controls just one half of one branch of the federal government, it’s not bad.
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