Until we have the legislative text of the deal now being finalized, it will obviously be difficult to come to any firm judgments about its contents. But as the details emerge, I think it’s worth clarifying a bit about the mechanism that will apparently be at the heart of the failsafe “trigger” in the second stage of the process.
The basic mechanism for spending cuts in the first stage of the process will be statutory caps on discretionary spending. Those caps would set an overall limit on discretionary spending in each of the next ten years (a limit that would reduce that spending against the baseline by about a trillion dollars in total). Each year, the budget committee in each house would decide how to allocate that year’s amount (or a lower one, should its members decide, but not a higher one) among the different appropriating committees, and then the appropriators would decide exactly where the cuts would happen and what the spending levels for individual programs would be — keeping to the overall level of spending assigned to them. If they failed to do so, then the entire discretionary budget would be subject to an automatic across-the-board cut (a “sequester” by the Office of Management and Budget) in the amount required to get spending down below the cap, divided equally among all the line items in the budget subject to the cap and applied equally to all of them.
The “trigger” would basically work the same way. If the special committee created to find another $1.2 trillion in cuts for the second tranche of the debt-limit increase fails to reach agreement, or if its proposal fails to pass both houses, and if the Congress has not sent a balanced-budget amendment to the states, then another set of caps would take effect, basically just further lowering the caps created in the first stage sufficiently to save another $1.2 trillion over ten years.
This second stage of caps would also include some non-discretionary spending. My understanding is that its design would follow the design of the Gramm-Rudman caps and the PAYGO caps created in the 1980s and 90s, respectively, and amended a few times since. This would mean that the cap would apply across the board except for some carved-out programs — Social Security, most anti-poverty programs (including Medicaid), FDIC obligations, and a few smaller line items — and that reductions in Medicare spending would be limited to 4 percent of total program spending per year (about $20 billion a year at this point, and more each year).
Defense would also be included under this cap (as it would be in the first stage), but it would be treated differently than the rest of the budget. Simply put, the discretionary caps in this second stage would be divided 50/50 between defense and non-defense spending. So half of the overall discretionary-spending reductions would need to come from defense each year. Advocates of this approach justify it by pointing out that defense discretionary and non-defense discretionary spending account for roughly the same amount of money, so that 50/50 cuts take about the same portion out of each. That’s true — in fact, defense discretionary spending is greater for now. But the practical effect of this approach would actually be a set of cuts that is seriously tilted toward defense cuts, because while the cuts in non-defense discretionary spending would be divided among a lot of different agencies and programs, the cut in defense (of the same total size) would be entirely a cut in defense. This is made all the worse by the fact that significant portions of the non-defense budget are exempted, as noted above, so that the cuts they would have borne must be divided among the remaining programs, further increasing the share of the overall cut taken by the defense budget. If you just added defense and non-defense discretionary spending and tried for a roughly proportional set of cuts across the entire budget (applying the same percentage cut to each program), defense would not be hit quite as hard. And if you just set one overall cap and allowed the budget committees to assign specific levels based on some sensible prioritization of the government’s proper functions, defense almost certainly wouldn’t be cut nearly as much as the entire rest of the budget combined.
Now, this mechanism should not be confused with “automatic cuts.” The caps would set limits on the appropriations committees, but those committees would allocate the funds available to them using some kind of rational prioritization, and working with the agencies whose budgets they are shaping. So the defense cuts wouldn’t be blind cuts divorced from any sense of priority or purpose. But they would be deep cuts — deeper than those in other areas, though we will need to wait for the bill to see just how deep — in an area of the budget that does not seem to call for the deepest cuts.
There will be much more to say about the overall deal as its details emerge — as I understand it so far, there is a great deal to like about it; it seems on the whole (even accounting for concerns such as this trigger question) like a significant substantive success for the cause of spending restraint, and it sets the stage for further successes. The Democrats’ strategy of surrendering on policy in return for what they take to be political advantage (a strategy that is at fault for our year of lurching from one deadline-based budget crisis to another) appears to have backfired on them yet again.
But more on that, and the other pluses and minuses, when we know more for sure.