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Spending cuts: five reasons allowing sequestration is bad policy

Spending cuts will begin to automatically take effect in two weeks, Harris writes, and allowing the sequester's automatic spending cuts to happen would be terrible policy.

By Ben HarrisGuest blogger / February 15, 2013

House Speaker John Boehner, R-Ohio, leaves a news conference after telling reporters that the looming sequester and resulting budget cuts would be like "taking a meat ax to our government," at the Capitol in Washington. Arbitrary spending cuts aimed mostly at one relatively small piece of the budget are no substitute for a comprehensive deficit-reduction package, Harris writes.

J. Scott Applewhite/AP/File

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In two weeks, about $1 trillion in automatic spending cuts will begin to kick in, a testament to the inability of policymakers to reach a grand fiscal bargain. Allowing these cuts to happen would be terrible policy.

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The Tax Policy Center is a joint venture of the Urban Institute and Brookings Institution. The Center is made up of nationally recognized experts in tax, budget, and social policy who have served at the highest levels of government. TaxVox is the Tax Policy Center's tax and budget policy blog.

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Here’s the background: In August 2011, Congress passed the Budget Control Act (BCA) as a last-minute solution to an impending debt ceiling crisis. BCA averted fiscal and financial disaster by allowing additional Treasury borrowing authority, but also put in place deficit-reduction measures that would cut the deficit by $2.1 trillion over 10 years.

These measures included caps on discretionary spending—cutting outlays by over $900 billion over the decade—and a requirement that Congress achieve an additional $1.2 trillion in deficit reduction. BCA stipulated that if Congress failed to cut the deficit by this amount (and it did), deficit reduction would be automatically achieved by “sequestration”—formulaic cuts in federal spending.

The cuts were originally due to begin on January 2, but fiscal cliff legislation pushed off the official commencement until March 1. On that date, the Office of Management and Budget will implement $85 billion in cuts for the remainder of the 2013 fiscal year—this translates into cuts of about 9 percent for affected non-defense discretionary programs and 16 percent for defense. If no action is taken, sequestration will reduce spending by $109 billion per year for the subsequent eight years. In all, cuts will total $960 billion, with an additional $216 billion in saving coming from lower interest payments. 

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