Are the Republicans Willing to Destroy the Economy? Yes, as Long as They Own the Wreckage
The sequester may bite for a few days or even weeks, but the end-game of this round of budget warfare is all too clear. The president and Congress agree to solve the sequester of automatic cuts — by substituting budget cuts of a like sum, with most them on the spending side.
But this has exactly the same depressive effect on the recovery as the sequester, itself. According to the CBO, cuts of this magnitude will cut this year’s economic growth rate in half — from the 3 percent necessary to signal even the beginning of a recovery to about 1.5 percent according to the Congressional Budget Office. This doesn’t even count the likely hit to the stock market.
This moves the budget even further away from the stated goal of reducing the ratio of debt to GDP a decade hence, because it shrinks GDP faster than it reduces debt.
And the sequester is only the beginning of a decade-long process of annual budget cuts of an even greater amount — at least $120 billion a year, which equals 10 years of economic deflation.
This brings me back to the political consequences for Democrats. The Republicans are willing to take the political heat now, as obstructions, for three reasons.
First, as noted, accountability will be blurred. Both parties will be blamed, and by 2014 the details of the great sequester squabble will be blurry.
Second, any short-term pain to Republicans is outweighed by long-term gain: an austere budget slows the recovery and leaves the Democrats with no economic bragging rights going into 2014 and 2016.
Would the Republicans be that cynical — to deliberately retard growth so as to embarrass Obama? Is the Pope Catholic? (Actually that’s become a more complex question, but I digress.)
The third benefit to Republicans is that the sequester, and all the sequential sequesters over the next decade, deprive Democrats of the resources that they need to be, well, Democrats. Obama can proclaim big, bold initiatives as he did in the State of the Union Address, but they are all mere gestures — because there is no money to spend on any of them, thanks to the bipartisan obsession with budget cutting.
Even worse, Democrats end up colluding in eviscerating very popular and necessary signature programs like Medicare and Social Security, which literally define the core differences between the two parties.
So by 2016, and even by 2014, nobody will much remember who was more at fault in the sequester battle of early 2013. The voters will be looking at their own economic situation, and it won’t be pretty.
Excerpt from Robert Kuttner at http://www.policyshop.net/home/2013/2/25/the-sequester-debacle-who-takes-the-fall.html