Opinion

Nicholas Wapshott

The sequester is just as destructive as we thought

By Nicholas Wapshott
April 23, 2013

Remember the sequester? When seven weeks ago the deadline to find a federal budget compromise came and went, there was much handwringing in Washington. In the event that no agreement was found there were to be cuts to public spending so severe and painful that no one would dare fail to agree. To deter Republicans from holding out, half the immediate spending savings of $85.4 billion was to be found from the defense budget, and, to ensure Democrats would work to find a deal, half from annually funded federal programs. Despite these encouragements to fiscal discipline, the March 1 deadline came and went.

For weeks the word “sequestration” was used so often that commentators and their readers grew sick of it. The headlines moved on. But quietly, without making much news, implementation is well under way and proving just as dire and destructive as advertised. It is hard to fully comprehend the impact of death by a thousand cuts and where they fall. This week the sequester broke surface when it began affecting air travel, causing long delays at airports, which is to be expected when you send 1,500 air traffic controllers home without pay. One in 10 controllers will stay at home on unpaid leave every day until October. With the vacation season looming, crowded airports full of frustrated passengers will become commonplace.

Many cuts have an impact less obvious than gumming up airports. Carnegie Mellon University in Pittsburgh, which relies upon federal sources for 86 percent of its research, is losing $7 million between now and September, while the University of Pittsburgh will lose $26 million, mostly from health research. All other research universities tell a similar story. This fiscal year the National Institutes of Health, the largest federal funding agency for many schools, like the University of Minnesota, is spending $1.5 billion less on research.

Postponing medical research sounds victimless, but it is not if you are among those helped when a new drug comes onstream. It is impossible to list those who will miss new treatments by a year or so but will continue suffering, or even die, as a consequence of the delay. More easy to picture are the thousands of cancer patients being turned away from hospitals because of the cuts. For a cancer center on Long Island, that means not administering the most expensive drugs and telling one-third of its 16,000 patients on Medicare it will no longer treat them.

Air traffic controllers are not the only federal employees being told to take the week off. Staff at the Smithsonian in Washington, which has lost $40 million of its federal grant, and at the National Zoo have followed suit. Managers at the oo stress that the animals will be unaffected, as well as the number of exhibitions, but staff vacancies will not be filled. One rare cut to raise a laugh was that IRS workers are also having to take unpaid leave. Funny, that is, until you realize that one of the reasons for the furlough and the public spending deficit is that not enough Americans paid the taxes they owe.

More troubling for the maintenance of civilized values are the cuts to the police looking after our national parks, which means partial closures and less safe parks, and the truncation of justice entailed in the $350 million removed from the federal court budget, which means fewer public defenders, the state-funded lawyers who help those who cannot afford to be represented. At least 2 million unemployed will be paid 11 percent less in benefits for the rest of this fiscal year.

The trimming of defense spending has already made the world a more dangerous place. There have been many specific decisions taken to reach the $450 billion reduction on defense spending over the next nine years. Routine training of forces has been cancelled, the USS Harry Truman, an aircraft carrier due to station itself in the Gulf, remains in port in Norfolk, Virginia, combat aircraft will not be maintained, and so on. Defense Department workers are being put on a furlough: Civilians can expect to lose one day’s work (and one day’s pay) a week for 14 weeks. As Oklahoma Senator James Inhofe  sees it, “These shortsighted cuts to defense capabilities will not protect our national interests. … A weakened U.S. military will only embolden our adversaries and threaten the safety of our citizens both at home and abroad.”

So far, the sequester appears to have pleased no one, except perhaps those fiscal hawks who agree to anything so long as the federal government is shrunk. The cuts are blind, irrational, hastily arranged, uncaring, arbitrary and dangerous. They are to good economic management what chain-saw sculpture is to Michelangelo’s David. Few doubt that federal expenditure is too high, but even if one is persuaded that cuts need to be made right now – which, as we remain stuck in a stagnant economy, flies in the face of macroeconomic reason – the sequester is the wrong way to make cuts and is already cutting the wrong things.

Although the federal government is reluctant to put a GDP figure on the cost of Hurricane Sandy, it and anticipation of the sequester drove American growth in the final quarter of 2012 into the red for the first time in 14 months. Even with Sandy, growth dropped by just 0.1 percent. The Congressional Budget Office estimates that the sequester alone will cost 0.6 percent in GDP this year. The cuts are not merely the enemy of good economic management but an automatic depressant upon the nation’s economic health.

