The Skeptics

Sequestration: It’s Not That Bad

Sequestration, the automatic budget cuts scheduled for January 2013, looms large over Washington, and it seems that almost everyone wants it to go away, Democrats and Republicans alike. The epitome of sequestration doomsaying is a recent comment by the chairman of the House Armed Services Committee, Rep. Buck McKeon (R-CA). At a May 31 dinner honoring the congressman, he claimed that sequestration was an existential threat, warning that it “will do what the Soviets exhausted themselves attempting. It will do what countless tin pot dictators, ideological madmen, and ruthless suicide bombers have failed to do.”

There’s fantastic irony in making such a statement after receiving the Eisenhower Award, given each year by the National Defense Industrial Association (yet more irony). They are either unaware of or ignore the fact that, at the height of the Cold War, President Eisenhower cut defense spending by 27 percent. Nevertheless, McKeon’s statement and others like it are simply attempts to scare us into believing that sequestration means a ravaged defense budget and a weakened economy. It’s not that bad.

In reality, sequestration means that we will have roughly the defense budget of 2007, when spending (in real terms) was at its highest since the apex of the Vietnam War in 1968, a more dangerous time for Americans than 2012. Furthermore, we can spend less on war as we have withdrawn from Iraq and continue to withdraw from Afghanistan. Some point to the need to reset the force after a decade of war. To a certain extent, that may be necessary. But before we recapitalize, we should think about what we’re resetting for. A post-sequester budget would certainly be big enough to protect Americans, but our leaders should take this opportunity to make long-neglected choices about our national security interests abroad.

Some complain that sequestration doesn’t allow for those choices because it slashes all programs indiscriminately. However, across-the-board sequestration affects budget authority, not outlays, and occurs only in FY2013. From FY2014 through FY2021, spending caps enforce budget limits. So, even though the initial cut will be broad and blunt, most programs will survive on previously appropriated funds until 2014, when the Pentagon and Congress will have greater flexibility to tailor reductions under those caps.

Another worry is that sequestration will further increase unemployment and damage the industrial base. Recent reports claim at least one million jobs will be lost (over two years) and GDP will suffer. A closer read of those reports reveals that the majority of those supposed losses would be private sector jobs, many of which are not directly related to the defense industry. It is far from certain that local retail, restaurants, or even many contractors will lay off workers or close up shop, especially if they are allowed to keep the taxes they are currently spending on the bloated defense budget.

During the significant defense drawdown of the 1990s (36 percent), when taxes went up, the economy not only survived, it flourished. Unemployment did initially rise from 5.4 percent in 1990 to 7.3 percent in 1992. But by 1995, it had dropped to 5.6 percent, and by 2000, it was 4 percent. Meanwhile, GDP grew from $5.7 trillion in 1990 to $9.8 trillion in 2000. The answer for those who say, “Yes, but there were other factors involved in that growth!” is, of course, “Exactly!” It is extremely difficult to predict the effects of cutting inefficient government spending equal to three-tenths of one percent of GDP per year in an economy so large that Americans can spend $110 billion every year on fast food alone. While some regions heavy with defense industry will indeed feel some effects, history has shown that those areas can and have recovered in a relatively short time.

As legislation goes, sequestration is awful. But it is not the end of the world; it is not the end of the United States; it is not even the end of the defense industry. It is merely a symptom of a long-approaching budgetary reckoning and a symbol of Congress’s cowardice. If it’s as bad as McKeon fears, we are facing no less than the combined cataclysm of invasion, metropolitan destruction and foreign domination. Thankfully, it’s not that bad.