Pain now or pain later

Were there any doubts, the timid and short-sighted compromise deal that averted the “fiscal cliff” on 1 January proved that the legislative machinery of Washington DC will remain broken for some time, with potentially disastrous consequences for US aerospace.

The deal achieved some clarity over near-term tax policy, but only delayed a day of reckoning for defence spending from the effects of a plainly ill-conceived budget-cutting drill known as “sequestration”.

Moreover, achieving consensus on a sensible approach to reducing US defence spending intelligently is not likely to become easier during the interim.

On New Year’s Eve, a now permanently gridlocked US legislature postponed the sequestration trigger by two months in order to resolve a raging and previously intractable dispute over tax policy.

But in two months’ time, there could be an even more passionate disagreement over raising the federal debt ceiling, set to reach crisis point around that time.

That might leave the military’s budget planners in a scenario perhaps even worse than if the budget sequester had already been activated, and not knowing until mid-way through the fiscal year whether or not between 9.4 to 11.4% of the defence budget must somehow be wiped from the ledger by year-end.

It was never supposed to be like this. As a budget-cutting device, the concept of sequestration was invented by Congress in the mid-1980s to curtail deficit spending by a decentralised appropriations process. In that context, sequestration was supposed to activate automatic budget cuts if approved spending levels exceeded a predetermined cap, but, in practice, legislators simply suspended the rule rather than face the consequences of their own lack of discipline.

Sequestration was revived in August 2011 when Congress almost defaulted on federal debt rather than agree to make concessions on spending cuts with the Obama administration. The Budget Control Act of 2011 required a select committee of lawmakers to agree  at least $1.2 trillion in cuts by November 2011, but the group failed. That activated the provision requiring the Treasury to begin sequestering authorised funds to federal agencies totalling $1.2 trillion over 10 years.

The US military should be expected to review spending levels nearly four years after completing one war in Iraq and winding down another in Afghanistan. But the arbitrary, across-the-board reductions imposed by sequestration are not the way to do it.

(The above first appeared as a leading article in Flight International 8 January 2013) 

Leave a Reply