Obama To Challenge GOP To Compromise On Budget Cuts
RENEE MONTAGNE, HOST:
This is MORNING EDITION from NPR News. I'm Renee Montagne.
LINDA WERTHEIMER, HOST:
And I'm Linda Wertheimer.
Unless Congress and the president can agree on an alternative, in less than two weeks the government will be facing across-the-board cuts on everything, from defense to domestic spending. The all-encompassing reductions are known as sequestration. Later today, President Obama will officially challenge congressional Republicans to find a compromise, one that from the president's point of view, benefits the middle-class.
For clarification on the situation and its implications for the economy, we turn to David Wessel. He is the economic editor of The Wall Street Journal and a frequent guest on our program.
DAVID WESSEL: Thank you.
WERTHEIMER: So what happens on this drop-dead day, Friday March one? Do the lights go out all over the government? Will Social Security checks be late?
WESSEL: No. The law does require that federal spending be cut by $85 billion over the next several months, a small slice across a lot of programs. It doesn't affect Social Security benefits and the lights are going to stay on. It is a small fraction of the $3.6 trillion federal budget, but it was designed to be unpleasant and unwieldy, to force Congress to do something else. And indeed it is.
Erskine Bowles and Alan Simpson, the ringleaders of the anti-deficit campaign, in a statement they're issuing this morning, call it mindless and the wrong approach to budgeting, because it doesn't distinguish between cutting valuable programs, programs everybody agrees are valuable, and ones that are redundant. And it doesn't attack the real drivers of the deficit, which are future increases in benefit costs for health care and retirement programs.
WERTHEIMER: Well, if the sequester does take effect on March 1, who is hit the hardest?
WESSEL: You know, it's really hard to tell because some of it depends on precisely how the White House budget office administers it. Some programs are going to feel the pain immediately. Others, because they operate on last year's funding, will not show up until next year. But all across the government, agencies are not filling vacancies or not letting(ph) contracts in anticipation of these - this budget tightening.
Cabinet secretaries have told the Congress it'll be catastrophic. Fewer airports screeners, longer wait times. Seventy thousand kids won't have Head Start to go to. The Air Force won't be able to operate radar surveillance 24 hours a day, and so forth.
The cuts would be concentrated in places that, well, get a lot of federal money. For defense that means the Western states and the Washington area. The domestic cuts would be particularly hard hit in D.C., Maryland, Virginia, as well as New Mexico, which gets a lot of federal money.
But of course the administration has an incentive to exaggerate the effects of this thing and say, like, it will be awful. And members of Congress who'd like the cuts to take effect have an incentive to minimize the effect. And actually it will be somewhere in between - really uncomfortable for some places but not noticeable in others.
WERTHEIMER: What about the impact on the economy overall?
WESSEL: Well, in the short-term, when the government spends less, the economy grows less. Economists at J.P. Morgan, who had expected the sequester to be put off, now think it'll take effect. And they say that'll reduce the growth rate by half a percentage point in the second half of the year - small in the scheme of things, but noticeable.
WERTHEIMER: Given all the concerns about the sluggishness of the economy, employment - why would politicians, even those who want to cut spending, want to do it now?
WESSEL: Well, basically people who want to reduce the deficit by restraining spending say, if not now, when? When are you going to start doing this? The president says, look, I want to restrain spending but I want to spread it out and I want to close some tax loopholes and raise some money. And Bowles and Simpson, in the new manifesto they're releasing today, they pretty much side with him on the concept. But they say he's not doing enough to reduce the deficit.
The betting now is that it's going to take effect March 1. We'll have a month's worth of argument. The government spending authority runs out on March 27, and eventually they'll come to some compromise. But it's really hard to predict what's going to happen next.
WERTHEIMER: Thanks very much.
WESSEL: You're welcome.
WERTHEIMER: Wall Street Journal's David Wessel.
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