Tax Analysts Blog

The Sequester: 'Designed to be Stupid'

Posted on Mar 6, 2013

The sequester has occurred and the sky hasn’t fallen…yet. Still, there has been a seemingly endless stream of reports on how states will be impacted by the budget cuts. But actual data on those impacts is lacking, so it is unclear whether any of the reports reflect reality.

Still, despite the lack of discretion in how to implement the spending cuts and the onslaught of reports on how states will be affected by the sequester, it actually could be worse. Of course the impact will be felt on a state-by-state basis, but importantly, Medicaid is exempted from sequestration. States pushed hard for this exemption, but it was also supported by the White House. In addition, state revenues, while still rocky, have risen to their highest level since 2008. Combine these two simple factors and the result is that most states will have little trouble balancing their budgets for the upcoming fiscal year.

Beyond that, however, things get hazy. It is unclear how the spending cuts will be implemented and whether the cuts will have a significant effect on markets or the economy. But we have time to think about all that. For the short term, little will change. Kids will go to school, social programs remain intact, and our military will be funded.

But we have to get off the roller-coaster once and for all. The time has come for real discussions in Washington about our long-term economic health, and ideas like the sequester do nothing to help. It was a ridiculous idea from the start. Los Angeles Times columnist Doyle McManus wrote the sequester was deliberately “designed to be stupid.” And it was. It was designed to force Republicans and Democrats to sit down and come up with a plan to tame our $16 trillion debt. But it hasn’t forced anyone to do anything. What has been going on is like a bad game of chicken. Republicans thought they would get their way because Democrats wouldn’t allow across-the-board spending cuts in domestic programs. Democrats thought they would get their way because Republicans wouldn’t allow step cuts in defense spending. In the end, no one really got their way.

House Republicans have now introduced a bill that would continue funding of federal programs until the end of the fiscal year and would ease some of the indiscriminateness inherent in the sequester. It is a stop-gap measure, but all indications are that it will pass. It’s a far cry from tax reform or even from a serious discussion about controlling the level of federal spending. But something had to be done.

I wonder, though: given how difficult it was to arrive at a stop-gap measure in response to a purposely stupid, self-inflicted crisis, is tax reform dead? My rational self says yes, but then my optimistic side hopes that tax reform will finally be seen as the only real solution to the problems we are facing.

Read Comments (1)

AMT buffMar 6, 2013

We know that good intentions usually backfire, so we can hope that the same
happens for bad intentions.

Submit comment

Tax Analysts reserves the right to approve or reject any comments received here. Only comments of a substantive nature will be posted online.

By submitting this form, you accept our privacy policy.

* REQUIRED FIELD

All views expressed on these blogs are those of their individual authors and do not necessarily represent the views of Tax Analysts. Further, Tax Analysts makes no representation concerning the views expressed and does not guarantee the source, originality, accuracy, completeness or reliability of any statement, fact, information, data, finding, interpretation, or opinion presented. Tax Analysts particularly makes no representation concerning anything found on external links connected to this site.