The Corner

Future Spending Under the Sequester

I have argued, along with Dan Mitchell and Peter Suderman, that the sequester could a better, more fiscally responsible option than any debt-reduction package the “supercommittee” may come up with. However, sequestration won’t make much of a difference in our overall budget outlook.

This chart uses data from the Congressional Budget Office to examine the estimated growth in spending with or without the potential Budget Control Act (BCA) sequester. As you can see, the perceived spending “cuts” are merely reductions in the overall rate of growth in spending, not actual cuts addressing the fundamental drivers of U.S. debt problems. And, of course, these are just projections. Sequestration estimates are susceptible to political rhetoric (like crying foul about the severity of sequester cuts) and opportunism (like pretending that the debt ceiling deal was a sign of commitment to fiscally responsibility), as policy changes are scored against the current-policy baseline.

Between 2013 (the first year that sequester “cuts” kick in) and 2021, federal spending will increase by $1.6 trillion (red line) versus $1.7 trillion without sequester (blue line). A further breakdown of specific budget programs shows that sequestration provides relatively small reductions in spending rates across the board: Under sequestration, defense increases 18 percent (vs. 20 percent); nondefense discretionary increases 12 percent (vs. 14 percent); Medicare increases at roughly the same rate; net interest increases 136 percent (vs. 152 percent).

Unfortunately, the use of these baselines strongly influences public perceptions about the budget and the commitments made, which makes really hard to adopt reforms or spending cuts that would have a real impact on budget policy. The main consequence is a level of spending that never ceases to grow, and a growing burden for the children of tomorrow.


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