So here we are in the early dawn of the Age of Sequester, and the howls of rage are strangely subdued. Sure, Robert Reich is jumping up and down, and a few members of the bobblehead-pundit set are doing their thing, but, so far, there is no widespread public outcry over the “cuts”—which aren’t really cuts, of course, in most cases. Politically speaking, the sequester is a far tamer beast than, say, the Clinton–Gingrich government shutdown, an episode during which Republicans got burned, and burned but good.
As one insightful observer put it, the very modest reduction in the growth of government spending is roughly equivalent to an alcoholic switching from Guinness Extra Stout to Heineken Light, and while the ripples of economic anguish may be felt acutely by those closest to the federal cash flow — government employees and contractors — the general public seems at the moment to be taking the suspension of White House tours in stride.
Barack Obama, however, seems to be feeling the squeeze, as he would: His most important constituencies are those receiving direct payments from the government, in the form of either paychecks or welfare benefits. So he is courting Republicans, hoping they’ll sit down and hash out another broad, long-term deficit deal. Republicans should allow themselves to be courted, but they should make sure their skirts stay in place. What is needed now is a simple, two-step program for achieving a better sequester regime.
Step One: Pass a simple, straightforward bill that keeps the sequester spending controls in place but empowers federal-agency heads to decide for themselves how to divvy up the non-cut “cuts” among their programs. Republicans have already made a move in this direction in the House’s continuing resolution, which would allow defense officials some flexibility in how they meet sequester targets. But why not give non-defense agencies the same flexibility? Conservatives realize that some programs are more worthy than others, and there is no reason to fund USDA chardonnay-quaffing expeditions or spend nearly $300,000 a year on salaries for three official White House calligraphers while we’re taking funds away from meat inspectors. The current law requires agencies to spread sequester cuts evenly across every project, program, and activity, but Congress can and should ask the executive branch to act like an executive and start prioritizing spending. And what would the Obama administration say in objection to that? That Barack Obama and his appointees cannot be trusted to make responsible decisions?
The sequester is the classic bipartisan compromise: an imperfect deal that nobody likes but both sides supported. It is, for the moment, the only meaningful brake we have on discretionary spending, and we should allow it to stand. Which brings us to . . .
Step Two: Do nothing.
Really: Do nothing. The spending controls imposed by the sequester will not be the end of the world, but adding an element of flexibility will require the administration to make some difficult choices. That should make for better spending policy and excellent theater. Surely, the USDA is not the only agency sponsoring wine-tasting receptions for bureaucrats and cronies. As painful decisions become necessary, the incentive for case-by-case reviews of existing outlays will be very strong. A long and spirited public discussion of particular federal outlays would be a very salubrious thing indeed. Those will be some amusing congressional hearings.
The sequester does not fix the deficit, of course, and it is unlikely that any grand bargain on offer in the next few years will. Entitlement reform is the key, but meaningful entitlement reform probably is not going to happen until either Barack Obama or Harry Reid loses his job.
If the 2014 elections put Republicans in the position to move forward on entitlement reform, they should insist on three straightforward measures that deserve bipartisan support: (1) means-testing the major entitlements, (2) gradually raising the retirement age, and (3) changing the formula by which benefit increases are indexed. These are not crazy right-wing ideas, but sensible, achievable steps. As much as I would like to see outright privatization of Social Security and a radical restructuring of Medicare, those three steps would stabilize the entitlements for a good long while, enabling piecemeal reform to be worked out in a non-crisis environment. The Democrats will demand a pound of flesh in exchange, and the Republicans could do worse than to give it to them in the form of raising the Social Security payroll-tax ceiling from the first $110,000 or so to $500,000 or $1 million — on the condition that the sequester controls remain in place. While no tax increase is welcome, trading an increase in the tax that nominally supports Social Security for a major reform of the entitlements is good politics and a worthwhile policy tradeoff.
Deeper reforms of the entitlements, federal spending, and the tax code will be necessary as well, but they all depend on something that will not be easy to achieve: reclaiming the Republican party’s reputation for fiscal prudence. The best way to get a start on that is by allowing the sequester to become the new normal and by giving the administration the flexibility to help implement it more intelligently. Republicans are well positioned to argue that the sequester was in the main President Obama’s big idea, and they are only trying to give his administration the tools to carry it out in a way that’s consistent with our priorities and with good governance. That’s not a permanent solution, but there are no permanent solutions. It is, however, a start.