Happy sequester day

Please enjoy your massive economic contraction with a side of no actual fiscal benefit. 

In part, that has to do with the complex way the government handles its money. But it also reflects the probability that the spending cuts will hurt the economy, which in turn will lower tax revenue and drive up the costs of social safety-net programs like unemployment insurance.

On top of that, federal agencies - especially the Pentagon - will have to pay penalties to suppliers if the sequester forced them to cancel contracts.

Add it up, and the actual savings could be a lot less than budget hawks envision.

"There is a possibility that we'd save virtually nothing in outlays," said Steve Bell, a former Republican congressional aide now with the Bipartisan Policy Center, a Washington think tank.

And the punchline.

The nonpartisan CBO estimates gross domestic product will grow by 1.4 percent this year, compared to 2.0 percent if the sequester was not in place. The Bipartisan Policy Center estimates the sequester will lead to 1 million lost jobs in 2013 and 2014.

Remember also, none of this had to happen. It's only happening because congresspersons "on both sides of the aisle" agreed to make it happen in the first place.

Far from the case of Washington gridlock it's being described as in the press, the sequestration austerity package is actually a monumental achievement of bi-partisanship.  In this "grand bargain" Republicans get the draconian evisceration of what's left of the American social "safety net" that has long been at the core of their agenda anyway while Democrats get to pretend there was nothing they could have done to stop it.

In the larger picture, what we're seeing is another version of the European triumph of the Davos elites sold for an American audience.

Well, in Europe even more than in the US the Very Serious People live in a bubble of self-regard at their own seriousness, and imagine that the general public will follow their lead — hey, it’s the only responsible thing to do. Wolfgang Münchau has a great lede in his column today, that gets at the essence:

There was a symbolic moment in the Italian elections when I knew that the game was up for Mario Monti, the defeated prime minister. It was when in the middle of the campaign – in the midst of an anti-establishment insurgence – he took off to Davos to be with his friends from international finance and politics. I know his visit to elite gathering in the Swiss mountains was not an issue in the campaign, but it signalled to me an almost comic lack of political realism.

What Europe’s VSPs fail to get is that the public perception of their right to lead depends on achieving at least some actual results. What they have actually delivered, however, is years of incredible pain accompanied by repeated promises that recovery is just around the corner — and then they wonder that many voters no longer trust their judgment, and turn to someone, anyone, who offers an alternative.

Back home, the Democrats feel like they've isolated themselves from political fallout by casting themselves as victims of a scenario they never had to agree to in the first place.  Look for this principle of avoiding responsibility at any cost to dictate their strategy as this train continues to wreck.

Thus, if Republicans try to rejigger the sequestration cuts such that they make the lower overall spending levels permanent, but rescind its indiscriminate cutting mechanism and thus remove the pressure on Congress to pass a balanced alternative, they’ll set off a government shutdown fight.

But if Republicans can pass a government funding bill that adheres to spending levels agreed to and set in 2011, then the government will stay open and the fight over sequestration will continue indefinitely.

However the fight over ongoing funding of the government shakes out, Obama said he hopes public pressure convinces Republicans to relent on revenues so that he and Congress can replace sequestration with an alternative deficit reduction plan.

Of course anyone who has been paying the slightest amount of attention should know by now that the Republicans are quite happy to accept either an indefinite extension of the sequestration austerity or another shutdown fight.  They tend to win all the crises anyway. 

I think the Democrats understand this too.  But all they're bargaining for is an opportunity to claim they "lost" on the policy so long as nobody blames them directly for it.   Both sides have been thrown into a briar patch they're all too comfortable to sit in.  What could be more "bi-partisan" than that?

Just dump the thing

The sequester "crisis" is not a real crisis.  All Congress has to do is click its heels together and we all go home.

The AFL-CIO is coming out today for a repeal of the sequester. The labor federation will press the case in the days ahead that the sequester perpetuates destructive government-by-crisis, and that more austerity — replacing the sequester with other spending cuts — is exactly what the country doesn’t need at a time of mass unemployment and lackluster growth.

“We need to repeal the sequester,” Damon Silvers, the policy director of the AFL-CIO, told me in an interview this morning. “It’s bad economic policy, and it feeds a dynamic that encourages hostage taking. We are calling on elected officials not to play this game of substituting one bad thing for another bad thing. We’re insisting that our elected officials not buy into this inside Washington game of manufactured crises.”

But  Congress prefers all of those bad outcomes.

Winning

The Democrats are "poised and confident" because they believe they are going to "win" the public opinion fight over the sequester.

Democrats enjoy a massive public relations advantage over the GOP. Voters are prepared to blame Republicans. The Democrats have an unusually steady message. Republicans are lurching from message to message as they try futilely to blame Obama for sequestration’s very existence, while contending that its consequences won’t be so dire (except when they contend it will hollow out the military) and to argue just as futilely that Obama’s revenue demand is an act of duplicity.

Unfortunately this is very different from "winning" the policy fight.  In terms of their party's (nominal, anyway) policy goals, we're likely to see the Democrats lose a lot.  Whatever deal is eventually reached will undoubtedly contain lots and lots of horrifying cuts to many necessary social services that people rely on.  But because the Democrats have maneuvered things in such a way that Republicans will take most of the "blame" for these cuts (at least initially) then this constitutes a big win for team D.

Way to go, guys.

Sequestration is a bad bad thing

Here is a list of some of the very bad things that will happen in Louisiana if the sequester is allowed to go into effect.

Sequestration was sold as an arm-twisting mechanism that would goad congress into action.  But it's really just a game of chicken that can be called off at any time. Also Republicans, despite their whining, are mostly happy if the sequester cuts happen anyway.  This is the tax cut extension standoff in reverse. That time the Democrats had all the leverage but caved anyway.  This time Republicans are going to get most of what they want either way.

But everyone will continue to talk about how badly they're being beaten for some reason.