Slicing Sequestration: Can the GOP Abolish Cuts Without Political Consequence?

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.”