Friday 22 September 2017

Obama's $85bn budget cuts 'not end of the world'

US president was hoping for public outcry, but 'sequester' battle turns out to be damp squib

Peter Foster

ANOTHER week in Washington, another budget face-off between Democrats and Republicans over whether to employ spending cuts or tax rises to fix America's finances – or as it turned out, do neither.

After the New Year's Eve nail-biter 'Fiscal Cliff', last week came the sequel – 'Episode II: The Sequester' which (spoiler alert) is to be followed before March is out by a third, 'Continuing Resolution – the final countdown'.

This battle over the so-called "sequester" – $85bn in mandatory budget cuts this year – has worn an air of unreality. While US President Barack Obama has been touring schools and shipyards warning of a perfect storm of "brutal" cuts that will take a "meat cleaver" to America's dreams of a prosperous future, the rest of the country has reacted with a collective "meh".

Unlike with the "fiscal cliff", the stockmarkets are sanguine, business leaders are not warning of a confidence crisis and the public, according to a poll last week, are so exhausted with Congress that fewer than one in four say they are paying the sequester any attention at all.

The lack of interest over the sequester – a set of budget cuts that were devised in 2011 to be so unthinkable that Republicans and Democrats would be forced to strike a deal – has extended to Congress, which has shown little interest in seeking a new agreement.

That nonchalance is born of the fact that, despite what Mr Obama has been saying, the sequester is not the end of the world as we know it. The cuts, even if enforced, will be painful in some areas, but they will knock, at most, half a percentage point off America's GDP, and be phased in.

So does any of this matter? Sadly it does. The lack of concerted action should not be taken as a source of comfort but as a warning of how dismal and intractable America's budget woes really are.

The sequester was supposed to put a gun to everyone's head, but as it turned out, it was firing blanks.

Republicans had to swallow defence cuts, but they won cuts to federal spending and, crucially, have avoided having to agree to any new taxes.

Democrats are happy to see defence spending take a hit and, while there is limited trimming of social spending, they avoid making serious concessions on entitlement spending. What we are left with is continuing irresolution. Both sides are happy to do nothing. Mr Obama's strategy has been to take to his bully pulpit. The idea has been to let the sequester take effect then blame the Republicans for their refusal to countenance tax increases.

But that game would be more effective if the cuts were actually going to produce the effects and public outcry Mr Obama has been threatening – analysts say they won't.

As Thomas Friedman put it in The New York Times, Mr Obama needed to show he was prepared to take on his base over the real fiscal crisis in America, which is how to pay for all those baby-boomers as they get older. Then he would have been in a position to call out the Right.

(© Telegraph)

Irish Independent

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