Deer Hunting, Economist-Style

One of the best-ever economist jokes has three econometricians out deer hunting.  They encounter a deer, and the first econometrician takes his shot and misses one meter to the left.  Then the second takes his shot and misses one meter to the right, whereupon the third begins jumping up and down and calls out excitedly, “We got it!  We got it!”

By latest accounts, the current budget conference committee is giving a fair impersonation of those three econometricians, aiming both too high and too low.  They are acting as though this game were on the level (that is another joke for another day), and therefore are trying to produce some real product.  But being incapable in these circumstances of producing something truly real, they are faking it.  The result may turn out to be a substantial disappointment, though it may still turn off the pending appropriations and debt-limit crises – which would be sufficient reason for all of us to turn Washington off for a few weeks, and enjoy the holidays.

Back in August of 2011, the Congress and the President escaped an already far too close brush with the debt limit by creating a Supercommittee, charged with saving $1.2 trillion – or else that amount would be cut mostly from annually appropriated spending.  Almost everyone agreed that if put into effect, this automatic “sequester” would be excessive; and so it was assumed that it would motivate the Supercommittee to cut a deal.  However, this trigger did not have its intended motivational effect, and so it was pulled.

Today, as we approach yet another pair of scheduled train wrecks – one more appropriations expiration and potential government shutdown on January 15, and the beginning of another debt-limit drama on February 7 – the sequester has somehow claimed a leading dramatic role.  This is truly hard to justify.  Not only is the sequester not sound budget or governmental policy, its amount is also arbitrary, and insufficient to solve the actual long-term budget problem.  Yet the new budget resolution conference committee – and the Congress as a whole – have chosen to sanctify the sequester as their reason for being.  They seek somehow to replace the arbitrary sequester savings for the next year to justify enacting appropriations and turning off the debt limit.

One might say that seeking to impose some discipline – any discipline – on the budget would be admirable after what we have been through.  But the sequester is so aimless that replacing its savings now would accomplish very little.

Still, even replacing those savings seems beyond the motivations of these times.  So the week’s news stories suggest that the solution will be some reshuffling of the same tired deck.  One option seems to be to take the sequester savings of 2014, and perhaps 2015 as well, and re-scheduling them for later years.  It is hard to tell much of a story to justify that approach.  It would further sanctify a sequester process that was misguided and miscast in the first place.  It would simply move the next scheduled train wreck just one or two years down the tracks.  And it would leave our budget policy fundamentally aimless.

CED has urged the Congress and the President to abandon the sequester, recognizing that it is a motivational device that did not motivate, and so has outlived its usefulness.  But while they are at it, our elected policymakers should take the opportunity to plan a framework for a solution to the real problem.  Our recommended approach would be to measure the long-term fiscal gap, and specify the budgetary savings needed to fill it – but without the automatic sequester’s cuts at the already-reduced annual appropriations levels, and giving the stumbling economy a two-year breather so that it can build up some momentum for a real recovery and expansion.

If the budget resolution conference committee beats Santa Claus down the chimney with a plan to avoid next year’s shutdown and debt crisis, perhaps we should count our blessings and give thanks.  But satisfying the demands of the aimless sequester is neither necessary nor sufficient to solve our fiscal problems.  We don’t need such small amounts of budget savings now, whether real or contrived.  What we need instead is a framework or roadmap to our ultimate objective.  CED is trying to put our recommendations before the conference committee and the rest of the Congress and the White House.  Some real judgment and real bipartisan cooperation would make for a much happier holiday, and a far more prosperous new year.

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