While the sequester is advertised as an across-the-board spending cut, it’s not.
- The sequester is modeled after a similar provision in law from more than 20 years ago. That earlier sequester exempted certain programs from spending cuts, most notably Social Security, and it limited any Medicare cut to at most
2%4%. These are the two largest entitlement programs in the federal budget.
- When the terms of this sequester were negotiated in the summer of 2011, the President’s advisors expanded the list of programs exempt from spending cuts to include most low-income/safety net entitlement programs. Most notable here is the exemption of Medicaid, the third largest entitlement. They also limited the Medicare cut to no more than 2%.
- In the summer of 2011 President Obama wanted the sequester to raise taxes as well but Congressional Republicans refused. For the past few months the President has been trying to rewrite the terms of that deal so that tax increases will be substituted for spending cuts, at least for the first year. His insistence has contributed to a stalemate.
- The sequester is now cutting spending in FY13 by the following percentages:
- defense discretionary: 7.8% cut;
- domestic discretionary: 5.0% cut;
- Medicare: 2.0% cut;
- small pots of defense and domestic mandatory spending are cut by almost the same percentages as their discretionary counterparts above.
tsaLet’s do a thought experiment: suppose the sequester now taking effect was instead structured as a true across-the-board spending cut? Suppose we wanted to cut government spending this year by the same $85 B as is being cut now, but we didn’t exempt huge swaths of entitlement spending? And suppose we cut all spending by the same percentage?
The discretionary programs now being cut by the sequester would take smaller hits. Let’s see how the numbers change.
In my hypothetical across-the-board spending cut I will exempt only interest payments and defense spending in a combat theater. Everything else, including all non-combat theater defense and the three largest entitlements of Social Security, Medicare, and Medicaid is on the cutting block along with all other non-interest, non-combat spending. And I’m going to cut everything by the same percentage rather than having a higher percentage cut for defense and a lower percentage cut for Medicare.
My arithmetic shows that such a true across-the-board spending cut would save the same $85 B this year through a 2.6% cut to all spending except interest and defense spending in a combat theater.
A true across-the-board spending cut would therefore be about one-third as deep of a cut in defense spending as the current sequester, and about half as deep of a cut in nondefense discretionary spending as the current sequester.
Seniors wouldn’t like a 2.6% cut in their Social Security checks, and the poor wouldn’t like the same percentage cut in Medicaid, cash welfare, food stamps, and other low-income support programs. Medical providers and health insurers wouldn’t like the larger cuts in Medicare and the inclusion of Medicaid and CHIP in the cuts.
But there would be upsides for other things the federal government does relative to where we are now. Let’s look at the effect of this alternative on spending this year for some popular programs relative to the effect of the sequester now in place. If we substituted a true 2.6% across-the-board spending cut for our current sequester, this year the federal government would spend:
- $300M more for Special Education;
- $732M more for medical research at the National Institutes of Health, $138M more for National Science Foundation grants, and $424M more for NASA;
- $124M more for the Food & Drug Administration and food safety;
- $131M more for airport security, $110M more for the FAA, and $23M more for air marshals;
- $333M more for the FBI;
- $139M more for immigration and customs enforcement and $242M more for customs and border protection;
- $53M more to operate the National Parks and $141M more for the Forest Service;
- $24M more for the Smithsonian;
- $54M more for child are and development block grants, and $238M more for children and families services programs;
- $195M more for global health programs;
- $142M more for the Coast Guard;
- and about $27B more for defense.
By insisting that the deficit reduction debate is a choice between cutting spending and raising taxes the President has frozen Washington in a stalemate position that is likely to last for the remainder of his term. If policymakers were instead to set the tax stalemate aside and examine more closely the choices they are implicitly making within the universe of government spending, they would see that by exempting huge swaths of popular entitlement spending from any cuts they are focusing the pain on programs that to many are more important and more popular.
Our federal budget process is fouled up in that it gives procedural advantages to entitlement spending over discretionary spending. Benefit programs that primarily help particular individuals are advantaged, while programs that principally provide for the common good are disadvantaged. The current sequester exacerbates those procedural advantages and, as a result, means that many broadly-supported functions of government are being cut even more that they would be if the spending cuts were distributed evenly across all government spending.
(photo credit: Anita Ritenour)