Sequestration is certainly not a smart way to manage federal spending. Some programs are more important than others, some programs are better able to sustain spending reductions than others, and any cuts should be prioritized accordingly. The sequester doesn’t do that. It was proposed by the White House and accepted by Congress precisely to avoid a debate about specific prioritization and just pass the debt ceiling deal in 2011. They hoped the “supercommittee” might agree on some kind of prioritization (and perhaps especially on entitlement reforms that could add up over time). But that didn’t happen, and here we are. This was the only way the parties could agree on to implement modest cuts.
Now that we’re facing these cuts, there’s a concerted effort, particularly by the administration, to suggest that they are not modest at all—indeed that they are so severe that our economy (if not our very society) simply cannot sustain them.
Let’s get a grip. In its first year, fiscal year 2013, which ends September 30, the sequester would involve a total of $85 billion in spending cuts. That’s a reduction of 3% from what federal spending otherwise would have been this year. But even that significantly overstates the effects the sequester would actually have this year. The federal government is so lumbering and huge that it can’t even reduce its own spending that quickly. That’s why “first year” cuts are always so difficult in even the most fiscally conservative budget proposals. The Congressional Budget Office (on page 11 of its latest budget outlook, published earlier this month) estimates that while FY 2013 spending will ultimately be reduced by $85 billion, “discretionary outlays will drop by $35 billion and mandatory spending will be reduced by $9 billion this year as a direct result of those procedures; additional reductions in outlays attributable to the cuts in 2013 funding will occur in later years.” So in this fiscal year, we would actually be looking at a $44 billion spending cut, or less than a 1.5% reduction from what federal spending otherwise would have been. It would mean that federal spending in 2013 will be about $3.553 trillion. In 2012, federal spending was $3.538 trillion. Yes, that means that even with the sequester we will be spending slightly more in 2013 than we did in 2012. In fact, we will be spending more than we did in any year in American history except for 2011 (when we spent $3.598 trillion). Here’s a quick sense of what we’re looking at (the historical figures are from this CBO spreadsheet and the 2013 ones are from this one, both are updated as of earlier this month):
So why is the president talking about firing all the firemen and watching half the country die of food poisoning? He’s doing it for political effect, of course. But he’s able to do it because the sequester is targeted largely at discretionary spending. Under the sequester, discretionary spending (including both domestic and defense) will equal $1.213 trillion in 2013. It was $1.285 trillion in 2012, so it would indeed see a decline of about $72 billion from last year to this year. Discretionary spending in 2013 would thus be roughly equal to what it was in 2009—that dreadful year of federal government austerity. Of that total reduction from 2012 spending, about $43 billion would be cut from defense-discretionary spending and about $29 billion would come out of domestic-discretionary spending. The president’s scare tactics focus almost exclusively on the domestic-discretionary portion, so he is saying that our economy and government will basically cease to function because we will be spending $29 billion less on these domestic-discretionary programs this year than last year. $29 billion is about what the federal government spends in 72 hours. In fact, because this year is not a leap year while last year was, about a third of that spending cut was going to happen anyway across the federal budget.
That doesn’t mean that the administration isn’t actually going to furlough people and cut government services because of the sequester. It just means that we’re going to be looking at particular instances that are very tiny drops in a very large bucket. It won’t be so easy for the administration’s demagogues to work off the Clinton White House’s script from the 1995-96 government shutdown, which after all involved a shutdown of the government and not a slight increase in spending over the prior year. They’ll do their best, of course, and they’ll have eager help from many in the press, but I do think they’re over-hyping those reporters’ expectations of the sort of story they’ll be able to cover here.
None of this is to justify or defend the sequester. It would still be much better to reduce this spending in a more purposeful and intentional way—prioritizing and allocating cuts by implementing reforms of government programs that cost too much, and especially of entitlement programs that could provide the same benefits at far lower cost. This kind of tiny cut doesn’t get us much, and some of its effects will genuinely harm some vulnerable Americans. By all means let’s avoid it. But let’s not pretend that what we would be replacing is some bold and massive spending cut. It is a tiny fig leaf placed over Washington’s inability to enact even tiny reforms to yield tiny savings and improve our fiscal outlook by a very little bit. Like the tax increase imposed in this year’s fiscal-cliff deal, it’s basically a distraction from our actual fiscal challenges, which have to do almost entirely with the entitlement programs.