WSJ: “Scary” sequester a 5% reduction in discretionary spending –after 14% increase since 2008

Barack Obama and his allies have attempted to derail the sequester that his own White House demanded in the summer of 2011 by issuing lots of scare stories about the consequences.  Layoffs, national-security crises, and an economic plunge are just a few of the dire predictions being offered if Republicans don’t cave on the automatic cuts to which all sides agreed less than two years ago.  Poppycock, says the Wall Street Journal, which points out that the sequester amounts to a third of the increase in discretionary spending since 2008:

Republicans have rightly concluded after two years of being sucker-punched that the sequester is the main negotiating leverage they have and may be the only way to restrain spending. So now Democrats and a gaggle of interest groups are denouncing Mr. Obama’s fiscal brainchild because the programs they cherish—from job training to education, to the EPA and energy subsidies, to money for Planned Parenthood—are about to get chopped too.

Fear not. As always in Washington when there is talk of cutting spending, most of the hysteria is baseless. The nearby table from the House Budget Committee shows that programs are hardly starved for money. In Mr. Obama’s first two years, while private businesses and households were spending less and deleveraging, federal domestic discretionary spending soared by 84% with some agencies doubling and tripling their budgets.

Spending growth has slowed since Republicans took the House in 2011. Still, from 2008-2013 federal discretionary spending has climbed to $1.062 trillion from $933 billion—an increase of 13.9%. Domestic programs grew by 16.6%, much faster than the 11.6% for national security.

The chart shows the increase, with and without the 2009 Porkulus spending bill that was supposed to keep Americans employed as the Great Recession grinded forward:

Even without the stimulus spending as a baseline, each of these areas — defense included — has seen double-digit percentage increases in federal spending.  The sequester amounts to a 5% reduction in discretionary spending after this spending spree, hardly a crisis that will bring Washington to impotence.

Nor will it kill the economy, as the WSJ points out:

The most disingenuous White House claim is that the sequester will hurt the economy. Reality check: The cuts amount to about 0.5% of GDP. The theory that any and all government spending is “stimulus” has been put to the test over the last five years, and the result has been the weakest recovery in 75 years and trillion-dollar annual deficits.

The sequester will help the economy by leaving more capital for private investment. From 1992-2000 Democrat Bill Clinton and (after 1994) a Republican Congress oversaw budgets that cut federal outlays to 18.2% from 22.1% of GDP. These were years of rapid growth in production and incomes.

What does the Obama administration really fear from the sequestration?  As I explain in my column for The Fiscal Times, it’s the exposure that Obama and his team are bereft of any real plan for fiscal responsibility and economic growth — a reality that the previous fiscal-cliff fights helped hide:

Obama provided plenty of dire warnings about the damage that his own budget-gimmick proposal may do if it becomes active in less than four weeks.  What Obama hasn’t provided is an actual solution for replacing his previous solution.  In fact, Obama hasn’t yet provided a budget proposal for FY2014, despite having a statutory requirement to do so by now – making four budget proposals out of Obama’s five opportunities that arrived late.  Instead of offering specific proposals for spending cuts to replace the sequester, Obama offered a vague demand for “tax reform” that would increase revenue again.

This deadline has been in place for months.  It became clear weeks ago that Republicans would likely allow the sequester to go forward, at least long enough to put pressure on replacement cuts from Democrats, and would be in position to refuse to raise any more revenue.  And yet Obama not only sounded like someone shocked out of a reverie, he offered nothing to resolve the standoff – and neither did Harry Reid and Senate Democrats, not even an offer to take up the bill approved by the House in the last session if passed again.

Boehner has triumphed in at least exposing the White House’s fumbling on spending issues – and he wasted no time in driving the point home. “Yesterday the president warned of grave economic consequences if the sequester were to go into effect, but he didn’t announce any specific plans of how he would address it,” he pointed out after Obama’s demand for a delay.  “He didn’t bother to outline how he would replace the sequester, which he suggested and insisted upon in August of 2011. He didn’t even tell us when we might see his budget, which is again late, and how he would address the sequester in his budget.”

In short, the President has no plan, and no leverage.  With the tax rates and Alternative Minimum Tax fixes now permanent, Obama has no more leverage to force the House into bending to his will.  His one gimmick to force Republicans to cave into his demands for higher taxes and more spending just backfired, and Obama has nothing more to offer.  After almost four years of budget cliffs and gimmicks, Barack Obama will have to accept that reality and get serious about budget reform on the other side of the ledger.

Republicans need to let the sequester do its work, or demand that the White House and Senate act to replace them with better plans for spending reductions.  It’s time to keep the leverage on that side of the federal ledger.

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