Dumb and dumber on the sequester
The Washington Post, February 20, 2013
It's hard to know which is stupider: the coming sequester cuts or the arguments being made to avoid them.
Everyone knows that across-the-board budget cuts are the worst way to save money. They don't let you discriminate between programs that deserve to be expanded and those that have outlived their day. They let programs protected by small but powerful lobbies survive even as smarter investments serving millions of powerless Americans face an identical ax.
But then came President Obama's press event Tuesday. In rapid succession we heard the president say that 5 percent cuts in so-called "domestic discretionary" spending (and roughly 7 percent in defense) would impose "hardships" that were "brutal," akin to being hacked with a "meat cleaver," certain to "eviscerate" all we hold dear.
I couldn't scribble the scary words or looming disasters fast enough. Criminals would run free, planes might collide, teachers would be kicked to the curb, Al-Qaeda would be given an opening, and "emergency response" would be transformed into anything but. Tragically, today's airport security lines—models of efficiency, as all who travel often can attest—would suddenly become the site of unthinkable delays.
All thanks to a 5 percent cut.
Now, don't get me wrong. I oppose the sequester cuts. I've written for years that the long-term challenges we face are in the "mandatory" health and pension programs that make up the lion's share of domestic spending, not the much smaller "discretionary" part that's home to much of what we think of as government as well as much of the new investment (in research and infrastructure, for example) that the country needs.
Still, the idea that a 5 percent cut will bring Armageddon is too much to stomach.
When I worked as a management consultant as a younger man I was involved in a few cost-cutting efforts at large, admired companies. I knew of many more from colleagues. These were never happy exercises. Some people lost their jobs. But it was a truism that even well-run firms could cut 10 percent (and often far more) of their expenses with scant impact on the quality of their products or services, or on their "seed corn" for the future.
That's just the way large organizations are. Over time, various accretions of people and activity take place during periods of growth. And that's in the private sector, where competition and the profit motive act as continuous prods to efficiency (just think of how many firms went through much larger cuts during the Great Recession only to come back stronger). In government, the organizational tendency toward endless expansion is much greater.
Which means the idea that a 5 percent cut by definition spells disaster is preposterous.
On defense, the case for cataclysm seems even crazier. When our defense budget has doubled from $350 billion to $700 billion in the last decade, and is orders of magnitude larger than that of any potential rival, a 7 or 8 percent trim can't mean the sky must fall.
That's not to say that determined administrators can't choose to make a 5 percent cut seem calamitous by cutting visible, important things. That's the oldest budget con in Washington. It's also true that government rules make it harder to trim public budgets intelligently than is the case in the private sector. But to act as if the sequester means the end is nigh is to take exaggeration to new levels even by Washington standards.
Is the hype harmless? No. It adds to Washington's credibility gap. When independent or Democratic business people in high-tax states such as New York or California hear the president say the feds can't possibly endure a 5 percent cut but instead need to hike effective top marginal tax rates beyond the mid-50s level to which Washington's last fiscal deal just raised them, it turns what should be a winning economic showdown for the president into one that leaves influential constituencies wondering if Obama "gets it."
The right argument against the sequester is macroeconomic. It's a mistake to cut government spending when unemployment remains so high and we need Uncle Sam's contribution to aggregate demand to remain strong (or, ideally, even higher for a time).
Luckily, even though it looks like Democrats and Republicans have tied themselves into a political knot on the sequester, there's still a way out. They can simultaneously re-enact a payroll tax cut equal to or greater than the sequester and call it a day.
The get-tough-on-spending crowd could crow that it "did something."
The (rightly) worried-about-the-economy crowd and the tax-cutting crowd could make sure there's no net drain on government's boost to our sluggish recovery.
And the whole contraption would be so perfectly cockeyed, herky-jerky and devoid of anything resembling an economic "strategy" that it would be a perfect fit for this moment.
Plus, it would buy time until our next self-inflicted fiscal showdown—in a month!