There seems little sign that a “grand bargain” in Congress to settle the balance between revenue and spending is on its way. Instead weak lawmakers, true to form, are hoping to avoid having to take a decision by busily trying to exempt their pet projects and favorite causes from the sequester. The list of those lobbying to be taken off the hit list includes the homeland security department, drug and pharmaceutical companies, and medical equipment suppliers. But money saved on exemptions must be made up by cuts to other federal programs, only increasing the agony.

It is a mark of how dysfunctional Congress has become that even the failed bipartisan negotiations over gun control count as an optimistic sign that other matters, such as defanging the sequester, could be fixed through negotiation and compromise. Until that happens, we must impotently watch as essential government services slow down and seize up, and as Americans, particularly those at the bottom of the heap, cry out in pain. It will be something to think about as we line up for hours at the airport to catch our delayed planes.

***

Nicholas Wapshott’s Keynes Hayek: The Clash That Defined Modern Economics is published by W.W. Norton. Read extracts here.

PHOTO: U.S. House Armed Services Committee Chairman Rep. Buck McKeon (R-CA) left coins he used to illustrate his point about how sequestration cuts affects defense funding, as well as his notes, on the podium following a news conference at the U.S. Capitol in Washington, March 1, 2013. REUTERS/Jonathan Ernst

Comments
26 comments so far | RSS Comments RSS

It’s not the sequester that’s destructive, it’s the reckless over-borrowing and overspending policies that preceded it that were destructive.
A government’s role is to enable things, not to stimulate things. It’s certainly not the government’s job to force households and companies to do things they deem unwanted, unproductive or too risky.
It’s “by the people and for the people” – not against the people.

Posted by reality-again | Report as abusive
 

The one thing that both parties agree on is that economic growth is a necessity. There are only two things that cause real growth. The first is population growth, and the second is technology advancement. Our rate of population growth is decreasing (still positive but slowing down) and we don’t do innovation any more, we protect markets. Innovation gets badgered by the politicians and the news media as too expensive or dangerous, but it’s just a plan to prevent competition for those markets that have bought our politicians fair and square.

Posted by brotherkenny4 | Report as abusive
 

I am tired of hearing how $85 billion in cuts from a $3.7 trillion dollar budget is so onerous. Perhaps the President and Congress should go through the budget line by line and identify where funding can actually be cut. I’d bet that any five CFO’s from the Dow 30 Industrials could find 10% in reductions that would have zero impact on government services.

The logical place to start would be to eliminate 50% of all the conventions that are scheduled each year. Even the airlines stated there is enough fluff in the FAA budget to offset the furloughs. Both Congress and the President are into political gamesmanship–and the taxpayer takes the beating. Tell me this is something new.

As for Hurricane Sandy, $60 billion in reconstruction costs for many items that the states refused to maintain for the last ten years. So New Jersey and New York postpone their obligations–now the taxpayers in the remaining 48 states have to pay for it. And our illustrious senator from Colorado proposes funding for the ski industry as part of an “immigration bill”. The list of this type of fraud is endless.

Yet this author wants us to believe that government is pinched for funding.

Posted by COindependent | Report as abusive
 

What a naive reporter.

Of course, Obama et. al. are going to concentrate the sequester on items that have the maximum impact. It will cause the maximum pain and help to push voters towards the Dems.

It is the Chicago political way.

There are many areas that could be cut that would create little or no pain, but, hey, they don’t bring in the vote.

Poor old Nick Wappershitt simply cannot see that.

Posted by eleno | Report as abusive
 

Americans have no idea what their govt spends money on, or at least Americans that think like the above comments… Discretionary spending is only about $500B, and the sequester eats out over 40B of. So another words IT IS nearly a 10% cut in spending. Pentagon budget is $710B, so it’s $40B cut is less painful but not by much – they also have much more bloat. The other $2.5T is SS, Medicare/aid and interest on the debt: can’t skimp out on the interest; cutting SS means money literally out of your pocket; the ACA was meant to cut healthcare costs (and the debt hawks probably were against that). So before crying bloody murder about spending understand where the money is being spent then you might realize they don’t have much to work with.

Posted by CDN_Rebel | Report as abusive
 

Mr. Wapshott, look up “yellow journalism”. You’re now the poster boy for it.

A more balanced headline would have been: Inconveniencing of the public by our government’s implementation of their own sequester just as effective as they intended it to be. It’s like the local school district that immediately shuts down student buses when a community refuses to increase the local tax rate or approve an unnecessary school bond proposal.

