Sequester Blues

Just about all sides agree that Congress is a dysfunctional body, but that is where agreement ends. With both the sequester and the Continuing Resolution that funds the federal government staring us in the face there appears to be little or no communication between the parties to try to resolve the ongoing budget saga. I had an opportunity to listen to U.S. Congress Reps. Niki Tsongas and John Tierney at a Merrimack Valley Chamber of Commerce breakfast this week, and while Congresswoman Tsongas expressed “optimism” and had words of praise for Speaker Boehner I do not share that (short term) optimism.

The Republicans, having been rolled on taxes (in their minds), during the fiscal cliff imbroligio, have now dug in on the sequester, saying that they will allow it to occur even though Defense takes a major hit from that process. They will only consider other “cuts” to replace the sequester cuts, with the original House bill passed to replace the sequester simply replacing the defense cuts with deep cuts to social programs helping our citizens that are in the most need. It is a non-starter. The President seeks some additional revenues to go along with the budget cuts to get to the sequester number, and the Republicans are saying that is a non-starter. At this point you might expect me to say that negotiations have begun to bridge the gap, but alas I cannot say that. Both sides have now determined that political positioning in advance of the sequester will determine the political winners and losers once the sequester cuts are imposed. Is that any way to run a government? It is how we run ours. Let us take a look at some of the facts involved, and see if we can divine what might happen after the sequester.

Both sides are now seeking political advantage, and the lack of trust that has been built up certainly makes that unsurprising. But what is the fight really about? Let us look at the claims.

The Republicans claim that they “have done revenues” through the fiscal cliff deal. In general they generically claim to be supportive of the Simpson-Bowles framework for deficit reduction, and where it serves their purpose they trumpet that loudly. They also pose the rhetorical question “You just raised taxes, why are you asking for ANOTHER TAX INCREASE?” We are done with tax increases!!!! Don’t they have a point? Has the President gone “tax crazy”? A close examination of the facts leads you to see the type of shell game that is being played here. wHAT ARE THOSE FACTS?

The Simpson-Bowles Commission advocated for increased revenues through a reform of the tax code that would close loopholes and actually lower and simplify marginal tax rates. The Commission assumed, in their so called “baseline”, that the Bush tax cuts for top earners would be allowed to expire. They calculated that revenue in advance of their calculations, and they were right to do so. The President and Democrats compromised on the issue, raising the threshold for top earners seeing an increase in marginal tax rates from the $200,000 mark to the $400,000 mark. Bottom line is that the revenue raised, over ten years, went from $800 billion to $600 billion. Simpson-Bowles, after assuming $800 billion in revenue from that change as a part of their baseline, raised taxes by $1.6 trillion over ten years. They achieved this largely, though not exclusively, through loophole closings. What does all that data tell us?

It shows that Republicans, in fighting a scorched earth policy on taxes, now consider the revenue question closed after less revenue was achieved than the Simpson-Bowles baseline. The President, although he has not endorsed Simpson-Bowles, simply wants to implement the other revenues that are envisioned by that Commission through tax reform. And while I agree that the time frame for achieving tax reform is simply not there in light of current budgetary calendar deadlines the question needs to be asked as to why that is? The President has asked repeatedly for a large deal on the fiscal question, but Republicans see those negotiations as a one way street, with offers that are laughable in terms of revenue offered, especially in light of Simpson-Bowles. Even the Republican claim that the fiscal cliff deal offered revenue but no cuts needs to be examined closely. The claim itself is true, but again we must ask why? The Republicans gave up on the revenue question for political reasons, but the President had offered, again, a larger deal that would have mirrored Simpson-Bowles in terms of deficit reduction achieved. It could have, and would have, included cuts that may have offended some Democratic constituencies. The Republicans opted for the final product by boxing themselves in, and refusing to negotiate a larger fiscal deal.

I realize that negotiations require two to tango, and Republicans will see the above as mere partisanship. But it is all true. The President, under normal circumstances, might be subject to some criticism on the poor results of all of these negotiations. In my view he has had it with the failure of the Republicans to negotiate in good faith prior to the election. They took a shot, and they lost. As I am fond of saying “bad faith begets bad faith”. If the President has taken a tough position now it is as a direct result of the Republicans acting in bad faith before the Presidential cycle, confident in the belief that the President would be defeated. At this point the idea that the President will bring forward modifications to entitlements for the crumbs being offered by the Republicans is actually laughable. A ten year plan that hits the Simpson-Bowles deficit targets requires a lot more revenue than the Republicans are willing to give, and on that basis we will lurch from fiscal crisis to fiscal crisis. And I believe that the Sequester will go into effect. What then?

The Republicans will be under immense pressure from the military, from defense contractors, from the Republican Party wing dedicated to military interventionism around the world. That prospective Republican civil war over the sequester has already started. Bill Kristol, over at the Weekly Standard, has made a strong case against allowing the sequester to occur. He believes it will debilitate our military:

Republicans—as well as Secretary of Defense Leon Panetta and defense experts across the political spectrum—have explained so many times how damaging the sequester would be to our military that there’s no need to restate the case here. But consider last week’s announcement by the Navy that, just 48 hours before its deployment from Norfolk to the Gulf, the USS Harry S. Truman would not sail but instead be put on alert to “deploy on short notice.” This will leave only the USS John C. Stennis in the Gulf, until it is replaced by the USS Dwight D. Eisenhower—meaning our aircraft carrier presence in the Persian Gulf will be reduced from two carriers to one. Christopher Harmer, naval specialist at the Institute for the Study of War, explains the consequences:

It’s a drastic move: The continuous deployment of two U.S. aircraft carriers to the Persian Gulf area guarantees an immediate and crushing military response to any provocation—especially to one coming from the Iranians. .  .  . The typical deployment pattern for two carriers in this area is to station one carrier in the Persian Gulf, inside the Strait of Hormuz, and one outside the Persian Gulf, patrolling the Arabian Sea, Somali Basin, Gulf of Aden, Red Sea, or Indian Ocean. .  .  . Maintaining one aircraft carrier inside and one outside the Strait of Hormuz ensures that the Iranian Navy is constantly aware that any attempt to close the Strait will result in an overwhelming military response. A two-carrier presence has a much greater deterrent effect than a single carrier would.

In light of Kristol’s views on matters in the Middle East this is an unacceptable outcome for him and the neo-con wing he speaks for. But Charles Krauthammer had advocated for letting the sequester occur. So Republicans continue to not have a cogent position, even on something as fundamental as the sequester. That “divergence” makes them a difficult group to negotiate with, as leadership simply cannot deliver votes for ANY deal. I am not sure how the President can get blamed for the lack of a deal when he is negotiating with that group. And as the American public surveys the wreckage after the next round I do believe that they will reach the same conclusion.

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