Skip to main content

The fairy tale on spending cuts

By Michael D. Tanner, Special to CNN
updated 2:47 PM EST, Fri February 22, 2013
STORY HIGHLIGHTS
  • Michael Tanner: Most of what we are told about the sequester is just a fairy tale
  • Tanner: Some think the sequester imposes savage spending cuts, but that's not true
  • He says although defense spending will be cut, it would never fall below 2007 level
  • Tanner: Government spending may destroy more jobs in the long run than it creates

Editor's note: Michael D. Tanner is a senior fellow at the Cato Institute.

(CNN) -- "The sequester is coming, the sequester is coming," cries Chicken Little, speaking of the across-the-board spending reductions set to kick in next Friday. As a result, much of the Washington establishment, politicians of both parties, and the media are bracing for the apocalypse.

Henny Penny worries about poisoned meat going uninspected, the air traffic control system shutting down, and schools being forced to close. Meanwhile Turkey Lurkey is afraid that national security is threatened because our military will be gutted. And Foxy Loxy is concerned there will be massive job losses and our economy will crash.

The reality, though, is that most of what we are being told about the sequester is just a fairy tale. Here's why:

The sequester imposes savage spending cuts

Actually, the sequester doesn't cut federal spending at all, or rather it cuts it only in the Washington sense of any reduction from projected baseline increases is a cut. In reality, even if the sequester goes through, the federal government will spend more every single year. In fact, in 2023 it will be spending $2.39 trillion more than it does today.

Become a fan of CNNOpinion
Stay up to date on the latest opinion, analysis and conversations through social media. Join us at Facebook/CNNOpinion and follow us @CNNOpinion on Twitter. We welcome your ideas and comments.



OK, but at least the reductions in projected spending are big, right?

Hardly. This year, the sequester would slow the growth in federal spending by just $85 billion, from an expected, pre-sequester budget of $3.64 trillion -- less than a 2.3% reduction. To put that in perspective, the federal government borrows $85 billion every 28 days . In fact, this actually overstates the size of this year's cuts. Because of ongoing contracts and the Byzantine labyrinth of federal budgeting, only $44 billion of that $85 billion will actually be cut from this year's budget. The rest will be cut in future years, but attributed to this year's budget. So, the real reduction in federal spending this year is just 1.2%. If the federal government can't reduce spending by less than a penny-and-a-half on the dollar without throwing us into the dark ages, something is truly wrong.

But aren't the cuts larger for domestic discretionary spending?

It is true that the cuts are not spread equally across all types of federal spending. Entitlement programs, such as Medicare, Medicaid and Social Security are generally exempt -- Grandma's Social Security check won't be cut -- meaning that discretionary spending takes a disproportionately larger hit. Still, we are talking about a reduction of less than 9%. That would leave domestic discretionary spending, after adjusting for inflation, at roughly the same level as 2009. You recall 2009, don't you? The starvation, the mass closure of our schools, the shutdown of the transportation system, the burning cities?

What about defense? Surely, the sequester guts defense

Defense does take the biggest cut under sequester, nearly 13% of planned spending. In fact, defense spending would really be cut, in the sense of actually spending less, over the next two years. Still, it would never fall below the level of spending we had as recently as 2007, a year we managed to survive without al Qaeda wading ashore in Long Beach. Beginning in 2015, defense spending would start rising again, in real terms, and would exceed current levels by 2019. Keeping all this in perspective, over the entire 10-year period covered by the sequester, defense spending would average roughly $100 billion more each year (after adjusting for inflation) than we spent at the height of the cold war.

I'm still worried about the impact on the economy. Some economists believe that the sequester will cost thousands of jobs and throw us into another recession. True or not?

The proposed spending reductions amount to less than 0.03% of our gross domestic product. If our economy can't survive spending cuts of that size, we truly are Greece. Of course, in the short term, there will be some layoffs and furloughs. This will be hard on some communities that depend heavily on government spending, and even harder on those workers directly affected. However, most of the numbers cited about the numbers of jobs at risk come from industry groups with a vested interest in making the cuts look as bad as possible.

This entire argument buys into the Keynesian conceit that government spending creates jobs over the long term. But the resources necessary to create those jobs have to be extracted from the private economy either through taxes or borrowing. That means the private sector then has fewer resources to invest in job creation. Given that the private sector generally puts those resources to a more productive use, it is likely that government spending destroys more jobs over the long run than it creates.

We can and should have a legitimate debate about the best way to cut spending. But let's not be distracted by fairy tales about how the sky is falling.

Follow us on Twitter @CNNOpinion.

Join us on Facebook/CNNOpinion.

The opinions expressed in this commentary are solely those of Michael D. Tanner.

