The jobs crisis has almost disappeared from the major newspapers, but the prospect of “the sequester,” or an annual average of $120 billion in spending cuts to take effect automatically starting March 1 if no other agreement is made, is now all over them.
On Sunday a New York Times editorial titled “A Million Jobs at Stake” called the sequester “a mindless government austerity program that no one in Washington seems able to stop,” and cited the Bipartisan Policy Center and the Congressional Business Office projecting it to cause a loss of somewhere between 1.0 million and 1.4 million jobs by the end of 2014. Republicans, according to the editorial, are willing to let the sequester happen, with their interest in spending cuts allowing tolerance of a seven-month, $55 billion defense reduction. The piece called for raising money through tax increases, along with “eliminating tax loopholes for energy companies, hedge fund managers, and other high-end recipients of federal largesse.” Economist and columnist Paul Krugman went even further four days later, calling a current emphasis on deficit reduction “irresponsible and destructive,” and said that “even Republicans admit, albeit selectively, that spending cuts hurt unemployment.” He compared the prospects of austerity to Ireland’s hard landing and the effect of the ending of the Cold War on employment.
On the conservative side, Charles Krauthammer wrote in his Washington Post column yesterday that Republicans should insist on the sequester’s total amount of spending cuts, and negotiate only to rearrange them, without any changes in taxes until the reductions take effect. He said that last month’s fiscal cliff deal had tax increases and no spending cuts, and the opposite, in deference to the $16 trillion deficit, should happen this time.
So what conclusions can we make?
1). Reductions in government spending do indeed cost jobs, but the government is not a jobs program. Some of the areas for spending cuts are overdue, in particular cutting some military expenses that even the Joint Chiefs of Staff do not think are justified, and some are past that, such as the recently announced ending of Saturday non-package mail delivery. There are still plenty of unwarranted government programs, and the sequester, at its best, could force intelligent reductions.
2). Loopholes and waste are not the low-hanging fruit they seem to be. The tax code has been negotiated over many decades, and in most cases removing legal dodges would have been done already if enough considered it viable. Much of what seems to be waste is not really that. There are certainly areas which should be trimmed down or eliminated entirely, but the vision of budgets with obvious pork items, ready to be cropped off, is inaccurate. Cutting loopholes and waste will call for more work, more tradeoffs, and more negotiation than Congress has seemed capable of.
3). If the sequester does happen and costs many jobs, businesses, and by extension conservatives, will regret it much more than they think. Counter to what Speaker John Boehner said, companies do not make hiring decisions based on the size of the deficit, they make them on their customers and opportunities. One million more people out of work would mean one million more people with less money to spend, which will lead to even more unemployment. We need to remember the laborer who, upon hearing of the 1929 stock market crash, said “serves those rich bastards right,” and lost his job a week later.
4). The deficit is only one gigantic problem America faces now. True, the $16 trillion is gargantuan, but interest rates are very low and will stay that way. As of last month, there were over 22 million Americans with no jobs who wanted to work. Whether you blame Obamacare or not, health care expenses are still going in only one direction, and faster than inflation. As David Brooks pointed out, new retirees have paid a mean of $100,000 into Medicare and are expected to receive an average of about $400,000 – both numbers inflation-adjusted. The polarization between left and right, and lack of willingness of either to consider ideas from the other side, is more severe than it has been during my 56-year lifetime, and we have these festering problems and a Congress with single-digit approval ratings to show for it. At an internationally competitive time when we need to stand together as a nation, too many continue to emphasize race, sex, and sexual orientation over our common identity as Americans. Overall, the car is sputtering, but there’s nobody taking it to the shop.
So, once again, it’s time to sort out the big issues and start on them. Perhaps the sequester, if it goes into effect, will make that even more clear. Yet its damage will be real as well. Once again, we must think and choose.