When Congressional Republicans agreed to temporarily suspend the debt ceiling, they and their Democratic colleagues left chunks of the so-called fiscal cliff in place. Or rather, they left one in place and pushed the other ahead to March 1.
The deferred chunk is sequestration, i.e., the across-the-board cuts that were supposed to give the bipartisan Super Committee a compelling incentive to agree on a more sensible deficit reduction plan.
Supposed to, but as we all know, didn’t.
As I’ve said before, no one likes the across-the-board cuts — a genuine bipartisan sentiment here. But we also seem to have a bipartisan agreement that they’re more likely to happen than not.
When the Washington Post alerted us to this next act in the fiscal follies, it focused on the impacts on the national economy. So have most other news articles and commentaries.
Not so bad, the Post gave us to understand.
A nick in economic growth — earlier estimated by the Economic Policy Institute at 0.6%. But “the financial markets” — those barometers of investors’ hope and fears — aren’t sending up distress signals.
Defense contractors certainly are. Likewise governors and mayors — as well they might, since federal grants account for, on average, about a third of state revenues. Sequestration would cut many, though not all those grants.
States can expect further revenue losses — and more safety net spending pressures — because of the job losses the across-the-board cuts will cause, both directly and indirectly.
We don’t know how many jobs will be lost. The Bipartisan Policy Center has estimated a million over the next two years.
Another widely-cited study put the total at close to 2.1 million this fiscal year, based on the assumption the cuts would begin when originally scheduled, as was the Center’s estimate.
Well, the economy can’t afford even a nick, as the latest economic growth report reminds us. Or should I say, economic non-growth report?
Nor can we afford more job losses, when we’re still shy about 3.2 million of the jobs lost since the recession set in — and actually need to create an even larger number because we’ve got more working-age people now.
Republicans and Democrats agree that we need to create more jobs, though differ dramatically in their views on how to do that.
At this point, however, job losses are in the forecast because there’s a huge bipartisan gulf that would have to be bridged to stop them.
And they clearly want to halt the across-the-board cuts for defense, while preserving the overall savings from sequestration — $85.3 billion for the current fiscal year.
That would mean shifting all the cuts to the non-defense side of the ledger, though not necessarily to the vast number of programs and activities now targeted for cuts.
The sequestration replacement bill the House passed in December folded in the $16.5 billion cut in the food stamp program that was part of the House Agriculture Committee’s Farm bill — and made it bigger.
It also adopted some earlier “savings” that came out of the House Ways and Means Committee — all detrimental to low and moderate-income people.
Other provisions undermine the Dodd-Frank financial services reform legislation and the Affordable Care Act — a stab in addition to what was already in the Ways and Means plan.
House Republicans know full well that the Democratic majority in the Senate won’t swallow all these “poison pills” — a term commonly used for provisions designed to kill a piece of legislation.
They also now seem to know that Democrats won’t agree to a cuts-only bill to replace sequestration.
So they’re inclined to take the sequestration savings and move on to the next episode in the fiscal cliff follies — the expiration of the continuing resolution that’s funding the federal government.
That will happen on March 27, unless both parties in Congress come to some kind of agreement. And they probably will.
But in the meantime, we’ll have what Matt Yglesias at Slate has aptly called “the idiocy of sequestration.”
NOTE: I’m indebted to Joan Entmacher, the Vice President of Family and Economic Security at the National Women’s Law Center, for the term “fiscal follies.” She used it in a very informative webinar co-sponsored by the Center and the Coalition on Human Needs.
You can view the webinar by clicking the link at the bottom of this page.