Budget woes await winner
5th November 2012 · 0 Comments
By Julianne Malveaux
No matter who wins the November 6 election, he will have a mess on his hands. The Budget Control Act of 2011 will cut $109 billion from the federal budget in 2013 unless Congress is able to figure out how to either reduce the deficit or cut another deal. The cuts will range from seven to nine percent, and they’ll hit everything — Pell Grants, housing, employment services, and defense.
Already, some government contractors are cutting back in anticipation of what is called sequestration and some politicians are saying that our national defense will be “hallowed” by the process. While Mitt Romney talks about getting more ships for the Navy, the fact is that all of us will have to do with less if Congress cannot see its way out of this mess.
The deficit reduction sequester — a result of the failure to enact legislation that reduces the budget deficit by at least $1.2 trillion over the next 10 years — is scheduled to begin in January. It will affect all non-exempt federal programs, with equal savings coming from defense spending and from non-defense spending, according to the House Budget Committee.
Congress pushed itself into sequestration in 2011 when our nation’s credit rating slipped because our leaders failed to pass a budget. In a showdown with President Obama, Congress stepped all the way out on the cliff that we are now poised to fall off. Rather than making reasoned decisions about cuts, the notion of something automatic was supposed to scare everyone into sanity. The last year, however, has reminded us that few who make public policy are sane.
Most economists are clear that cutting spending during a recession or its weak recovery makes no sense. Deficit notwithstanding, taking money out of the economy is a prescription for disaster. We have only just climbed out of a recession, but recovery is not assured. We face the possibility of a double dip recession by withdrawing money from the economy.
One of the biggest challenges in avoiding the sequester is the fact that the Congress that will convene to attempt to make a deal in a lame-duck Congress. Some will lose their jobs as of January, but they still have the opportunity to pass laws between November and January. They have nothing to lose by continuing their obduracy, and they have few incentives to compromise, something they haven’t done before.
Republicans don’t want to raise taxes, especially on the wealthy, which is one way to avoid the sequestration trap. Democrats don’t want to cut vital social programs. That simplifies matters just a bit, but the bottom line is we get more money either by increasing taxes or cutting programs. We can’t increase taxes on the already beleaguered middle class, and the poor don’t have a penny to spare. That leaves the wealthy, but they are the sacred cows of the Republican Party. Cutting social programs hurts those who have already been hurt. Congress has a dilemma.
One of the things we know about sequestration is that it will cost jobs, both in the federal government and in companies that contract with the federal government. Our extremely weak recovery, which leaves us with an official unemployment rate slightly less than eight percent, cannot sustain more job losses. Our Congress, with a median wealth of $750,000, excluding the value of their homes, cannot fathom the lives of ordinary human beings. These are people who get up in the morning, pour cereal in a bowl, take a fast crack at the newspaper before hopping a subway or bus on the way to work, put in their hours, often more than eight, and then take the subway or bus back home. Many make a pit stop at a day care center or school, and then rush home to put food on the table. With median wealth of about $20,000, including home ownership, their lives are a far cry from those of their elected representatives. The gap, perhaps, explains why the American Jobs Act has not yet been passed after languishing in Congress for nearly a year.
Sequestration has come up only tangentially in the presidential debates. Yet it is one of the most important immediate issues that our nation faces. Across the board cuts hit more heavily at the bottom than at the top, and those who are already suffering will find themselves suffering more. It would have been great to have one of the debates focused specifically on this issue of sequestration. The way this sequestration is implemented is likely to depend on the outcome of the election. Yet both candidates have been mostly silent on this matter.
What happens after November 6? Whether President Obama or Willard Romney wins, hard choices will have to be made.
Julianne Malveaux is a Washington, D.C.-based economist and writer. She is President Emerita of Bennett College for Women in Greensboro, N.C.
This article originally published in the November 05, 2012 print edition of The Louisiana Weekly newspaper.