A Guide to Sequestration, the Bad Budget Policy We May Not Be Able to Avoid

Amid President Obama's call to postpone the pain of sequestration, signs that a solution may be elusive.

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NICHOLAS KAMM / AFP / Getty Images

President Barack Obama departs the White House in Washington, Feb. 4, 2013.

Of all the budget fights over the past several years, the sequester is the most emblematic of modern Washington. That is not a compliment. Its distant relatives — the government-shutdown fight and the debt ceiling spat and the fiscal cliff brawl — were manufactured crises, but behind the eye-glazing demagoguery lurked important issues, like the proper size of government, about which reasonable people can disagree. Everyone agrees that the sequester is terrible policy.

In fact, it was designed to be terrible policy. The sequester is a nondescript name for a poison pill, devised as a deterrent so unpalatable that Capitol Hill’s warring factions would be forced to make peace. That was back in the summer of 2011, when the threat of a debt default loomed. So the White House and Congressional Republicans crafted the Budget Control Act, which appointed a bipartisan “super committee” to find $1.2 trillion in deficit reduction over 10 years. The super committee’s failure would trigger sequestration, a package of about $1 trillion in automatic cuts to domestic and security programs. Economists warned it would send the fragile economy into a tailspin, and possibly cause a double-dip recession. Still, peace was elusive. The super committee failed.

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Now the U.S. is just weeks away from swallowing the poison pill. The fiscal cliff deal brokered on New Year’s Eve postponed the cuts for two months, but now they are set to take effect on March 1, and a solution to the sequester is nowhere in sight. Which is why President Obama on Tuesday afternoon called for Congress to stave off the sequester for a few more months, hoping such a move might buy time for lawmakers to replace it with smarter spending cuts. “The good news is, this doesn’t have to happen,” Obama said. According to a projection released Tuesday by the Congressional Budget Office, sequestration would cut U.S. economic growth in 2013 by half. The White House predicts it would cause the economy to shed hundreds of thousands of jobs.

This might seem like incentive enough for the two parties to find the $85 billion in deficit reduction necessary to delay sequestration from taking effect next month. But it won’t be easy. “I think the sequester is going to happen,” Republican Congressman Paul Ryan said Sunday on NBC’s Meet the Press. “We think these sequesters will happen because the Democrats have opposed our efforts to replace those cuts with others–and they’ve offered no alternatives.”

Obama, who in 2011 said he would veto any attempt to sidestep the sequester, offered an alternative Tuesday in the form of a stopgap bill. But he insisted that any deficit-reduction package to replace the sequester contain a mix of spending cuts and tweaks to the federal tax code, which means new revenues. This is a deal-breaker for Republicans, who forswore new taxes after a fiscal cliff deal that raised them for the first time in a generation.

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The impasse has members of both parties warning, once again, that an unthinkable policy is becoming a very real possibility. “I think people want it to happen,” Republican Sen. Tom Coburn, who favors replacing the sequester, told the New York Times. Both sides say that’s not true. But the glimpse of the wrecking ball has both parties scrambling to disown a policy that both houses of Congress passed and the President signed.

Republicans have stepped up their effort to charge the White House with cooking up the idea, hoping to pin the blame for the coming cuts on somebody else. As the Washington Post notes, House Speaker John Boehner used the phrase “the President’s sequester” (or some variant thereof) five times during a single floor speech Monday. (While the White House disputes that it came up with the sequester, Post reporter Bob Woodward and Post fact-checker Glenn Kessler say the idea originated with the White House.) President Obama first proposed the sequester and insisted it become law,” Boehner said in a statement Tuesday. “Republicans have twice voted to replace these arbitrary cuts with common-sense cuts and reforms that protect our national defense. We believe there is a better way to reduce the deficit, but Americans do not support sacrificing real spending cuts for more tax hikes.”

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For its part, the White House will blame Republicans for refusing to reduce tax breaks that benefit the wealthy. Democrats, who are seeking some $600 billion in new revenues, want to dump sweetheart provisions that protect owners of corporate jets or financiers who benefit from low carried-interest rates.”In our view, hedge fund managers should not be paying at a significantly lower rate than bus drivers or clerical assistants or store managers,” Carney said, noting that Republicans have been open to closing tax loopholes in past negotiations. “If that was true then, it’s got to be true now.

Obama also offered to revive dormant talks to reach a sweeping deal to slash the federal deficit and overhaul the U.S. tax code and entitlement systems. “The balanced approach of spending cuts and entitlement reform and tax reform that I put forward are still on the table,” Obama told reporters at the White House. But it would be very tough to iron out a grand bargain — a deal so thorny and elusive that it spawned the sequester in the first place — in the space of a few months, let alone a few weeks. If Republicans won’t give way on new revenues, it would become impossible. And there is no sense the GOP is prepared to cave, particularly because many of its members have sought the deep cuts the sequester would produce.

What we’re left with yet another stalemate, and yet another countdown to a self-inflicted crisis.

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