What if it's not really about the sequester?

Investors Business Daily asks the question, “Is Obama Losing His Media Allies Over The Sequester?” Only those that are paying attention. After a steady weeks-long diet of hysteria, hyperbole, and half-truths, Education Secretary Arne Duncan let the cat fully out of the bag yesterday with his face-plant on teacher layoffs, and now even the Washington Post has begun to express some long-overdue skepticism:

While the country has lived through five temporary government shutdowns since 1981, “we actually haven’t had something quite like this before,” said David Kamin, formerly special assistant to the president for economic policy in the Obama White House and now a New York University law professor. “We’ve never had an across-the-board cut of this magnitude applied.”

What is not new, however, is the impulse of officials to resort to melodrama when they are faced with budget cuts. Getting people’s attention has been a challenge in the case of the sequester. In the latest Washington Post-Pew Research Center survey, only one in four said they were closely following news about the automatic spending cuts.

The ploy even has a name: the “Washington Monument” syndrome, a reference to the National Park Service’s decision to close that landmark and the Grand Canyon for two days a week after the Nixon administration cut funding in 1969.

At the Pentagon, it’s called a “gold watch” maneuver, but it’s essentially the same idea.  Pick something that sounds scary or mean for your cuts, and watch support for fiscal discipline magically melt away.  The only problem with those strategies is getting caught in lies while trying to push them.

As for the “magnitude” of this across-the-board cut, the statement by the former Obama aide speaks volumes not about the sequester, but the lack of prior discipline that it exposes.  Cutting $85 billion from a $3.7 trillion budget is a reduction of only 2.3%.  I haven’t worked for a company yet that hasn’t had to impose across-the-board reductions in spending at one time or another with a much larger magnitude in almost all cases.  Millions of American families have had to cut a lot more than 2.3% of their budgets thanks to the Great Recession and the Obama recovery flop.

To call that a cut of any magnitude is almost laughably self-revealing, and the fact that we’ve never done it before makes it all the more imperative to start setting some precedents for it, even with a small step like the sequester.

But this Nightmare on Sequester Street hysteria isn’t really about the sequester at all.  In my column today for The Fiscal Times, I argue that the sequester was a fait accompli all along, which the lack of Senate action should have made clear to everyone.  This hysteria is a strategy designed to shape the battleground for another fight altogether:

Even with the surprise, the amount of hysteria combined with Obama’s ownership of the strategy is disproportionate to the effects.  Democrats began to openly worry about the messaging from the White House this week, fretting that an anti-climax after the sequestration hit would end up leaving egg on their faces.  If all of the horror stories turned out to be a big bust, then Republicans would be able to say, “We told you the world wouldn’t end if we cut spending!” That would leave them in a stronger position for further cuts.

Or would it? Just as Republicans decided to put the loss of the fight over the Bush-era tax rates behind them and ride the sequester to win the next round, the Obama administration may be doing the same in this round.  After all, the tables had turned to allow the GOP to do nothing to get its way, just as Obama did with all of the tax rates expiring on New Years Day two months ago.

The White House may have been surprised to see their opponents taking the substantial hit to Defense to win this round, but had to have seen that they couldn’t do anything about it – not without tipping their hand on the expiration of the continuing resolution (CR), which takes place on March 27th.  After that, the federal government has no budget, and without a new CR or final budget, the government will be forced to shut down.

And this is the real fight. The stakes will be the highest for both parties in a government shutdown, and both parties have reasons to avoid the fight.  Neither has an advantage in expiration dates.  The rubber game of chicken will be a straight-up battle of nerves … and public relations.

In that arena, the histrionics over the paltry sequester trims serve Obama’s purposes.  If the public perceives the GOP to have won a big fight by keeping the sequesters in place, that puts more pressure on House Republicans to compromise on the next continuing resolution.  If people don’t see an immediate impact from the sequester, they still will be open to the idea that we can’t go much further in spending reductions without risking real damage.  Those small reductions that generate anger and backlash against either or both parties will tend to hurt the Republicans more in 2014, since they have to defend their House majority in 435 districts, while Democrats will only have to protect their Senate majority in 33 states.  If Obama can create austerity fatigue with this sequester hysteria, Republicans will find themselves in serious trouble next year.

Consider this, too: the sequester cuts aren’t anywhere near as draconian as Obama and his Cabinet have suddenly proclaimed them to be.  However, the House will probably produce much more significant cuts in the next round of the CR, and in the FY2014 budget.  Obama wants everyone to believe we’re absorbing all of the pain we possibly can now in order to cut the ground out from the House GOP in the next fight.

Call that the Hype and No Change strategy, and don’t think it can’t work, either.