Analysis: Spending Cuts Stink, but They're Overhyped

If the country goes through with the insane, masochistic sequestration cuts, it’ll be ugly. The economy will shed jobs; GDP will slow. But it’s worth being skeptical about the sky-is-falling predictions you’ll hear about: an end to meat inspections, air-traffic control, federal prison guards, and so on. It'll be bad, but not that bad.

Here's why.

The pending cuts — what Democratic leaders have wisely started to call “a meat axe” instead of the ethereal-sounding "sequestration" — are big. But as big as $1.2 trillion sounds and is, it is over 10 years out of a federal budget that’s estimated to be $44 trillion over that time. That’s not exactly the kind of draconian cuts that, say, we (through the International Monetary Fund) regularly force on countries seeking aid.

Keep in mind the “firemen first principle.” The phrase comes from my old boss, former Washington Monthly editor and founder Charles Peters, who noted that agencies on the chopping block have an incentive to tout their most popular programs as the ones likely to get axed. Thus if you’re a mayor, you sow fear of cutting firemen first before you cite, say, delaying office renovations at City Hall.

When the cuts are this big there’s bound to be real — and not just phantom — pain. But when you read stories about FBI agents pulled off their pursuit of a serial killer or astronauts left in space, ask what else could get cut first. 

The answer is complicated. Unfortunately, the cuts demanded by sequestration famously fall about half on the defense side and half on domestic discretionary spending, with a number of things — such as a slew of veterans' benefits — exempted. Within departments, myriad accounts have to take hits, which spreads the pain. The Agriculture Department’s Food Safety and Inspection Service has to take about the same percentage hit as the Rural Electrification and Telecommunications Loan Program, which seems bonkers since rural electrification is complete and e coli is very much with us. 

Still even within each account, say the operations budget of the ederal Aviation Administration, you need to know if you can furlough more in terms of back-office personnel and less on the front lines of guiding in planes at LaGuardia. A recent White House Office of Management and Budget paper said that the cuts would “degrade” air-traffic control, which is surely true in the broadest sense. But would it actually mean fewer air-traffic controllers? The Aerospace Industries Association recently told its members:

It is unlikely that senior officials will allow a nationwide layoff of air-traffic controllers that will have a large negative impact on our economy. An option the agency could exercise to prevent this from happening is the "transfer authority" provided in its annual appropriations bills that could be used to modify sequestration’s across-the-board cuts.

It’s hardly comforting to know that money borrowed from the FAA’s “NextGen” program for improving the country’s aviation infrastructure could take a 50 percent hit in order to keep planes from whacking into each other, this at a time when China is building 100 new airports. The Aerospace Industries Association is rightly worried about cutting NextGen that much but it does show that there’s some fungibility of funds. 

In an ideal world, Congress would dispense with sequestration and come up with a budget that made sense and reflected the world as it really is: one in which we face serious long-term debt but also a still sluggish economy and — mercifully — still cheap borrowing costs. But of course if they were able to do that, we wouldn’t have had sequestration in the first place and all the mishigoss that went before it, like the super committee.

And so agency heads are diligently preparing for the worst and they want to make sure the world knows the worst. The director of the National Park Service recently sent out a notice asking top management to carefully catalog the cuts they would need to make and to show the impact on local businesses. This exercise is being repeated throughout the government. Those looming cuts are real and such memos are necessary. But it’s telling that each agency is eager to get out the word on what these cuts would mean. It’s up to the rest of us to be appropriately skeptical.