Removing or Weakening the Sequester Would Be Irresponsible
If the Super Committee fails, an automatic cut of $1.2 trillion over ten years (or whatever the difference is between the agreed upon cuts and $1.2 trillion) will be put into place starting in 2013. These cuts would be more or less across-the-board with non-interest savings stemming from defense and non-defense, though with notable exceptions. The purpose of the trigger is to force action by the Super Committee, and subsequently within Congress as a whole, because the consequence of failure would mean steep budget cuts that no one wants to see play out in reality.
Thus, it is disconcerting that there is talk from policymakers that if the Super Committee fails to come to an agreement, there would be a push to turn off the sequester or at least roll back the cuts to defense and domestic programs alike. As Erskine Bowles said in his testimony to the Super Committee last week, "The only thing worse than the committee failing to agree on savings would be if Congress followed that by voting to turn off the sequester." This is true for both halves of the sequester.
Threatening to turn off or weaken the sequester would have many drawbacks. First, it would take pressure off of the Super Committee at a time when lawmakers have a real opportunity to do something about our debt path. Given how we're facing such serious budget challenges, it isn't a surprise that cutting spending and raising new revenues will require tough political decisions. We shouldn't be taking any pressure off the Super Committee.
Secondly, ratings agencies have said that while a failure by the Super Committee would not necessarily prompt an automatic downgrade by itself, this was in part because of the sequester already being in place in order to ensure savings materialize. If the Super Committee fails and if lawmakers turn off or weaken the sequester without a viable alternative, this could undermine confidence in our economy and debt path in addition to confidence in our political system. It would send all the wrong signals: that our leaders cannot even agree on savings that they said they would just a couple months ago. But even if lawmakers did eventually enact serious fiscal reforms, a decision to waive the sequester enforcing the promised savings from Budget Control Act could undermine faith that the savings from a future deal will remain in place if there were serious efforts to weaken a trigger, let alone actual reforms. That's what could prompt another downgrade, or worse.
Granted, we don't want to have to rely on the sequester to generate the savings we need. We need smart decisions that focus on making thoughtful entitlement and tax reforms, not blunt and near-across-the-board reductions that would place a serious on the burden on the discretionary budget -- an area of spending from which $780 billion has already been cut. While there's an argument that more needs to be done on discretionary spending, the focus needs to be on entitlement and tax reform.
But the sequester is important to put pressure on lawmakers, and at least continue efforts to put the debt on a downward path if the Super Committee were to deadlock.
It is thus encouraging that Speaker Boehner (R-OH) recently said that lawmakers are "bound" by the sequester, because "[i]t was part of the agreement. And so either we succeed or we are in the sequester. The sequester is ugly. Why? Because we don’t anybody to go there. That’s why we have to succeed.” Additionally, as House Minority Leader Steny Hoyer (D-MD) has said, the sequester "ought to compel all sides towards reaching an agreement. The sequester will have harmful effects on both the defense side and the non-defense side." These are exactly the right sentiments. While the Super Committee should Go Big and exceed the $1.2 trillion in savings, failing and then turning off the sequester would be the worst possible outcome.