How to prevent spending cut backsliding

How to prevent spending cut backsliding

The big risk to the Debt Control Act is that policymakers might believe that the back-end threat will be undone just before it bites.

The Joint Committee has a deficit reduction target: a range of $1.2 T – $1.8 T over 10 years. Because Committee membership is split evenly between the parties, and because Congressional Leaders have a structural incentive to appoint less flexible Members, the Joint Committee’s chance of success is not high to start.

If the Joint Committee fails, an across-the-board sequester will be triggered, automatically cutting spending by $1.2 T, cutting some programs (defense and nondefense discretionary, Medicare, farm programs, some ObamaCare spending) while exempting others (Social Security, veterans’ benefits, Medicaid and welfare programs, civilian and military retirement). The programs on the chopping block could be cut as much as 10% for defense, 8% for nondefense and ObamaCare, and 2% for Medicare.

The fear of these spending cuts creates an incentive for the Joint Committee to reach agreement. If the trigger is going to bite, then the pain is certain and the only question is whether the Committee can find an alternative distribution of that pain which is preferable to the automatically triggered spending cuts.

The problem is that the first triggered spending cuts wouldn’t happen until January 2013, after a Presidential and Congressional election. The risk is that the Joint Committee fails to reach agreement and the election happens. With or without a new political configuration in DC, policymakers in both parties might look at the now-looming spending cuts and agree, “We can’t allow a 10% cut in defense, an 8% cut in education and health research spending, and a 2% cut in Medicare to take effect next month. That’s too sharp and severe of a cut. Let’s renegotiate a new 10-year budget deal and change the law. This new deal will reduce the deficit even more than current law would over the next ten years, but it will phase it in more gradually, so that we cut little to nothing in early 2013. We’ll turn off, reduce, or delay the triggered spending cuts, and in exchange deficit hawks and spending cutters will get even more promised reductions in the future.”

This risk exists independently of the election, but the intervening election exacerbates it. If there is sufficient agreement, a future Congress and the President can unwind any hard choice made by their predecessors.

As we look now at the Joint Committee before it begins, it matters less whether this post-election cop-out will happen, then whether the negotiators on that Committee and other elected policymakers think it will happen. If they think Congress will renegotiate post-election, then the pain threatened by the sequester is diminished. This reduces the expected cost of a Joint Committee failure and makes it even more difficult for them to reach agreement.

Here’s the irony. What we need from the Joint Committee is for the parties to agree on a solution. They may not reach agreement now on a hard choice, because one or both sides anticipate they will instead reach agreement 15-16 months later on a mutually agreed upon cop-out.

You can already see signs of this. Washington insiders are expressing skepticism about the sequester and Congress’ and the President’s willingness to enforce it later. They argue “Don’t worry, we can always renegotiate the X cuts we oppose after the next election.”

This is the right strategy if your top priority is spending taxpayer dollars on X. This behavior undermines the limited progress in cutting spending and reducing deficits that was just achieved.

There is a simple counter-strategy if your goal is to cut spending and/or reduce deficits. Now, while the public is focused more on the need to cut spending and reduce deficits than on the imminent pain of deep cuts in popular programs, citizens can force elected officials to pre-commit not to undo the sequester. A late 2012 cop-out requires a new law, and it’s hard to enact a new law if a large enough group of Members oppose doing so.

If a significant enough block of Members of Congress were to pre-commit now that they will, if necessary, block any legislation that would undo in any way the 2013 discretionary spending cuts that might be triggered, then the trigger gains credibility and the Joint Committee has a greater chance of succeeding. The more credible the threat of triggered cuts, the less likely the trigger will be needed.

The recently enacted spending cuts were a small first step toward a much bigger goal. The challenge is not just enacting the next step, but also making sure Washington doesn’t backslide on the step it just took.

(photo credit: Sean McGrath)

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