By Bill Wilson — Time for a little history lesson.
Sequestration may in fact have been Obama’s idea, but it was brought to the floor in the House of Representatives not once, but twice by Republican leaders. There, it was approved not once, but twice. In the Senate it passed easily with bipartisan support.
If Republicans didn’t like the Budget Control Act, they should have stuck with Cut, Cap, and Balance and passed the Full Faith and Credit Act — legislation that would have prioritized payments to our creditors, the military, Social Security and Medicare had the then-$14.294 trillion debt ceiling been reached — in order take Obama’s default threat off the table.
Instead, both Republicans and Democrats voted for the Budget Control Act, knowing full well that the so-called supercommittee it created would most certainly fail to achieve any agreement to cut spending. It was designed to fail. This whole idea that a grand bargain was somehow in the offing was pure fantasy.
Sequestration was always going to happenbecause that was the only way to guarantee there would be any cuts at all in return for increasing the debt ceiling by a record $2.1 trillion.
Republicans let it pass the House and Senate, and Obama signed it.
Recall, spending cuts were needed to keep our AAA credit rating, which we lost anyway — not because there was a debate about what to cut, or because ratings agencies are spiteful, but because they were saying $4 trillion of cuts were needed.
Even with sequestration, only $1.2 trillion of deficit reduction was ever included. In 2013, it will cut outlays by just $54 billion, or 1.5 percent. That’s really not that much in the great scheme of things.
Congress knew it needed $4 trillion of cuts. It had the ability to get it had members simply passed Cut, Cap, and Balance, but instead they ignored the ratings agencies warnings.
At the time, S&P wrote, “We expect the debt trajectory to continue increasing in the medium term if a medium-term fiscal consolidation plan of $4 trillion is not agreed upon. If Congress and the Administration reach an agreement of about $4 trillion, and if we to conclude that such an agreement would be enacted and maintained throughout the decade, we could, other things unchanged, affirm the ‘AAA’ long-term rating and A-1+ short-term ratings on the U.S.”
And then about the downgrade, S&P wrote, “The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics.”
Clear as day. Congress failed to cut spending by $4 trillion, so we were downgraded. Yet, Republicans have managed to allow the false narrative to be peddled that somehow the downgrade came as a result of Congress’ attempts to use the debt ceiling as leverage to force the spending cuts. Total rubbish.
But nowhere will you see any of these facts reported, not because of media bias per se, but really because Republicans appear to be incapable of defending themselves. They never adequately explained what the credit downgrade was all about and in the process gave Obama a free, phony talking point.
Now today, they are not defending the sequester cuts, which minimally are necessary to even begin to get our fiscal house in order. Instead, congressional Republicans appear to care more about averting blame for spending cuts they campaigned on and voted for than with saving our nation from certain insolvency.
If the sequestration is removed, the country will likely be downgraded again — and deservedly so.
In the Senate, Republicans are circulating draft legislation that would “cancel $85 billion in across-the-board spending cuts and instead turn over authority to President Barack Obama to achieve the same level of savings under a plan to be filed by March 8,” reports Politico.com.
So, after sequester goes into effect, rather than just letting the matter rest, Republicans want to pass legislation to let Obama pick and choose where he wants the cuts to occur. Why don’t we just name an emperor and be done with this charade of representation? First, Congress suspends the debt ceiling, now this.
Ironically, it may be something Obama already has the authority to do, if a Wall Street Journal editorial is to be believed: “Programs, projects and activities are a technical category of the federal budget, but the sequester actually occurs at the roughly 1,200 broader units known as budget accounts. Some accounts are small, but others contain hundreds of PPAs and the larger accounts run to billions of dollars… This means in most cases the President has the room to protect his ‘investments’ while managing the fiscal transition over time.”
Even if that is true, what a spectacular abdication of congressional appropriations powers to an all-powerful executive.
Either way, Republicans should be defending sequestration, not running away from it. If they cannot defend these cuts, much of it to discretionary spending, how do they ever intend to wrap their arms around the even-more-difficult-to-manage task of entitlement reform?
In the meantime, even with sequestration, government will still spend more than $47 trillion over the next ten years, reports the Congressional Budget Office (CBO). By 2037, the CBO projects the debt-to-GDP ratio will be 159 percent on its current baseline.
And without sequester, that a might be a lowball estimate, a must-read study for the U.S. Monetary Policy Forum reveals.
“[I]f the looming budget sequester scheduled to occur on March 1 is cancelled and that the steady-state unemployment rate is assumed to be 6 percent (as opposed to the 5.25 percent as assumed by the Congressional Budget Office)… debt/GDP ratio would [hit] 304 percent of GDP by 2037 and bond yields would skyrocket, eventually getting above 25 percent,” the report warns.
Republicans should be more worried about being blamed for cancelling sequester, not for implementing it when the country still had a chance to avert default.
Bill Wilson is the President of Americans for Limited Government. You can follow Bill on Twitter at @BillWilsonALG.