But, in the “glass half full” view, this is proof positive just how insufferable and unaccountable our govern is and can be. Anyone else ready to go toe to toe and “show ‘em who’s boss”? (Don’t expect easy or “instant gratification”. Government bureaucrats and unions are deeply entrenched.)

Posted by OneOfTheSheep | Report as abusive
 

Mr. Wapshott, instead of writing for Reuters, I suggest you do some reading. Throughout this site you can find people who have experience in business and have seen Macro Econ. up close and personal. We’re at a “structural impasse” no amount of federal money is going to change 5 years of policy aimed at bringing Capitalism to its knees. “The folks are moving and will start turning out the lights”. No one wants to throw money into Obama’s America, no one. The only way to get money into the economy is tax, or spend by borrowing more. This is not an answer, and I thought a writer at Reuters might have seen this a long time ago.

Posted by mercyme | Report as abusive
 

WE, THE SHEEPLE

{NW: Until that happens, we must impotently watch as essential government services slow down and seize up, and as Americans, particularly those at the bottom of the heap, cry out in pain.}

Impotently?

Who has been doing all the stonewalling? The Dems or the Replicants?

Who, since the 2010 elections, has refused any stimulus spending bills to exit from the HofR to get this country out from under its unemployment problem? The Dems? Nope.

Who had the opportunity to kick the recalcitrants out of the HofR in 2012, but did not do so. We, the sheeple, did.

So who deserves the government-by-gridlock that currently exists in LaLaLand on the Potomac?

We do …

Posted by deLafayette | Report as abusive
 

It’s a game the Left has PLAYED FOR years. At the local level, whenever a school district wants the local property tax payers to approve a spending measure up for vote, they claim that if the hike is not approved, the football team will not take the field, that teachers won’t have time to write college recommendations for pupils, etc. In short, they attempt overt blackmail by making the situation as bad as possible until they get their way.

We are talking about puny little cuts to the “growth” of spending – not cuts from the actual baseline. The answer is simple – if the managers on these government agencies cannot handle a tiny cut their budgets, then FIRE THEM.

Posted by charliethompto | Report as abusive
 

You voted for this

Posted by Crash866 | Report as abusive
 

Congrats you put the DEMs(those who take Obama orders) in control of those agencies like the FAA.

And now the FAA lays off (reduces hours) of the air traffic controllers and does nothing really to reduce their admin, their travel, their discretionary spending in order to put the hurt on americans and our economy. Any independent Cost Accountant could roll through the FAA spending and we would not have had any loss on air traffic controllers, yet Obama wanted this to happen.

/maybe the states need to start auditing the FEDs.

Posted by VultureTX | Report as abusive
 

{VTX: Any independent Cost Accountant could roll through the FAA spending and we would not have had any loss on air traffic controllers, yet Obama wanted this to happen.}

And you probably blame him for every little bit of rain that falls into your life as well.

Some people …

Posted by deLafayette | Report as abusive
 

Republicans pretend the sequester is being done unfairly. But what they do not acknowledge is that the sequester is being done precisely as the law mandates. There is no descretion. It is a meat axe approach, and is meant to be. It is not simply 8% of a huge budget, but 8% out of each category in the budget, with no descretion to transfer between programs. So the good as well as the bad get cut the same.

Republicans seem upset primarily with air traffic controllers being removed from underused airports. Well, that impacts some of their well heeled contributors.

But cuts in things like medical research and services to disabled persons are not on their agenda, since those poeple do not contribute to them.

Congress complains about defense cutbacks, but does not mention that they have mandated certain defense spending that even the Pentagon doesn’t want, so the pinches are not all that smart.

Posted by pavoter1946 | Report as abusive
 

The Republicans could write a bill that says all house pets should be immediately slaughtered. The Democrats would vote a majority to kill the bill (54%), but it would pass by a Republican minority vote (46%), and then every Republican from here to Timbuktu would blame the Democrats/Obama for the massacre.

“Impotent”? You bet. We can’t toss out every single member of the most corrupt (or most incompetent at best) Congress – all of them – the U.S. has seen in its history. We are at their mercy, and the mercy of the lobbyists who are on the payroll of “big money” and have paid Congress to vote their way.

A simple question: Why hasn’t Congress been intelligent enough to prevent this? They negotiated a deal that sucked and they knew it. They told us they knew it would happen; it’s happened, and now they’re still at the drawing board. “Incompetent”? Yep. They could not be any more incompetent than they are now; but if they could, what would that look like? Could they be any more self-serving?

Our Founding Fathers are rolling over in their graves, and more than a few vulnerable Americans will be going to theirs early.

