Only Washington strikes a last-minute deal to avert a fiscal cliff by setting the stage for an even worse train wreck two months down the road.
While Congress’s tax deal made 98 percent of American taxpayers and Wall Street happy — and delayed $1 trillion in automatic spending cuts, half from defense — it punted on equally vital spending cuts and tax and entitlement reforms.
Lawmakers now have until March 1 to strike a broader deficit reduction deal, raise the nation’s borrowing limit and avert sequestration entirely.
And without a 2013 budget by March 27 — or another measure — the government will shut down when the current continuing resolution to fund its operations expires.
Solving any of these problems is a challenge, but getting all three done before the deadline in this polarized political environment will be a tall order.
In short, Washington is headed for a perfect storm of its own making.
Lawmakers crossed party lines to compromise and approve by healthy margins legislation extending tax cuts vital to the growth of a still-fragile economy. Such bipartisanship will be crucial for the travails ahead.
But it won’t be easy. Senate Majority Leader Mitch McConnell, R-Ky., has made it clear that after compromising on higher taxes for the wealthiest Americans — without getting the spending cuts Republicans wanted in return — the GOP will try to hold the line with the remaining leverage it has. Republicans want a dollar-for-dollar offset in expense cuts for every dollar added to the nation’s debt limit. The president, meanwhile, says he won’t negotiate over Congress’ responsibility to pay for things it already authorized.
That’s the same approach — holding a debt-ceiling increase hostage to spending cuts — that sparked the entire fiscal cliff crisis in the first place. Stalled debt ceiling talks led to a worldwide panic in August 2011 over fears the United States might default for the first time in its history. The crisis was averted, but only with a poison pill. In exchange for raising the borrowing limit, lawmakers agreed to $1.1 trillion in automatic cuts that were supposed to kick in Jan. 1 and that have now been delayed until March. The idea was that a new budget deal would supersede that one, but 18 months later, no such deal has emerged.
This time, what’s clear is billions in spending cuts are coming — and coming quickly — and to assume that Social Security and Medicare will bear the brunt to spare defense is naïve.
Complicating the situation, the Pentagon’s been operating and spending as if no further cuts are coming. For more than a year, to avert sequestration, the Pentagon stridently argued how devastating automatic cuts would be to America’s national security, and staunchly maintained it would not plan for cuts that were both bad and unlikely to happen.
That was then. The fact is, sequestration is now more likely than ever. It can deliver big savings with minimal individual political fallout. No one likes the cuts, no one wants the cuts, but no one can be blamed for the cuts, either.
Never mind that it’s bad policy and would damage national security by making uniform cuts to everything.
Given that backdrop, the Defense Department cannot sit back and wait. Leaders must actively reprioritize missions, needs and programs and launch sweeping reforms now to ensure DoD emerges from this era of austerity with the right capabilities for the future.