The persistently practical duo of Alan Simpson and Erskine Bowles is once again tossing a fiscal lifeline to President Obama and congressional leaders. If they grab hold of it and use it as a framework for serious deficit reduction it would almost certainly accelerate the economic recovery and provide Washington the capacity to focus on other serious domestic and foreign policy priorities.
We fear, however, that a collective unwillingness to compromise will take Democrats and Republicans down a different path, one that will slow the recovery, and perhaps stall it, by allowing a series of imprudent, hasty and misguided discretionary spending cuts to take hold, cuts that won't even go to the heart of the deficit problem.
On March 1 so-called sequestration is set to begin. Congressional leaders and the White House agreed to the cockamamie plan in 2011. Under the deal, if a so-called "super committee" did not meet its mandate of finding $1.2 trillion in deficit reduction, automatic cuts - sequestration - would begin in 2013. Surprising no one, the committee announced in November 2011 it had failed.
If no alternative deal is reached, the administration will have to find $85 billion in cuts over the next seven months, with discretionary spending for non-defense programs cut 9 percent, and discretionary defense spending trimmed 13 percent. Theoretically, sequestration also requires $109 billion in annual cuts thereafter, reaching $1.2 trillion in spending reductions over 10 years, though even we are confident that the denizens of Washington can't avoid agreeing on genuine fiscal policy for that long.
The problem with sequestration is that it exempts some of the biggest drivers of long-term deficit spending, such as Medicare and Social Security, and human service programs, including Medicaid and food stamps. Instead it demands cuts where government is arguably the leanest. Federal workers will receive unpaid furloughs. Security lines will grow at airports. Food inspections will slow, as will the processing of tax returns. Border security will suffer, some medical research programs will be suspended, federal parks will reduce services, and the list goes on.
On the defense side of the budget there is no question that spending cuts can be found by reducing or eliminating some inefficient, redundant or outdated weapon systems and programs. But the sequestration approach won't employ surgical cuts after careful analysis, but instead chop away like a dull cleaver. In changes to be felt locally, the Coast Guard would slash one-quarter of air and surface operations. The Navy may extend submarine deployments to reduce the expense of turnaround costs. Groton's Electric Boat, set to begin $94 million in repairs to the Miami, damaged in an arson fire May 2012 while in dry dock in Portland, Maine, would see that work suspended.
On Tuesday Mr. Erskine, the former White House chief of staff for President Clinton, aptly called the sequestration approach "absolutely stupid and, I can say - stupid, stupid, stupid." His Republican counterpart, former Wyoming Sen. Simpson, called the unwillingness of party leaders to set aside politics and forge fiscal compromise "disgusting."
The pair led a deficit-cutting commission appointed by President Obama, but their 2010 report got little political traction. On Tuesday they provided an updated deficit fix. It has plenty for both sides not to like, which makes it a good outline for a deal. It calls for $2.4 trillion in deficit reduction over 10 years, more than the president says is necessary and less than Republicans want. It contains $600 billion in health care spending reductions, including for Medicare and Medicaid. It envisions $1.2 trillion in discretionary spending cuts, including recalculating cost of living increases for Social Security and other programs, reducing farm subsidies and adjusting federal pension programs.
Finally, $600 billion would come from boosting tax revenues, not through rate increases but by limiting or eliminating various loopholes and deductions.
The president and fellow Democrats will hate trimming entitlement programs; Republicans want no tax increases, even by closing loopholes. But demonstrating Washington can work would generate investor confidence and get money sitting on the sidelines back in the game and generating jobs.
Conversely, the Congressional Budget Office estimates allowing the indiscriminate budget cuts to kick in will reduce economic growth by 1.5 percent and diminish job growth by perhaps a million jobs.
Anywhere but in Washington the sensible course of action would be obvious.