NC Budget and Tax Center

Shooting at the wrong target: sequestration cuts part of budget least responsible for deficits

Last week, Congress failed to repeal the $85.3 billion in automatic, across the board spending cuts known as “sequestration,” and as a result, these spending cuts have begun to take effect.   Sequestration is the wrong way to go about reducing our nation’s budget deficit—it will hurt North Carolina’s economy, weaken the fiscal position of the state budget, and damage key public investments like K-12 education, job training, and food safety. 

And despite inflicting all this damage, sequestration targets the portion of the federal budget that contributes the least to national deficits, making it the wrong tool for achieving meaningful deficit reduction. Instead, Congress should take a balanced approach to deficit reduction that replaces the sequestration cuts for 2013 with equal amounts of new revenue and smart spending cuts.

The good news is that we are actually much closer to putting the nation’s debt on a sustainable path than is often realized by policy makers.  Since 2010, most mainstream economists have believed that the federal government needed to find about $4 trillion in deficit reduction over the next decade. And thanks to the $2.5 trillion in deficit reduction achieved in the Budget Control Act of 2011 and the fiscal cliff deal in January, we need to find only about $1.5 trillion in additional savings in order to hit the original $4 trillion figure. Given this lower deficit reduction, policy makers have more flexibility in choosing the right mix of spending cuts and new revenues.

The question facing policy makers is how best to achieve this much more manageable $1.5 trillion in deficit reduction—sequestration or more a balanced approach that includes revenues and smart spending cuts to those parts of the budget that are actually contributing to long-term deficits.

Since 2011, Congress has focused its spending cuts largely on the smallest category of the federal budget—so-called “non-defense discretionary” spending. Comprising less than a quarter of the federal budget, this category includes non-entitlement domestic programs like food safety, job training, K-12 education, and research and development. 

As a result of the $2 trillion in cuts to these programs contained in the Budget Control Act, spending on these domestic discretionary programs are now at their lowest levels as a share of the national economy since the early 1960s—despite facing the demands of 21st century economy. 

If allowed to go forward, sequestration would further reduce these domestic programs by an additional $1.2 trillion over the next 10 years, despite the fact that these programs are not the driver for our long-term budget deficits (the main drivers are health care entitlements). And according to a range of independent analyses, these cuts would significantly reduce critical services across North Carolina and damage the national economy – potentially leading to another recession.

If deficit reduction is the goal, sequestration makes no sense.

Instead of seeking deficit reduction through deep cuts to the smallest area of the federal budget, Congress should replace sequestration with a balanced approach that includes one dollar of new revenues for every dollar of smart spending cuts in programs that are actually the main drivers of the long-term budget deficit.

One Comment

  1. Doug

    March 7, 2013 at 10:55 am

    Just think of the article you would not write if it did actually hit the programs causing the deficit. Medicare, medicaid, social security and the other entitlements would have led to a backlash against the Democrats instead of Republicans and would not allow Barry to formulate appropriate Alinsky approved scare tactics.