Monsters, all of them.

Posted by JL4 | Report as abusive
 

@deLafayette

Dude stop projecting your Bush Derangement Syndrome onto others.

/you do realize you imply Bob Woodward lied about Obama, so did he also lie about other presidents. oops.

Posted by VultureTX | Report as abusive
 

Remember, Republicans, before you toss all responsibility for the sequester into the laps of Democrats, this deal was hammered out by both parties. Conveniently forgot that fact, have you? Typical.

Posted by JL4 | Report as abusive
 

Those that keep waving the flag of “big, bad government” are finding that there are a lot of good things that our government does for the general welfare, a Constitutional goal fulfilled. Of course, the Plutocracy doesn’t want to assist the Pee-Ons and keeps corrupting our Congress in their successful effort to support the capital preservation and wealth-building of the One Percenters. Then, there is the Idiocracy promoted by the One Percenters that has millions of fools voting against their own best interests!

Posted by ptiffany | Report as abusive
 

@JL4,

“The Republicans could write a bill that says all house pets should be immediately slaughtered. The Democrats would vote a majority to kill the bill (54%), but it would pass by a Republican minority vote (46%)…”.

Amazing how hard math can be to figure out when someone gives examples without those pesky details. I presume you refer first to the Republican-controlled Legislature where all “bills” must originate.

From there it gets very murky. The Democrats are a minority in the House, so perhaps it is in this context that “a majority of them” could vote “to kill the bill” and, yes, these Democrats would be unsuccessful.

It is by no means clear how such a bill could then somehow “pass” (in the Senate?) with only Republican minority support (46%)…” unless some Democrats jumped on board. Help, please?

Posted by OneOfTheSheep | Report as abusive
 

JL4
Like you said pot kettle black…are you willing to own up to that…if not YOU are part of the problem…

Posted by Crash866 | Report as abusive
 

The federal government had over a year to come up with a plan that met the requirements of the sequester legislation. They did nothing. The Obama administration made a bet the Republicans would cave in to save the militarism budget from any cuts. He lost his bluff.

To say the cuts are hasty is a lie. What they are is a lack of planning on the part of the Obama administration.

And why is it that government spending is included in GDP? The money the government spends is taken from the productive economy, borrowed or printed. At best it’s money that is counted twice. At worst it is pure inflation.

Posted by SteveTX | Report as abusive
 

If Obama’s regime spent one hundredth the time they spent on reelection on BUDGET MANAGEMENT there would be no pain.

Posted by gitmojo | Report as abusive
 

Same crap different day. Country goes to hell while both sides do nothing but blame the other.

Posted by crod526 | Report as abusive
 

Just as destructive as predicted?

Man, I don’t know why such a lot of noise was indicated over it then. What’s described in this article is a nuisance, with the author having to go to great lengths to describe exactly why the sequester cuts are so darned bad.

If it was causing REAL hardship, no extensive description would be required. Everyone would be immediately aware how bad it was, because they’d be facing serious hardship, rather than delays at airports.

How very spoiled we all are.

Posted by Yashmak | Report as abusive
 

The sequester would go unnoticed if the Obama administration didn’t do its best to maximize the pain despite the many legal avenues it has to do the opposite. Without these cynical efforts to grab headlines, Americans would understand what makes intuitive sense to anyone who’s ever had to manage a business or a household budget: a 2.3% spending cut after a multi-year spending binge is imminently doable.

Posted by amateurediteur | Report as abusive
 

If truth be told what the author, and the Dems, would title this not very good piece of propaganda “The sequester is just as destructive as we hoped”.

The Obama administration has done everything it can to make sure the public feels the pain … just to make a point.

The Republicans offered to put forward a bill to allow the administration to be more selective about applying the cuts (scalpel vs axe) but Obama and Reid told them it would never be passed.

The Republicans mistake was not passing it in the House and making the Dems formally reject it. Until the Republicans begin playing the same PR game the Dems have been playing for5 years, they will continue to be the Dems whipping posts.

Posted by An_Independent | Report as abusive
 

I never imagined when I was in high school that I’d live to see the day that one can showcase this level of economic ignorance and that it would still pass for quality journalism on an economic issue. The punchline is that I’m only 27.

How can a decrease in the rate of increase be called a spending cut? I didn’t miss a memo indicating that we were all supposed to go retarded one day did I?

I’m not even going to bother to blame one political party or the other, instead I blame everyone who sees this article as journalism.

Posted by RedScourge | Report as abusive
 

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