Republicans and Democrats disagree over how to resolve sequestration: a short-term fix versus a long-term deal.
The different approaches were on display July 17, when Sen. Kelly Ayotte, R-N.H., and Sen. Jeanne Shaheen, D-N.H., spoke at an event hosted by the Aerospace Industries Association (AIA).
The two New Hampshire senators agree that sequestration, if allowed to happen, would have a terrible impact on the U.S. economy.
To avoid the $1 trillion in spending cuts that are scheduled to begin in January, Ayotte said a stopgap measure is needed to buy Congress time to reach a longer term deal.
While Shaheen acknowledged that a short-term fix might be necessary, she advocated for a comprehensive long-term plan that includes spending cuts as well as revenue increases.
Ayotte joins other Republican lawmakers, including Sen. John McCain, R-Ariz., and Rep. Buck McKeon, R-Calif., in calling for a short-term fix to next year’s sequestration cuts.
For Democrats, the defense cuts are one of the key levers to get Republicans to compromise on including revenues in a larger debt deal, so there is little incentive to take them off the table yet, said Larry Korb, a former senior Pentagon official and now a senior fellow at the Center for American Progress.
Speaking July 16 at the Brookings Institution, Sen. Patty Murray, D-Wash., said “If Democrats were willing to accept a wildly imbalanced deficit reduction plan to avoid the automatic cuts we would have done that back in the supercommittee. But we didn’t then, and we won’t now. So anyone who tells you sequestration is going to simply disappear because both sides want to avoid it is either fooling themselves, or trying to fool you. It is going to have to be replaced, and that replacement is going to have to be balanced.”
As the two parties lurch toward a larger deficit-reduction deal, each side is trying to maintain maximum leverage over the other. Democrats can use the defense cuts and the expiration of the Bush-era tax cuts to bring Republicans to the negotiating table. And Republicans will once again be able to use the debt ceiling, which is set to expire at the beginning of 2013, to get concessions from Democrats as they did last summer with the passage of the Budget Control Act.
Ayotte said she knows revenues will have to be part of a bigger deal, but said she did not think today’s Congress could tackle tax reform before the impacts of sequestration begin to be felt.
Shaheen said she doesn’t oppose a short-term fix, but said if Congress chooses not to act it will have to return to the very same problems year after year after year.
“It’s not like we don’t know what to do,” Shaheen said, pointing to the various proposals put forward by bipartisan commissions that offer ways to tackle the country’s deficit.
In addition to the Simpson-Bowles and Rivlin-Domenici plans, there is also the work that went into the debt-deal negotiations between the White House and congressional leaders last summer. Plus, there are draft plans discussed by the supercommittee last fall and the Gang of Six in the Senate.
All of these provide Congress roadmaps to act, if it chose to, Shaheen said.
While she would like to see the country’s larger fiscal problems solved, Ayotte said she did not think it was possible to do so before the election.
“We do need to do a large agreement that deals fundamentally with the drivers of the debt,” Ayotte said. “I don’t see that happening realistically before the election, because of the planning that it would take to do that in the right way.”
What is realistic is a short-term fix that would give Congress room to get to that big deal after the elections or in 2013, she said.
To undo the first year of sequestration for defense and non-defense, it would take $109 billion of discretionary spending cuts, according to Ayotte.
If Congress leaves it to the lame duck session following the election, it will be too late, she said. By then, companies and federal agencies will have to start making adjustments to prepare for the spending cuts around the corner.
“It’s important that we don’t play chicken with our national security and our economy,” Ayotte said.
The senators were speaking at an event sponsored by AIA, who released an updated report on the impacts of sequestration. The report, conducted on behalf of AIA by Stephen Fuller, a professor at George Mason University, revised the numbers of jobs that could be lost if the automatic spending cuts are allowed to take place.
In September, Fuller estimated 1 million jobs would be lost if the automatic spending cuts to the Defense Department were allowed to happen in January 2013.
In this latest study, Fuller also considered the impacts to employment of the non-DoD spending cuts. When those are included, the potential number of lost jobs in the United States would total 2.14 million, he said.
Fuller admitted that to conduct the study, he had to make a number of assumptions because no one knows yet how DoD will choose to cut to meet its sequestration requirements.
He said the impact on non-DoD federal workers would be the most severe.