Mitt Romney warns that looming defense cuts will cost American jobs. Speaker of the House John Boehner calls them a “serious threat” to the nation’s security and Senate Minority Leader Mitch McConnell calls them “crippling” and “destructive.” Oddly, both congressional leaders voted for the cuts. Even odder, the Obama administration agrees: Its Office of Management and Budget says the cuts will have a “devastating impact” on both military and non-military government programs. Look! Bipartisanship!
Except, perversely, the parties can’t seem to bring themselves to do anything about the “fiscal cliff” than use it as a political cudgel. Republicans want to halt the defense cuts, but only by replacing them with even steeper cuts to non-military spending that they know perfectly well Democrats won’t agree to. Democrats would like to roll back the cuts on both sides, but only if Republicans make unnecessary tax concessions that they clearly won’t make. Consequently, we’re heading toward some sharp spending cuts that nobody really wants, cuts that Congress voted into law precisely because nobody really wanted them. Worst of all they’re coming at a time when short-term government spending isn’t actually a problem.
So what should happen? Members on both sides should take a deep breath and remember they can all get what they want by just calling the whole thing off.
To understand the true perversity of the standoff over these so-called “sequester” cuts, it’s important to remember how we got here. For no particular reason whatsoever, the U.S. Congress is in the habit of imposing a statutory limit on the federal government’s borrowing authority rather than simply telling Treasury to spend what Congress appropriates and collect the taxes Congress authorizes. Every so often this ceiling needs to be raised, creating an opportunity for the political opposition (then-Sen. Barack Obama in 2006, for example) to engage in a little grandstanding. Back in 2010 when Democrats ran Congress but were clearly facing a tough midterm election, they didn’t want to take the (minor) political hit involved in an increase and figured it would just be settled in 2011. Nor was the Obama administration particularly eager to resolve the issue during the lame-duck session in late 2010. They figured the need to raise the debt ceiling in 2011 would bring Republicans to the table and force them to accept shared responsibility for management of the country in a troubled time.
This began a catastrophic series of miscalculations. Republicans, in part because of the rivalry between Boehner and Majority Leader Eric Cantor, weren’t willing to just lift the ceiling and grandstand. They demanded concessions, specifically one dollar of spending cuts for every dollar the debt ceiling went up.
Obama, rather than rejecting this hostage-taking in principle, decided he saw an opportunity to push for a “grand bargain” in which deep long-term spending cuts would be paired with Republicans concessions on higher taxes. But the strategy was doomed from the start. Substantively, Republicans sincerely want low taxes. Politically, Republicans thought sealing such a deal would merely bolster the president’s re-election efforts by positioning him as a centrist deal-maker. So the country rushed closer to the deadline at which we’d be unable to roll over our debt and keep the government operating. Then everyone wisely decided to kick the can down the road.
This was a twofold strategy. First, a “supercommittee” of members of Congress was created to continue the grand-bargain negotiations. Second, Congress agreed to enact a series of tough automatic spending cuts in 2013 if no supercommittee proposal passed to supersede them. The cuts were designed to put pressure on both sides, with half falling on the military and half falling on domestic programs. The idea was that nobody would want to see that happen, so both sides would come together and make a deal. The partisan disagreement was and remains very simple—Democrats are open to spending cuts only if paired with tax increases and Republicans aren’t open to tax increases. So, predictably, the supercommittee agreed on nothing and now we’re stuck with the sequester.
Essentially Congress tried to bluff itself into compromising, and then called its own bluff by failing to compromise. That sounds ridiculous because it is ridiculous, but the only thing more ridiculous would be to end the story by following through with the bluff and imposing cuts that no one actually wants and will hurt the country.
A bipartisan compromise on the long-term deficit would be a nice thing to have, but it’s by no means necessary. The better thing to worry about is that the short-term impact of implementing these spending cuts is likely to have a negative impact on economic growth at a time when the unemployment rate remains very high. Since nobody in Congress seems to actually favor implementing these cuts on the merits, the best solution is to just take the easy way out. Instead of Democrats and Republicans arguing about who’s to blame for the sequester, they should just come together and repeal it. The debt deal doesn’t really bind Congress. The terms of the accord served their purpose at the time—giving both sides an acceptable way out of a dangerous standoff that they’d miscalculated their way into—but there’s nothing stopping Congress from just ditching it today. After the election, the new Congress and whoever’s in the White House will have plenty of new stuff to fight about—we’ll even hit the debt ceiling again—there’s no need to let the legacy of past fights harm the economy.