Blog Post by: Benjamin Landy, on February 6, 2013
The sequester, for those who don't remember, was a legislative trigger mechanism created in response to the debt ceiling crisis in the summer of 2011. Congress agreed to increase the nation's borrowing limit in exchange for $1.2 trillion in targeted spending cuts, to be selected by a bipartisan "super committee" of six Democrats and six Republicans and subject to a rare up-or-down vote without amendment. Failure to reach a compromise would trigger sequestration: an automatic $1.2 trillion cut, split evenly between Democrats' beloved domestic programs and Republicans' untouchable defense budget, beginning on January 1, 2013. It was, as Chris Cillizza puts it, "the ultimate insurance policy against legislative inaction."
Not surprisingly, the super committee failed. (Democrats insisted on tying spending cuts to revenue increases and Republicans refused to break their "no tax" pledge.) But no one in Congress ever really intended for the sequester to take effect either. So on January 1, after days of negotiations over the "fiscal cliff," Congress agreed to delay the sequester another two months.
Yet, with the March sequester less than four weeks away, Washington is no closer to a resolution. While President Obama yesterday encouraged Congress to "delay the economically damaging effects of the sequester for a few more months" if they are unable to reach a broader deal on spending cuts and tax changes, many lawmakers have privately come around to the conclusion that it may be easier politically to do nothing and let the cuts happen.
That is a serious problem. According to analysis by Century Foundation budget policy expert Andrew Fieldhouse, the $948 billion in government spending that remains to be cut is enough to slow real economic growth by 0.6 percentage points and cost 660,000 jobs in 2013 alone. The Bipartisan Policy Center estimates total job losses could top one million if the full sequester occurs as scheduled. Yet Democrats and Republicans alike appear resigned to mitigating, rather than averting, this damaging austerity program.
However, at least one group in Congress is still focusing on job creation and economic growth: The Balancing Act of 2013, unveiled yesterday by the Congressional Progressive Caucus (CPC), would replace the entire sequester with $960 billion in progressive revenue and inject $276 billion of short-term economic stimulus, paid for by $278 billion in defense cuts. Combined with the $1.7 trillion in spending Congress has already cut since the start of the 112th Congress, the Balancing Act would result in a one-to-one ratio of spending cuts and revenue increases while equalizing the cuts to defense and domestic spending.
This "evidence-based approach," as Fieldhouse describes it, addresses the "two imminent challenges actually facing policymakers: preventing what is intentionally terrible budget policy from taking effect," and exacerbating the jobs crisis:
Just as austerity measures can easily scuttle a depressed economy’s recovery, increased spending to boost demand is the most effective policy lever for accelerating growth. The Balancing Act would boost growth by investing $150 billion in near-term surface transportation infrastructure, $10 billion to establish an infrastructure bank, $55 billion in K-12 school modernization and rehiring teachers, and $61 billion to reinstate the Making Work Pay (MWP) tax credit for 2013. These are all cost-effective job-creation measures with fiscal multipliers (the amount of economic activity generated by year’s end per dollar spent) exceeding 1, meaning that this would actually reduce the debt-to-GDP ratio next year.
And although the CPC includes $960 billion in new revenue, progressive tax reform—such as the Balancing Act's repeal of the carried interest loophole and the elimination of subsidies for the oil industry—are "per dollar, the least economically damaging option for deficit reduction." Combined with targeted stimulus, the result is a net increase of 0.8 percentage points of economic growth, relative to current policy, and nearly 1 million new jobs by the end of 2013.
It is unfortunate, then, that any legislation proposed by the Progressive Caucus seems guaranteed to be ignored by both Congress and the news media. Even Wonkblog—the Washington Post's left-of-center blog on policy minutiae—left the Balancing Act off its recent post, "The three plans to stop the sequester."
The fact that the Balancing Act is unlikely to make it to the House floor is a troubling reminder of just how radical the idea of promoting job growth has become, and how disconnected Washington's fixation on debt reduction is from that of ordinary Americans. Steve Benen, writing for MSNBC, wonders how the bill would be received if it were not so marginalized:
I'd love to see a pollster put something like this to the test. Take competing deficit-reduction plans from the various players—House Republicans, the White House, the Congressional Progressive Caucus, etc.—and present them to survey respondents without any names or parties attached. Just have the pollster put it in the field as Plan A, Plan B, Plan C, and so on.
The media and the political establishment tend to scoff at the Congressional Progressive Caucus, but is there any doubt their plan would fare very well with the American mainstream? For all the talk about the "center-right nation," is it really outrageous to think that the plan crafted by House liberals would enjoy broad public support?
A sensible, balanced approach to deficit reduction that prioritizes jobs and growth over crippling austerity? Don't expect to see it in the news any time soon. (You can, however, read more about the Balancing Act and the Congressional Progressive Caucus on the CPC website here.)
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