Dysfunction Junction

Today is the day.  Today the ominous "Sequestration" goes into effect.  What will be the impact?  Well, depending upon who you talk to, it will be doomsday, not a big deal, or somewhere in the middle.  I think the impact will be entirely based on one's perspective. If you get laid-off or furloughed as a result of the sequester, it's not good. If you run a business and get contracts canceled it is not good.  If you are on Wall Street, the collective response on this has been "Meh".  Wall Street has already planned for and accounted for the intransigence in Washington, and basically wrote them off long ago.  We'll likely see some dip in the markets but overall, we won't see the catastrophic decline in the markets like we did in September of 2008.  This crisis is different than that one.  This crisis is a manufactured crisis created by Washington (The President and the Congress) and is entirely of their on doing.  The sad thing about this is that the sequester comes because Washington couldn't, for whatever reason reach a deal on dealing with the financial situation in the country.  By all accounts, the sequester was supposed to be the deal so bad no one would ever allow it to happen.  Well, it's happened.  It exemplifies two things:  One, that if you don't deal with problems when they happen and simply kick the can down the road, the problems become harder to solve.  Second, Congress is supremely broken and won't likely be back to health until one party or another gains a clear majority over the other.  Grid-lock is entrenched now.  It used to be a good thing. Having checks and balances in government was by design. However, this last decade, we've seen Congress go from a balancing act to one of destruction.   The House of Representatives and the Senate are both at fault here.  It is easy to understand what is happening.  The Republican majority in the House has become Balkanized.  There is no unification anymore between moderate and ultra-conservatives anymore. The Tea Party has taken over and like a wild-eyed ideologue refusing to compromise on any measure with the Democrats.  The members of Congress who might be tempted to compromise live under the threat of a primary challenge from the right.   Speaker Boehner has lost his majority as evidenced from having to drop the "Hastert Rule" that says legislation won't go to the floor unless there is a "Majority of the Majority".   His own party is in revolt over working with the other side.

Likewise in the Senate, Majority Leader Harry Reid has become the proxy-veto for the President.  Any bill the President doesn't like coming out of the House of Representatives never sees the light of day in the Senate.  The Senate has not passed a budget in years.   As intractable as the House of Representatives is, the Senate is similarly plugged up.  Action is either not brought to the floor by the Majority or, if it has a chance of coming to the floor, it is generally something Minority Leader McConnell cannot stomach so it is immediately filibustered.  So, Congress fiddles while the country burns.  

There are many who would cast the President in the role of Nero, that hedonistic leader of Rome who indulged himself and friends while ignoring the plight of the Roman people but I disagree with that altogether.  The President has consistently offered up compromise on this issue only to get his hand bit by the rabid dog that is Congress.  A "Grand Bargain" was negotiated with the Speaker in the summer of 2011 that had both revenue increases and significant entitlement cuts, a 3 to 1 ratio of spending cuts to revenue increases.  Mr. Boehner could not make it work in his own party, so it died. Subsequent attempts to make deals have resulted in preposterously negative results.  There is no equivalence here.  Congress (both Democrats and Republicans) are the villains here and the President seems to be the only adult in the room.  During the campaign he repeatedly said he believed the Sequester wouldn't happen, that a deal would be made.  What happened?  Well, a deal was reached to eliminate the Bush-Era tax cuts for those making above $450 thousand dollars a year while retaining the cuts for everyone else.  That yielded about $600B in revenue which was half of what the President was looking for.  Spending cuts, originally designed to go into effect January 1, were deferred to March 1st, where assuredly we would get a deal.  It was not to be.  The President has said he wants tax reform to close loop-holes and raised additional revenue as part of the deal.  The Speaker, now suffering from Tea Party Stockholm Syndrome has refused to discuss this.  "No deal, Mr. President. You've had your tax increase. Now it is time to cut spending".    The House has flatly refused to discuss anything resembling revenue/tax increases and the Administration has refused to discuss any deal that doesn't include revenue increases.  Well, what's the problem you say?  The President got his tax increase. Why is he being so obstinate?   Well, for one thing, it wasn't really a tax increase, it was an expiration of Tax Cuts that were originally supposed to be long gone before President Obama ever showed up.  The other issue is that the President campaigned on not wrecking the anemic recovery we currently have by implementing Draconian Austerity measures that would send us reeling back into recession.  One only has to look at Europe to see the fruits of the Austerity measures employed in the last couple of years. 

So, we have no action.  A decision forced on us because of lack of action. Everyone in Washington says this sequester is an idiotic idea. So why is it going forward?  Congress could simply write a one page document saying that the law is repealed. The President could sign it and it would be done.   Well, it seems no one has the sense to suggest or take that route, so we devolve into partisan finger-pointing and the blame game.  The White House is embroiled in this as much as the Congress is.  The polls show weakening support for both the President and the Congress, although Congress is taking the brunt of the criticism.  As well they should.   This Congress is shaping up to be just as feckless and inept as the last one.   Those who like to get into political prognostication are saying that both Congress and the White House are looking toward the 2014 mid-terms to shore up strength in their respective areas and then something might get done.  I think both groups underestimate the rancor and ill-will they are generating through their inaction.  They might be very surprised what the American People have to say in 2014.  It wouldn't surprise me to see an independent uprising with people voting out incumbents who are so locked in their intransigence that they won't vote for common sense solutions that deal with both reducing the cost of government and raising enough revenue to make a serious dent in the debt.  Those who think we can deal with the debt and deficits by either only raising taxes or only cutting spending are either naive or lying.  The President has said he wants a balanced approach.  The Tea Party, holding the Republicans and the American People hostage have said "no thanks".  As a result, we get the Sequester.  An idiotic solution to a problem caused by idleness, cowardice, and irrationality.  What a wonderful legacy for this Congress.

For an explanation of what happens now the Sequester has begun, go to the BiPartisan Policy Center and you'll get an objective and clear eyed reading of what the Sequester means.  This graphic shows the impact on spending for government.  It will not be pretty.

Write or call your Congressional Representatives and tell them to get off their backsides and get this resolved.

Tell me what you think.

Regards,

Dennis