WASHINGTON – Congressional negotiators attempting to hammer out what has been an elusive budget agreement are taking a long look at tinkering with the spending cuts known as sequestration but face significant problems coming up with a replacement formula amendable to all sides.
Democrats assigned to the budget conference committee are dissatisfied with the sequestration cuts that have negatively impacted domestic programs like Head Start and want to ditch the process and raise revenues to compensate for the resulting increase in funding.
Many Republicans likewise are unhappy about sequestration for a different reason – the nation’s military budget is slated to bear the brunt of upcoming cuts, leading Defense Secretary Chuck Hagel to warn that scheduled funding reductions “will cause an unnecessary, strategically unsound and dangerous degradation in military readiness and capability.” But rather than increase funding through a tax increase, GOP conferees are looking for additional savings in entitlement programs like Medicaid and Medicare.
“I’m hopeful that this committee can come to agreement on eliminating the damaging, senseless cuts of sequester by replacing them with changes to mandatory spending,” said Rep. Tom Cole (R-Okla.), one of the negotiators, deflecting Democratic calls for tax increases.
Cole is one of the 29 lawmakers appointed to reconcile differences in the proposed budgets from the House and Senate. Creation of the panel was one of the key components in the agreement to reopen the federal government and raise the debt ceiling after the Oct. 1 shutdown, which was caused by disputes over the Affordable Health Care Act, familiarly known as Obamacare, and spending levels.
The panel has until Dec. 13 to come up with a long-term taxing-and-spending framework.
The two sides entered talks last week far apart on how to proceed but it appears sequestration could provide an opening for discussion.
Sequestration was imposed as a result of the Budget Control Act of 2011, adopted as part of a deal between President Obama and Congress to settle another debt ceiling clash. Reductions in spending authority for the 2013 fiscal year came to about $85.4 billion. The cuts were evenly split – a bit more than $42.5 billion from defense and $42.5 billion from the domestic side. Some programs, including Social Security, Medicaid, federal pensions and veterans benefits, were exempted from the cuts.
Sequestration is scheduled to run through 2021. During that 10-year lifespan, it is expected to cut anticipated spending by about $1.2 trillion. The total per year, according to budget estimates, comes to about $109 billion.
Critics of the sequestration process maintain that any cuts should be targeted as opposed to across-the-board.
Sen. Patty Murray (D-Wash.), chairman of the Senate Budget Committee and the upper chamber’s lead negotiator, said the question “is no longer whether sequestration should be replaced – but how.”
Defense programs are facing sharp cuts as a result of sequestration beginning in January, Murray noted. Meanwhile, the process is “continuing to cost us jobs and slash investments in our children’s schools, in cancer research and in our nation’s law enforcement efforts.”
“Sequestration is bad policy and Democrats and Republicans have said it’s not sustainable,” Murray said. “But it is going to continue to cost us jobs and cut vital services until we get a bipartisan deal to replace it that is fair for seniors and the middle class.”
Arriving at a bipartisan deal “is going to require compromise from both sides—there’s no way around it,” Murray said. “I am going into this budget conference ready to agree to some tough spending cuts that, unlike the sequester caps that disappear in 2022, would be permanently locked into law.”
“I know there are many Republicans who would be very interested in swapping some of the inefficient and damaging sequester cuts with structural changes to programs that would save many multiples of the cuts they replace over the coming decades.”
Cole, who seemed the most amenable GOP panel member to reforming sequestration, said the object can be accomplished without raising taxes, although he expressed a willingness to consider changes in the tax code.
“There are a number of pro-growth policies that, if enacted, would generate significant revenues for the federal government and grow our economy,” Cole said. “Policies like repatriation of corporate profits from overseas, expanded oil and gas exploration both offshore and on federal land, onetime federal asset sales and the like.”
Increased revenue, he said, “doesn’t and shouldn’t mean higher taxes.”
Several committee Republicans, including Rep. Paul Ryan, of Wisconsin, chairman of the House Budget Committee and the chamber’s lead negotiator, and Sen. Lindsey Graham (R-S.C.), acknowledge that sequestration has proved problematic and the panel could develop a better way to cut spending. Like Cole, they remain unwilling to raise taxes to address the issue.