ADVERTISEMENT
Part of complete coverage on
updated 9:29 AM EDT, Mon October 20, 2014
Cornell Belcher says the story of the "tea party wave" in 2010 was bogus; it was an election determined by ebbing Democratic turnout
updated 4:12 PM EDT, Mon October 20, 2014
Les Abend says pilots want protocols, preparation and checklists for all contingencies; at the moment, controlling a deadly disease is out of their comfort zone
updated 11:36 PM EDT, Sun October 19, 2014
David Weinberger says an online controversy that snowballed from a misogynist attack by gamers into a culture war is a preview of the way news is handled in a world of hashtag-fueled scandal
updated 8:23 AM EDT, Mon October 20, 2014
Julian Zelizer says Paul Krugman makes some good points in his defense of President Obama but is premature in calling him one of the most successful presidents.
updated 10:21 PM EDT, Sun October 19, 2014
Conservatives can't bash and slash government and then suddenly act surprised if government isn't there when we need it, writes Sally Kohn
updated 8:28 AM EDT, Mon October 20, 2014
ISIS is looking to take over a good chunk of the Middle East -- if not the entire Muslim world, write Peter Bergen and Emily Schneider.
updated 9:00 AM EDT, Mon October 20, 2014
The world's response to Ebola is its own sort of tragedy, writes John Sutter
updated 4:33 PM EDT, Fri October 17, 2014
Hidden away in Russian orphanages are thousands of children with disabilities who aren't orphans, whose harmful treatment has long been hidden from public view, writes Andrea Mazzarino
updated 1:22 PM EDT, Sat October 18, 2014
When you hear "trick or treat" this year, think "nudge," writes John Bare
updated 12:42 AM EDT, Sat October 18, 2014
The more than 200 kidnapped Nigerian schoolgirls have become pawns in a larger drama, writes Richard Joseph.
updated 9:45 AM EDT, Fri October 17, 2014
Peggy Drexler said Amal Alamuddin was accused of buying into the patriarchy when she changed her name to Clooney. But that was her choice.
updated 4:43 PM EDT, Thu October 16, 2014
Ford Vox says the CDC's Thomas Frieden is a good man with a stellar resume who has shown he lacks the unique talents and vision needed to confront the Ebola crisis
updated 4:58 AM EDT, Sat October 18, 2014
How can such a numerically small force as ISIS take control of vast swathes of Syria and Iraq?
updated 9:42 AM EDT, Fri October 17, 2014
How big a threat do foreign fighters in Syria and Iraq pose to the West? It's a question that has been much on the mind of policymakers and commentators.
updated 8:21 AM EDT, Fri October 17, 2014
More than a quarter-million American women served honorably in the Iraq and Afghanistan wars. Now they are home, we have an obligation to help them transition back to civilian life.
updated 4:27 PM EDT, Thu October 16, 2014
Paul Begala says Rick Scott's deeply weird refusal to begin a debate because rival Charlie Crist had a fan under his podium spells disaster for the Florida governor--delighting Crist
updated 12:07 AM EDT, Thu October 16, 2014
The longer we wait to engage on Ebola, the more limited our options will become, says Marco Rubio.
updated 7:53 AM EDT, Wed October 15, 2014
Democratic candidates who run from President Obama in red states where he is unpopular are making a big mistake, says Donna Brazile
updated 12:29 AM EDT, Thu October 16, 2014
At some 7 billion people, the world can sometimes seem like a crowded place. But if the latest estimates are to be believed, then in less than a century it is going to feel even more so -- about 50% more crowded, says Evan Fraser
updated 12:53 PM EDT, Mon October 20, 2014
Paul Callan says the Ebola situation is pointing up the need for better leadership
updated 6:45 PM EDT, Wed October 15, 2014
Nurses are the unsung heroes of the Ebola outbreak. Yet, there are troubling signs we're failing them, says John Sutter
updated 1:00 PM EDT, Wed October 15, 2014
Dean Obeidallah says it's a mistake to give up a business name you've invested energy in, just because of a new terrorist group
updated 7:01 PM EDT, Wed October 15, 2014
Fear of Ebola is contagious, writes Mel Robbins; but it's time to put the disease in perspective
updated 1:44 PM EDT, Tue October 14, 2014
Oliver Kershaw says that if Big Tobacco is given monopoly of e-cigarette products, public health will suffer.
updated 9:35 AM EDT, Sat October 18, 2014
Stop thinking your job will make you happy.
updated 10:08 PM EDT, Tue October 14, 2014
Ruben Navarrette says it's time to deal with another scandal involving the Secret Service — one that leads directly into the White House.
updated 7:25 AM EDT, Tue October 14, 2014
Americans who choose to fight for militant groups or support them are young and likely to be active in jihadist social media, says Peter Bergen
updated 9:03 AM EDT, Mon October 13, 2014
Stephanie Coontz says 11 years ago only one state allowed same sex marriage. Soon, some 60% of Americans will live where gays can marry. How did attitudes change so quickly?
updated 4:04 PM EDT, Tue October 14, 2014
Legalizing assisted suicide seems acceptable when focusing on individuals. But such laws would put many at risk of immense harm, writes Marilyn Golden.
updated 9:07 AM EDT, Mon October 13, 2014
Julian Zelizer says the issues are huge, but both parties are wrestling with problems that alienate voters
updated 6:50 PM EDT, Mon October 13, 2014
Mel Robbins says the town's school chief was right to cancel the season, but that's just the beginning of what needs to be done
updated 11:43 AM EDT, Sat October 11, 2014
He didn't discover that the world was round, David Perry writes. So what did he do?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT