Sequestration Is Finally Working
Speaker Boehner had come up with the Boehner Rule which required dollar-for-dollar spending cuts for every dollar increase in the debt ceiling.
President Obama and Congressional Democrats were adamant that taxes should be included in the deal, but unlike this past October, the president was open to negotiate.
But negotiations were not going well. Talks between House Majority Leader Eric Cantor and Vice President Joe Biden had broken down and Boehner and Obama were struggling to come to an agreement. At the last minute, though, they broke through with the debt ceiling compromise that cut $900 billion over 10 years (the "Budget Control Act") and set up a supercommittee charged with finding another $1.2 trillion in deficit reduction by November. If the supercommittee failed, across-the-board cuts to mandatory and discretionary spending would occur, though Medicaid and Social Security were exempted and Medicare was limited to 2% cuts.
There were two main goals of the sequester:
- Avoid a default.
- Incentivize both parties to agree to a bipartisan deficit reduction deal by intentionally designing the cuts to inflict extra pain on government agencies by limiting their ability to control what gets cut. The cuts to defense would incentivize Republicans to cut a deal while the cuts to non-defense programs would bring Democrats to the table.
At least that was the hope.
But, as we all know, the super committee failed. The sequester took effect this past March and has held back growth this year. The defense cuts weren't a strong enough incentive for Republicans to agree to any deal with tax increases, which were a necessity for Democrats to accept entitlement cuts.
Finally though, it looks like the sequester is going to work as advertised, at least for the next two years.
Senate Budget Committee Chairman Patty Murray and House Budget Committee Chairman Paul Ryan are putting the finishing touches on an agreement that would undo some of the sequester's cuts for the next two years, replacing them with targeted spending cuts, increased user fees and sales of broadcast spectrum. It would give agency heads more leeway to adjust the cuts to mitigate their impact as best as possible.
Why is the sequester finally working now?
Because both parties, in particular the GOP, are now incentivized to cut a deal. The non-defense discretionary spending cuts were front-loaded in 2013 (for a number of different reasons) so that the 2014 level is nearly the same as 2013 at $469 billion. Democrats, however, want to restore as much of the cuts that took place in 2013 as they can.
However, defense spending drops by $20 billion in 2014. This, plus avoiding another politically-damaging government shutdown, is driving Republicans to come to an agreement.
This is still a very small deal, it leaves much of the sequester intact and still must pass both houses, which is certainly not a given. But at least this was how the sequester was initially designed. Neither side finds the cuts acceptable and are willing to work together to avoid them. It's been a messy, ugly process, but it would be the first budget agreement since sequestration. In this time of heightened partisanship, that's an achievement in and of itself.