Ryan acknowledged there exists “a better way to cut spending” and the best way to accomplish that is to reform the tax code.
“Today, our tax code is full of carve-outs and kickbacks,” he said. “We need to get rid of them — and those bipartisan talks are just the way to do it. So let’s do all we can to encourage that effort. And let’s focus our energy on the task at hand — a budget that cuts spending in a smarter way.”
Graham is particularly concerned about the impact of sequestration on the military, asserting that the projected cuts could prove devastating to the nation’s defenses, particularly at a time when the nation is facing challenges like the development of Iran’s nuclear program, al-Qaeda and the continued instability in Syria.
“There’s reasonable entitlement reforms that could replace defense and non-defense sequestration,” Graham said.
But not everyone is on board. Sen. Chuck Grassley (R-Iowa) was cautious about tackling sequestration and asserted that even defense has room for a haircut.
“I’m aware that there is a great deal of angst surrounding the impending sequester cuts, particularly those to the Department of Defense,” Grassley said. “The defense of our nation is one of the primary constitutional responsibilities of the federal government and we should not take it lightly. However, there should be no illusion that the Department of Defense is immune from wasteful spending, fraud and mismanagement that costs taxpayer millions and billions of dollars.”
Grassley said there’s no reason to believe that “the Pentagon is spending every taxpayer dollar wisely without a penny to spare.”
“So, while I recognize the concerns about these Defense cuts, and I wish we had gone about it in a more thoughtful way,” he said. “We should seriously consider giving agency heads more flexibility in managing the sequester cuts. But, I know firsthand that billions of dollars of taxpayer money at the Pentagon is lost to waste, mismanagement and negligence.”
Sen. Jeff Sessions (R-Ala.) expressed even greater reluctance, maintaining that the “bipartisan agreement is in law and must be maintained.”
“If we violate this solemn promise and this plain law, how can we expect the American people to believe us when new promises are made in the future?” he asked.
At first glance it would appear that sequestration carries few, if any, political consequences for those either for or against it. A United Technologies/National Journal poll conducted in October found that almost three out of every four individuals questioned failed to notice any effect from this year’s across-the-board cuts.
The survey showed that 23 percent of the respondents experienced the impact of the cuts while 74 percent said they felt no impact. The survey found the most common response among those who experienced an impact regarded the furlough of federal workers. Others answered that they had noted reductions in government services
That view would seem to create problems for Democrats itching to repeal sequestration but it also could indicate the issue has yet to ripen. A report from the Bipartisan Policy Center maintains that the full brunt of the cuts has yet to hit and “if we go down the sequester path for too long, we won’t be able to reverse the devastating impacts.”
Sequestration’s impact, the report said, will double in 2014 and triple in 2015 when compared to 2013.
“Essential government services, especially in defense, are not being performed, and will not be if sequester continues,” the report found. “The combination of sequester cuts and unaddressed cost increases will erode force readiness, stall modernization, and reduce the fighting forces by at least 50 percent by 2021.”
Still it appears the Tea Party will exhibit little sympathy for Republicans looking to repeal or alter sequestration, especially if it leads to any tax increases.
“Congress doesn’t have a sequestration problem; they have a sequestration promise to keep to the American people, one that the president supported on the campaign trail before he was against it,” said FreedomWorks President Matt Kibbe. “And frankly, it’s the bare minimum effort that Congress and President Obama can make, considering they have failed to pass a budget in over 4 years.”
Obama and Congress, Kibbe said, need to “stop tinkering at the margins.”
“Squabbling over $1.2 trillion in anticipated spending reductions over ten years seems pretty silly when considering that the fiscal deficit was $1.3 trillion for 2012 alone,” Kibbe said.
Senate Republican Leader Mitch McConnell, of Kentucky, is aware of the potential political pitfalls of a sequestration repeal.
“For the first time since the Korean War, government spending has declined for two years in a row,” he said. “This legislation is the largest spending reduction bill of the last quarter century and the largest deficit reduction bill since 1981 that didn’t include a tax hike. Preserving this law is critically important.”