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Can we live with the budget 'sequester'? Yes, but it’s better if we don’t.

Congress has many incentives to prevent the $100 billion 'sequester', the feared 'fiscal cliff' among them. But it’s main drawback is that it’s a blunt tool for a delicate budgetary task.

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Penner isn't saying 8 percent cuts would be easy for the government to manage. The law doesn't give an agency like the Federal Aviation Administration flexibility to, say, shift funds from technology investments to give more money to cover the day-to-day air-traffic controllers. That lack of flexibility, though, is something Congress could potentially change by modifying the law.

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Scott Lilly at the liberal Center for American Progress has done his own analysis of the problem, noting that the cuts of about 8 percent would go into effect after the fiscal year is already three months old. That means agencies might really find themselves scrambling to reduce outlays by about 12 percent in the remaining nine months of the fiscal year. One strategy many agencies could take, he suggested in a June report, might be to furlough workers for as much as 4.7 weeks each, spread over those months.

Many experts say some of the harshest impacts would come on the defense side of the discretionary ledger. That's because the law provides that military pay won't be reduced, so the savings need to come out of procurement, training activities, and the like. And, as on the domestic side, the law appears to leave little flexibility.

"If the Navy were budgeted to issue contracts on 10 ships in fiscal year 2013, then it would not be permitted to cancel one of the ships but would have to apply the cuts equally across each of the 10 ships," Lilly predicted in his report.

In the presidential race, Romney is the champion of spending cuts, but he makes a big exception when it comes to defense. He calls for expanding military spending, rather than cutting it alongside his reductions in discretionary spending.

Critics of Romney say the Republican's spending-cut zeal is too extreme, and would erode important nondefense programs. Critics of Obama, by contrast, worry that he won't do enough to tame spending, which, if unchecked, might grow to become a hindrance to economic growth.

Entitlements and tax revenues untouched

Almost all budget experts agree that sequestration is a very bad way to tackle federal deficits. Far better is for politicians to do the difficult work of devising a long-term strategy for deficit reduction. That would mean making judgment calls among programs, rather than impose equal cuts for all.

Many finance experts say the larger lesson that emerges from the sequester law is this: America's giant fiscal problem appears impossible to solve if two big tools – entitlement reform and tax-revenue changes – are left on the sidelines. So far, Republicans in Congress have insisted that fiscal progress be sought only through spending cuts, while Democrats have shied away from entitlement changes that might result in leaner benefits.

The Budget Control Act was a stopgap measure that emerged from that lack of consensus. But the act can't come near to closing America's fiscal gap.

Cutting $100 billion a year is a relatively significant percentage of discretionary spending, in part because the discretionary portion of the budget keeps shrinking (as the entitlement portion grows). Yet $100 billion is a relatively small part of a federal spending that totals some $3.8 trillion for 2013.

"The things that are really causing us budget problems are protected" by the sequester law, Penner says.


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