Ideas. Action. Results.

Scheduled Sequester Cuts to Domestic Programs Pose Serious Threat to Still-Struggling Economy

By Loren Adler, Shai Akabas

Friday, July 20, 2012

Rebecca Morris contributed to this post.

Looming automatic defense cuts from the sequester have drawn substantial attention in the media and on Capitol Hill, of late – and the Bipartisan Policy Center Task Force on Defense Budget and Strategy’s report, Indefensible, called attention to the damaging effects of these cuts that are scheduled to occur on January 2, 2013.

Half of the sequester cuts, however, will occur on the domestic side of the budget, and these reductions have received less attention, in part because they affect an array of organizations and interests that are not natural bedfellows. BPC has outlined the mechanics and economic effects of these heavy cuts to non-defense spending, mainly borne by discretionary programs. The ramifications of the domestic cuts will be widely-felt. Similar to those in defense, their immediate and indiscriminate nature will hinder economic growth in a still-struggling economy and preclude sensible planning.

A recent letter to Congress – signed by a diverse coalition of nearly 3,000 national, state, and local organizations – attempts to shed light on the domestic cuts, emphasizing that they will cause immense harm and reduce non-defense discretionary (NDD) spending from 3.4 percent of gross domestic product (GDP) to 2.5 percent, the lowest level in over 50 years.

Among the numerous consequences, the Office of Management and Budget estimates that if the sequester is implemented, approximately 700,000 young children and mothers would lose nutrition assistance, and more than 25,000 teachers and teaching aides would lose their jobs.

Both defense and domestic discretionary spending programs already faced restraint in the form of caps imposed by the Budget Control Act of 2011 and are scheduled to decline to their lowest levels as a percentage of the economy in the modern era. These caps approximated the levels of spending of discretionary spending called for by the Bipartisan Policy Center’s Domenici-Rivlin Task Force.

While some additional reforms and cuts to these areas of the budget may prove necessary, there is widespread agreement that the sequester must be replaced with a balanced approach to deficit reduction that addresses the true drivers of our national debt – healthcare spending and a complex tax system that raises too little revenue.

Given this consensus, let’s hope that the two parties can practice “greatest common factor” policymaking – where Congress actually passes legislation on issues that have general agreement – rather than “least common denominator” politics – where ideological posturing and tit-for-tat threats are the default outcomes.

Read the letter below:

Coalition for Health Funding letter to Congress urging a balanced approach to deficit reduction