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With automatic federal budget cuts set to begin, lawmakers in Washington are now confronting the challenge of trying to reach a deal over spending cuts and tax hikes before the sequester begins seriously impacting the business of government. Several Harvard Kennedy School faculty members are offering their perspectives on the budget battle as the nation anxiously awaits a resolution.
“The sequester is the ‘cut-off-your-arm’ approach to dieting. You lose weight but it causes even worse problems. The country is lurching from one self-inflicted budget crisis to the next, at a time when we should be stabilizing the economy -- and my sense is that the public is extremely frustrated, even exasperated. But the actual budget problems are not insurmountable if the political will could be found. There are a number of concrete steps that would be make it easier to reach consensus, including changing the annual appropriations process to a biennial one, adopting a more and transparent and effective budgeting framework, and reforming the congressional committees that deal with expenditures.”
“I think agencies need to be ready for the likelihood that sequestration itself will last for a while, and that, even more importantly, tight agency budgets will last for a very long time even after the sequester is ‘fixed.’
“In this situation, as far as personnel expenses (S&E in government budget lingo) are concerned, agencies simply must look for alternatives to furloughs for wide swaths of staff. Organizations, and managers, will need to start – and should be starting now, on the assumption this fiscal environment is not going away – thinking more strategically about how to bring down personnel costs.
“For managers and the human resources system, this means becoming more serious about taking on poor performers. For organizations, this means making tough choices about units that need to downsize or even be eliminated.”
“The only sensible solution involves legislation locking in modifications to entitlements (Social Security and Medicare) to bend down their rate of cost increase over the next 40 years, coupled with some (smaller) measures to increase tax revenues (such as curtailing income tax loopholes and perhaps adding something like a consumption tax or carbon tax). This requires the Republicans giving way on taxes and the Democrats giving way on entitlements.
“The sequester doesn’t help in this process in itself. But if the political backlash from the public is strong enough, it might help. The political analysts tell us that the public will mostly blame the Republicans for effects of the sequester. The way this might work, if we are lucky, is that the Republicans respond by proposing something specific on entitlements together with some implied willingness to consider tax revenue, [President} Obama then takes them up on their offer, and they work out a deal.”