How to Sidestep Sequestration

February 20, 2013
By Colleen Walsh, Harvard Gazette

The March 1 deadline is approaching for Congress either to reach a budget agreement or force the government to begin cutting programs, in a process known as sequestration. Analysts increasingly fear that a compromise will not be reached to avoid automatic, across-the-board cuts affecting everything from Defense Department outlays to discretionary domestic spending.

Linda J. Bilmes, Daniel Patrick Moynihan Senior Lecturer in Public Policy, spoke with Gazette staff writer Colleen Walsh about the looming sequestration, and offered suggestions on how to fix the nation’s rudderless budget process. Her recent books include “The Three Trillion Dollar War: The True Cost of the Iraq Conflict” (with Joseph E. Stiglitz, 2008) and “The People Factor: Strengthening America by Investing in Public Service” (with W. Scott Gould, Brookings, 2009).

Q: Can you define sequestration?

Bilmes: Sequestration is a process of making automatic, across-the-board budget cuts. The currently scheduled sequester would cut about $85 billion out of federal discretionary programs, which means all programs, including defense, that receive appropriations on an annual basis. It does not include entitlement programs like Social Security.

Q: How did we get here?

Bilmes: For some years now, we have been lurching from one budget crisis to the next, and this is simply the latest iteration. The current sequester came about because after the July 2011 budget fiasco, in which the government almost shut down, Congress decided to set up a “supercommittee” of members who would try to come up with a series of budget and tax reforms that could receive bipartisan support.

The penalty for not coming up with this agreement was that there would be an automatic, across-the-board set of budget reductions known as sequestration. This was supposed to be such an unsatisfactory solution that it would incentivize the supercommittee to reach agreement. But unfortunately, the committee was not able to agree. So the penalty, which is the sequestration, is back on the table.

Q: Can you explain what happened in January with the first sequester deadline?

Bilmes: There were two big threats that were potentially going to happen at the beginning of the year, leading to the phrase “fiscal cliff.” One was the expiration of the Bush tax cuts, and the second was the automatic sequestration. The fear was that if the tax cuts expired at the same time that [the] government cut spending by a large amount, this double whammy could push the country back into recession.

Fortunately, the president was able to reach a compromise with Congress around the tax cuts. Taxes have increased for wealthier people, but tax cuts have been extended for middle-class taxpayers, except for the payroll tax, which has gone up for everyone. But the threat of recession is still there if the budget is cut as radically as the sequestration would propose.

Q: What do you foresee happening on March 1?

Bilmes: I would be very surprised if the sequester went ahead without changes. It’s unlikely that Congress will take any action until the last minute, because it seldom does anything unless it is forced to. But in all likelihood, Congress will not allow such draconian cuts to take place, especially in the Defense Department. What will probably happen is that there will be some kind of compromise on the sequester, and they will kick the can down the road again to the next deadline, which is in May when the debt ceiling issue is coming up again. And then there will be another threatened calamity. But in the unlikely event that this sequester goes ahead, we will be reducing funding for many programs that should not be cut, but doing nothing to get at the waste and duplication and inefficiency and all the other things that give government a bad name.

Q: Do you envision any movement, or any kind of real compromise with such a divisive government?

Bilmes: The overwhelming majority of Americans of both parties want compromise, according to the Pew and Gallup polls. But many of the congressional districts have been so gerrymandered that the districts are representing either extremely liberal or extremely conservative electorates, and this has made it very difficult to achieve a consensus. Many of the newly elected members of Congress [whom] we teach here at the Kennedy School are more worried about challenges from within their party in the primaries than they are about facing the opposite party. This political redistricting has created a pernicious problem. It is becoming more and more difficult to achieve consensus even on subjects like reducing the national debt or raising taxes on the wealthy, where you have a pretty high degree of consensus among the voters.

Q: Why is the budget process so broken?

Bilmes: The budget process in this country has become completely dysfunctional. It’s broken down, for several reasons. Partly because of the congressional polarization, partly because budget reform is not glamorous — it’s not a headline-grabber — it requires a lot of time and attention to detail to fix it, and partly because it has been easier to open the federal checkbook than to work out how to get better value for what we already spend.

The public is exasperated, not only in the U.S., but around the world, with this crises-driven budget situation. My foreign students are astonished that we put up with it. When you read the budget theory by scholars such as Aaron Wildavsky, budgets are supposed to help with allocation of resources, setting priorities, planning, and management. The current budgeting system at the federal level doesn’t facilitate any of those things. read more

Linda J. Bilmes, Daniel Patrick Moynihan Senior Lecturer in Public Policy

Linda Bilmes, Daniel Patrick Moynihan Senior Lecturer in Public Policy

Photo Credit: Dominick Reuter

"The budget process in this country has become completely dysfunctional," said Bilmes.


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