Ecclesiastes remains correct and there really is nothing new under the sun. It applies to the unprecedented, horrible, just downright awful federal budget sequester, too. As former Sen. Phil Gramm reminds us, there was a budget sequester in the mid-1980s and states like Virginia — so dependent upon the taxes extracted from folks elsewhere in the nation — somehow survived:
The first Gramm-Rudman sequester took effect on March 1, 1986. It cut nondefense spending by 4.3% and defense spending by 4.9%.
The most recent estimate by the Congressional Budget Office for this year’s sequester is that nondefense spending will be cut by 4.6% and defense spending will be cut by 7.9%. While the sequester will reduce spending authority by $85 billion, the actual cuts that will occur in 2013 will be $44 billion. That is a mere 1.2% of total federal spending this year.
The first round of cuts under Gramm-Rudman weren’t so devastating that Congress and the president rushed to repeal them. In July 1986, Congress had the opportunity simply to stop the sequester after the Supreme Court invalidated its triggering mechanism. Instead it voted overwhelmingly to reaffirm the across-the-board cuts. The vote in the Democratic House was 339 to 72, and the Republican Senate approved it by acclamation, not deeming it worthy of a roll-call vote.
In 1987, Congress fixed the triggering mechanism and restored the sequester in Gramm-Rudman II. That deal would have cut nondefense discretionary spending by 8.5% and defense spending by 10.5%, far greater cuts than will be triggered this year. Yet a Democratic Congress and a Republican White House came together to replace that sequester with spending cuts in fiscal years 1988 and 1989 that were larger than those called for by Gramm-Rudman II.
The other key take-away from this? Sequesters, then or now, ultimately do little to stem the long-term rise in federal spending. As Gramm also notes, the current round of cuts will still find the government spending money as fast as the Federal Reserve can print it:
Even after the sequester, the federal government will spend $15 billion more than it did last year, and 30% more than it spent in 2007. Government spending on nondefense discretionary programs will be 19.2% higher and spending on defense will be 13.8% higher than it was in 2007.
Which does bring up a side note: for all the caterwauling about the current sequester’s cuts, almost entirely overlooked is the fact that the Federal Reserve continues to purchase $85 billion worth of Treasury and mortgage debt each month. In just over a year, the Fed will add more stimulus to the economy than the federal government will (in theory) take away in a decade.
But that stimulus is an entirely different and much more frightening monster. It would be extremely helpful, though, if the worthies current rending their garments over sequester would spare a few minutes to contemplate the gravity of Uncle Ben’s bond buying spree. It’s consequences will make any fallout from the budget sequester look positively benign.
