“Our biggest problems over the next ten years are not deficits,” the president told House Republicans Wednesday, according to those who attended the meeting. The president needs to deliver the same message to the public, loudly and clearly. The biggest problems we face are unemployment, stagnant wages, slow growth, and widening inequality—not deficits. The major goal must be to get jobs and wages back, not balance the budget. Paul Ryan’s budget plan—essentially, the House Republican plan—is designed to lure the White House and Democrats, and the American public, into a debate over how to balance the federal budget in ten years, not over whether it’s worth doing.
As he has in years past, Wisconsin Representative Paul Ryan presented his latest budget as a necessary step—the only thing we have to avert a destructive debt crisis. It may be painful to turn Medicare into a voucher program, cut spending on social services, and devolve Medicaid into a block grant for the states, but it's the only choice we have to avoid catastrophe. Here's Ryan in his own words:
Senate Democrats are set to release a budget this week, the first time they've done so since 2009. As always, it will be a collection of the party's goals and priorities—more a political statement than a plan for governing. Democrats, according to National Journal, will propose new revenue beyond the fiscal-cliff deal as well as new spending on education, infrastructure, and job training.
Today is the first day of the rest of your sequester, and the cuts are already coming—undocumented immigrants released from detention, furloughs on military bases, agencies scrambling to determine whom they won't be serving and what they won't be doing. The optimistic take on all this is that in a country where people regularly shout at their members of Congress, "Tell the government to keep its hands off my Medicare!", this could be an education. Start cutting back government services, and citizens will come to an understanding of some of the good things government does for them. Then that in turn will make the next crisis less likely, since the public won't stand for it.
The sequester has failed. I say that because it was intended as a deterrent, not as something that was ever supposed to actually go into effect. So because it has gone into effect, it has failed. What should we do now? The answer is simple—not easy, but simple. We have to end this madness, this string of manufactured crises that hamstring the economy and cause enormous amounts of genuine human suffering. Enough is enough. So Congress has to do three things:
The latest fiscal showdown concerns the “sequester”—across the board cuts to (almost entirely) discretionary spending that will total just over $1 trillion in the next decade, and which are set to take effect on March 1. What should those who have better things to do with their life than follow fiscal policy debates know about the sequester?
President Obama has miscalculated both the tactical politics of the sequester and the depressive economic impact of budget cuts on the rest of his presidency. The sequester will cut economic growth in half this year. But it’s now clear, one way or another, that we will get cuts in the $85 billion range that the sequester mandates this fiscal year. All that remains are the details.
The last several years have been bleak for state governments. Most had to tap, if not drain, rainy-day funds—money set aside for emergencies. But that usually wasn’t enough to bridge shortfalls. Some raised taxes and other revenue, but for the most part, states relied on cuts. Since 2007, states have slashed nearly $300 billion from their budgets, with health care and education being hardest hit; according to the Center on Budget and Policy Priorities (CBPP), a progressive think tank, over the last five years 23 states have made deep cuts to pre-K and public school spending, while 20 have made major cuts to health care.
At this point, odds are low for a deal to avert the sequester. Republicans want an agreement to replace the planned across-the-board spending cuts—which include cuts to defense spending—with ones that target social spending and entitlements. President Obama is willing to compromise on spending cuts, but insists on new revenues. "Balanced" deficit reduction—a key part of his reelection platform—is still a priority for the administration, and it commands wide support from the public.
It’s hard to be happy about the prospect of the sequester—the huge, automatics cuts to domestic spending set to take place if lawmakers can't reach a long-term budget deal—going into effect at the end of the week. Not only will it will mean substantial cuts to important programs; it will be a further drag on an already weak economy, shaving 0.6 percentage points off our growth rate. The end of the payroll tax cut, which expired on January 1, has already pushed it down to around 2.0, but the sequester cuts will depress it below the rate needed to keep pace with those entering the labor market. As a result, we are likely to see a modest increase in unemployment over the course of the year if the cuts are left in place.
A key part of the GOP's strategy on the sequester is to blame President Obama for the fact it exists at all. One good example is House Speaker John Boehner's op-ed in today's Wall Street Journal:
With the debt limit set to be hit in a matter of hours, Republicans and Democrats in Congress reluctantly accepted the president's demand for the sequester, and a revised version of the Budget Control Act was passed on a bipartisan basis.
Senate minority leader Mitch McConnell says Senate Republicans will unanimously support a balanced-budget amendment, to be unveiled Wednesday as the core of the GOP’s fiscal agenda.
There’s no chance of passage so why are Republicans pushing it now? “Just because something may not pass doesn’t mean that the American people don’t expect us to stand up and be counted for the things that we believe in,” says McConnnell.