The Super Committee’s announcement yesterday that it would not produce a deficit reduction plan has been viewed by many as a “failure” in Washington. In fact, the debt limit deal passed in August secured victory for taxpayers in any scenario - without a committee plan, a budget sequestration will go into effect, axing $1.2 trillion from federal spending. Taxpayers in favor of smaller government win either way.
Unlike a detailed committee proposal, the sequestration is an across-the-board cut for next year’s spending levels. The August debt deal requires half of the sequestration to fall on the defense side (the largest discretionary allocation by a long shot; defense spending makes up more than half of the funds appropriated each year) and half to come from domestic discretionary spending. OMB will be responsible for reporting to Congress what the spending levels will be and lawmakers will be able to flesh out where cuts will fall from there.
Most of the mandatory spending is exempt from sequestration, as is supplemental spending that has been used to side step budgetary restraints (supplementals are the common vehicle for war funding as well). The sequester can touch Medicare spending, but only cut about one-half of one percent of its expected costs over the next ten years.
This means supporters of bigger government and domestic spending are going to be feeling a very tight squeeze. CBO estimates that defense spending will amount to $8 trillion over the next decade. Non-defense discretionary spending will amount to $5.9 in that same period. That $600 billion in cuts from either of these categories would be deemed “draconian” is laughable, but it is obvious that the cuts will weigh much more heavily on the non-defense side of the ledger.
What’s more, the CBO projection does not include the security spending that happens outside of Pentagon budgets which will add over $200 billion in spending over the next ten years. It is a truly unserious lawmaker who can claim efficiencies cannot be made anywhere in these ballooning accounts.
As Dan Mitchell of Cato points out, the full sequester hardly augers austerity; with the $1.2 trillion cut federal spending will still grow by $2 trillion in the next ten years. This is slightly more than the spending growth of the past decade, which included two new wars, unprecedented unemployment compensation, bank bailouts, and “stimulus” spending binges. The sequester, then, only prolongs the reckless spending habits of the past decade. While $1.2 trillion in automatic cuts is a good start, it is a small first step on a much larger journey towards solvency.