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Walt Laws-MacDonald | Show Me The Money!

Doomsday Budget Cuts

Published: Wednesday, February 27, 2013

Updated: Thursday, February 28, 2013 00:02


Our great — and greatly indebted — nation’s latest budget crisis is set to kick in this Friday, as roughly $85 billion of a total $1.2 trillion in budget cuts will take place. The cuts are the result of “budget sequestration:” indiscriminate, across-the-board cuts to government spending.

Congress has threatened sequestration before in a large 1985 deficit-reduction bill, but in 1990 sequestration was replaced with a system called “PAYGO,” which was in effect from 1990 until 2002 and from 2010 onwards. It required any new spending to be offset by savings or cuts from current programs, though there were significant exceptions to the rule.

Congress reintroduced budget sequestration in the Budget Control Act of 2011, the result of the 2011 debt ceiling debacle — and we all remember how much fun that was. OK, maybe that was just me.

The bill called for raising the debt ceiling in return for spending cuts of $917 billion over the next 10 years and an additional $1.5 trillion to be agreed upon by the “Super Committee.”

In the exceedingly rare — read: definitely going to happen — event that the bipartisan Super Committee was not able to agree on $1.2 trillion in cuts, the doomsday device of budget sequestration would go into effect.

It’s not the “we’ll blow you up if you blow us up” sort of doomsday device, but it serves a similar purpose. It gives Congress an incentive to actually follow through on their promise to agree on budget cuts. If they fail — which they will — budget sequestration comes into play, and huge spending cuts automatically occur, with no discretion for what the spending is going to or which party approved the spending in the first place.

Sequestration should make sense — either we all succeed and Congress works together to reduce spending, or we all fail and sequestration cuts into everyone’s programs. More importantly, budget sequestration does not hold the same sort of “bargain value” that the debt ceiling or fiscal cliff did. Though Republicans are usually gung-ho on spending cuts, budget sequestration gives them no power on what the spending cuts affect. To oversimplify, it’s sort of like a flat tax on all government spending. The bill provides some protection for certain programs — like Medicare — but it affects everything from defense spending to foreign aid to flu vaccinations.

That hasn’t stopped Republicans from blaming things on the White House, and — don’t kill me, Ma — they have a point. The legislative branch has proven time and again that it doesn’t really give a damn about hard and fast deadlines when it comes to balancing the budget.

They made a 13th-hour deal for the debt ceiling, and flew right off the Fiscal Cliff. Even though they did make deals in the end, how did creating such a deadline ever seem like a good idea?

That doesn’t mean the blame falls squarely on the president’s shoulders, of course, but it seems that the Republican line of spending cuts alone is simply incompatible with the programs and tax increases the Obama administration wants to see.

I’ve been saying this for 18 months, but the American economy and its fragile recovery are slowly chugging back to life. Consumer confidence, housing indexes and the stock market are looking the best they have since pre-recession levels. The White House reported that “sequestration would be deeply destructive to national security, domestic investments and core government functions,” and both Democrats and Republicans would agree.

So, Congress will probably throw together a last-minute deal to somehow postpone the cuts, and we’ll get to play this whole game again in a few months.

But then again, I learned everything I know about politics from “The West Wing” (1999-2006) — and I’m only on the first season.



Walt Laws-MacDonald is a sophomore majoring in quantitative economics. He can be reached at

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