The sequester is here, with an initial $85 billion worth of haphazard and economically destructive spending cuts, a Washington wound almost universally described as “self-inflicted.” Let’s be clearer: It’s Republican-inflicted. It is a direct result of the insistence by GOP leaders in the summer of 2011 that they would not raise the federal debt ceiling unless President Obama agreed to dramatic spending cuts. One can argue that the growth of the debt or the size of the government justified that insistence; I’d disagree. But it’s simply a fact that every budget crisis of the last two years—the downgrade of the U.S. credit rating, the failure of the “supercommittee,” the fiscal cliff, and now this—stems from Republican debt-limit brinksmanship.
This is what makes all the Beltway back-and-forth about who came up with the sequester, and who moved which goalposts, and what Gene Sperling said to Bob Woodward, so annoying. The origin of this mess is absolutely clear. It was created by the Budget Control Act of 2011, the ransom Republican leaders received for agreeing to let the U.S. government pay its bills.
Traditionally, the debt ceiling had been a symbolic cap, an opportunity for members of Congress in the minority party (including a certain Illinois Senator Barack Obama back in 2006) to grandstand about the fiscal irresponsibility of the majority party before the limit was increased. (In Obama’s semi-defense, the irresponsibility of tax-cutting, big-spending Republicans in the Bush era was truly breathtaking.) After their big congressional wins in the 2010 midterms, though, GOP leaders declared that the debt was out of control, so they would not raise the debt limit without an equivalent amount of spending cuts. They threatened to force the U.S. government into default—essentially, to crash the global economy—unless Obama accepted a massive rollback of the welfare state.
Let’s pause for a moment to discuss that threat. Republican leaders like House Speaker John Boehner and Senate Minority Leader Mitch McConnell didn’t really want the Treasury to default on its obligations; they just wanted to use the debt ceiling as a hostage to extract spending cuts as a ransom. But some new Tea Party congressmen genuinely welcomed a default, because, well, let’s be charitable and say they didn’t understand the catastrophic consequences. In any case, the threat was real. Republicans say the debt had become so outrageous that drastic measures were necessary to prevent us from becoming Greece. I’d just point out that markets didn’t agree; interest rates on Treasury bonds were historically low and getting lower, a measure of financial faith in U.S. credit. I’d also point out that the kind of austerity the Republicans were trying to impose on the U.S. led to double-dip recessions in Great Britain and Spain; recessions make fiscal problems worse because they increase spending on social services, while decreasing tax revenues from workers without jobs and companies without profits. It’s also worth noting that the deficit exploded under Bush and has declined under Obama; federal spending has actually increased at the lowest rate since the Eisenhower years.
But whether or not Republicans were right to threaten to create a fiscal Armageddon if Obama didn’t agree to reduce the deficit—through spending cuts, not tax increases, and non-military spending cuts only—that’s what they did. Obama wanted a “clean” increase of the debt limit; the GOP wouldn’t give it to him. That’s why Standard & Poors downgraded the U.S. credit rating. Bondholders didn’t care about the debt ceiling when it was purely ceremonial, but now Republicans had dragged us into an era where we’d need to pass a bill through both houses of Congress just to pay our obligations. They had turned the debt ceiling into the fiscal equivalent of a bill requiring us to start a nuclear war every couple of years unless Washington could agree on an alternative foreign policy.
The political drama of 2011 was about whether we would default, or whether Obama could give Republicans enough of what they wanted to avoid a default. The president and Speaker Boehner tried to negotiate a Grand Bargain for $4 trillion in long-term deficit reduction, which would have taken the debt ceiling off the table for awhile, but they couldn’t. After their negotiations collapsed, Republicans continued to demand significant deficit reduction as their price for raising the debt ceiling, while refusing to include any new tax revenues in a smaller deal. Obama agreed to some cuts, but the GOP insisted on more. That’s when the White House suggested the sequester: $1.2 trillion in cuts that would be politically unpalatable to Republicans and Democrats, taking effect automatically in January 2013 unless a bipartisan “supercommittee” agreed on a better plan. The sequester was supposed to be so awful that it would force the two parties to come together to avoid it, which turned out to be wishful thinking.
The supercommittee failed. Obama comfortably won reelection, but not much has changed on Capitol Hill. January’s deal to avoid the instant austerity of the fiscal cliff—the expiration of the Bush tax cuts plus the sequester—merely punted the sequester to March. And that’s where we are, paying the ransom that Republicans demanded in the summer of 2011. Incredibly, Republicans (who overwhelmingly voted for the sequester) are now calling it the “Obamaquester,” like kidnappers claiming the ransom was their victim’s idea because he came up with the method of payment. If they really hate the sequester as much as they claim, they could always just cancel it—but of course, they don’t want to do that.
Incidentally, after enduring intense post-election criticism for their willingness to endanger the full faith and credit of the federal government, Republicans did agree to raise the debt ceiling for another three months in late January without demanding even more cuts. But they didn’t promise that they wouldn’t try to use it as leverage again. So even if Obama manages to work out some kind of deal with Republican leaders to undo the sequester, this entire cycle of budgetary insanity could begin again in May.