We are in the midst of the blame game about the “Sequester.” I wrote last year about the fact that President Obama had twice blocked Republican efforts to remove the Sequester. President Obama went so far as to issue a veto threat to block the second effort. I found contemporaneous reportage on the President’s efforts to preserve the Sequester – andthe articles were not critical of those efforts. I found no contemporaneous rebuttal by the administration of these reports.
In fairness, the Republicans did “start it” by threatening to cause the U.S. to default on its debts in 2011. Their actions were grotesquely irresponsible and anti-American. It is also true that the Republicans often supported the Sequester.
The point I was making was not who should be blamed for the insanity of the Sequester. The answer was always both political parties. I raised the President’s efforts to save the Sequester because they revealed his real preferences. Those of us who teach economics explain to our students that what people say about their preferences is not as reliable as how they act. Their actions reveal their true preferences. President Obama has always known that the Sequester is terrible public policy. He has blasted it as a “manufactured crisis.”
the administration has stated publicly the three reasons this is so. First, the Sequester represents self-destructive austerity. Indeed, it would be the fourth act of self-destructive austerity. The August 2011 budget deal already sharply limited spending and the January 2013 “fiscal cliff” deal raised taxes on the wealthiest Americans and restored the full payroll tax. The cumulative effect of these three forms of austerity has already strangled the (modest) recovery – adding the Sequester, particularly given the Eurozone’s austerity-induced recession, could tip us into a gratuitous recession.
Second, the Sequester is a particularly stupid way to inflict austerity on a Nation. It is a bad combination of across the board cuts – but with many exemptions that lead to the cuts concentrating heavily in many vital programs that are already badly underfunded.
Third, conservatives purport to believe in what Paul Krugman derisively calls the “confidence fairy.” They assert that uncertainty explains our inadequate demand. The absurd, self-destructive austerity deals induced or threatened by the Sequester have caused recurrent crises and maximized uncertainty. They also show that the U.S. is not ready for prime time.
When he acted to save the Sequester, Obama proved that he preferred the Sequester to the alternative. When the alternative threatened by the Republicans was causing a default on the U.S. debt (by refusing to increase the debt limit), one could understand Obama’s preference (though even there I would have called the Republican bluff). The Republicans, however, had extended the debt limit in both of the cases that President Obama acted to save the Sequester in 2011.
Similarly, President Obama has revealed his real preferences in the current blame game by not calling for a clean bill eliminating the Sequester. It is striking that as far as I know (1) neither Obama nor any administration official has called for the elimination of the Sequester and (2) we have a fairly silly blame game about how the Sequester was created without discussing the implications of Obama’s continuing failure to call for the elimination of the Sequester despite his knowledge that it is highly self-destructive.
The only logical inference that can be drawn is that Obama remains committed to inflicting the “Grand Bargain” (really, the Grand Betrayal) on the Nation in his quest for a “legacy” and continues to believe that the Sequester provides him the essential leverage he feels he needs to coerce Senate progressives to adopt austerity, make deep cuts in vital social programs, and to begin to unravel the safety net. Obama’s newest budget offer includes cuts to the safety net and provides that 2/3 of the austerity inflicted would consist of spending cuts instead of tax increases. When that package is one’s starting position the end result of any deal will be far worse.
In any event, there is a clear answer to how to help our Nation. Both Parties should agree tomorrow to do a clean deal eliminating the Sequester without any conditions. By doing so, Obama would demonstrate that he had no desire to inflict the Grand Betrayal.
Bill Black is the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. He spent years working on regulatory policy and fraud prevention as Executive Director of the Institute for Fraud Prevention, Litigation Director of the Federal Home Loan Bank Board and Deputy Director of the National Commission on Financial Institution Reform, Recovery and Enforcement, among other positions.
Bill writes a column for Benzinga every Monday. His other academic articles, congressional testimony, and musings about the financial crisis can be found at his Social Science Research Network author page and at the blog New Economic Perspectives.
This piece is cross-posted from New Economic Perspective and Benzinga with permission.
15 Responses to “Why Obama Refuses to Kill the Sequester”
The author's assertions are too ridiculous to warrant a comment…
And yet you do comment.
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If these were the only two choices, what you write would make sense. The fact of the matter is that Congress and our president will have to cut $1 trillion of expenses in order to balance the budget which was part of his promise when elected, And not 1 trillion over 10 years. I am still waiting for Obama to show some leadership but then why would I expect that – before becoming president he was never in a leadership position.
Blaming the Sequester on Obama for the actions of Congress?
Raising taxes (just a tad) on the uber wealthy is an austerity measure and strangling the economy?
The author's desperation to blame the Democrats is laughable!
This is going to be the GOPs Waterloo.
Perhaps their French Revolution too.
Let them eat cake, indeed!
And yet Fat Jack is right…
The fact of the matter is that you are completely wrong! Please do not dishonestly assert your wrong headed opinions as facts.
It has been proven time and time again that Keynesian fiscal spending is called for when neither consumers nor businesses are spending money. Your suggestion will turn America into Greece.
Oh good……I'm not the only one who thought that. ……economics professor….sheeesh!
I'm waiting for a wingnut criticism of substance. If he isn't leading what are you whining about?
I'm not at all happy with what I see as Obama's stealth conservatism…but good God the right is INSANE. As usual, I can't see what the president's game plan is but I hope it's something along the lines of standing back and letting the GOP implode.
How does the president "kill the sequester"? By decree?
I thought the Constitution required funding legislation to originate in the House?
Kevin : " When the going gets tough, The Weak get screwed. " – Author Unknown
I DEFINITELY agree with your blame comments… As the Right Wing is DEFINITELY ' The Party of Zero Accountability ', yet my sense is that our Legislators will continue to keep their jobs, medical coverage, and Pensions / Retirement Plans, at OUR expense, and ' inform ' We, The " Little People " that their urination down upon Us, is merely " a little rain, we must All endure "… -ralph
Why aren't the military contractors shakin' in thier boots?
The Democrats know that the fattest pigs at the trough are the government contractors.
I know because I used to be one.
The Tea Party believes its own rhetoric and doesn't realize the biggest handouts are to their own corporate sponsers.
The Republicans are committing suicide with this idiot move.
Obama does not want austerity. He wants fairness.
This is being felt in the IT/IS markets and we are letting India overwhelm our already shrinking job pools. Acturally they get prefered treatment. I know this becuase I am a Java architect and seeing 3/4 Indian and 1/4 U.S in a government project. How is that fair?