Skip to main content

The fairy tale on spending cuts

By Michael D. Tanner, Special to CNN
February 22, 2013 -- Updated 1947 GMT (0347 HKT)
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
October 1, 2014 -- Updated 1947 GMT (0347 HKT)
Julian Zelizer says Jimmy Carter's message about the need to restore trust in public officials is a vital one, decades after the now 90-year-old he first voiced it
October 1, 2014 -- Updated 2156 GMT (0556 HKT)
Ford Vox says mistakes and missed opportunities along the line to a diagnosis of Ebola in a Liberian man have put Dallas residents at risk of fatal infection
October 1, 2014 -- Updated 2221 GMT (0621 HKT)
Pepper Schwartz says California is trying, but its law requiring step-by-step consent is just not the way hot and heavy sex proceeds on college campuses
October 2, 2014 -- Updated 0217 GMT (1017 HKT)
Mike Downey says long-suffering fans, waiting for good playoff news since 1985, finally get something to cheer about
October 1, 2014 -- Updated 2139 GMT (0539 HKT)
Steve Israel saysJohn Boehner's Congress and the tea party will be remembered for shutting down government one year ago
October 1, 2014 -- Updated 1856 GMT (0256 HKT)
Yep. You read the headline right, says Peter Bergen, writing on the new government that stresses national unity
October 1, 2014 -- Updated 2312 GMT (0712 HKT)
Hong Kong's pro-democracy demonstrators are but the latest freedom group to be abandoned by the Obama administration, says Mike Gonzalez
September 30, 2014 -- Updated 1653 GMT (0053 HKT)
Jeff Yang calls Ello a wakeup call to Facebook and Twitter, and a sign of hope for fast-rising upstarts Pinterest and Snapchat.
October 1, 2014 -- Updated 1423 GMT (2223 HKT)
Paul Waldman says the Secret Service should examine its procedures to make sure there are no threats to the White House--but without losing the openness so valuable to democracy
October 1, 2014 -- Updated 1455 GMT (2255 HKT)
Jesse Williams says the videotape and 911 call that resulted in police gunning down John Crawford at a Walmart reveals the fatal injustice of racial assumptions
September 30, 2014 -- Updated 2303 GMT (0703 HKT)
Mel Robbins says officials should drop the P.C. pose: The beheading in Oklahoma was not workplace violence. Plenty of evidence shows Alton Nolen was an admirer of ISIS.
September 30, 2014 -- Updated 1911 GMT (0311 HKT)
The Occupy Central movement has already achieved much by bringing greater attention to Hong Kong's struggle for democracy, William Piekos says..
September 30, 2014 -- Updated 1911 GMT (0311 HKT)
The Occupy Central movement has already achieved much by bringing greater attention to Hong Kong's struggle for democracy, writes William Piekos.
September 30, 2014 -- Updated 1413 GMT (2213 HKT)
As Prime Minister Narendra Modi visits America, Madeleine Albright says a world roiled by conflict needs these two great democracies to commit to moving their partnership forward
September 30, 2014 -- Updated 1404 GMT (2204 HKT)
John Sutter: Lake Providence, Louisiana, is the parish seat of the "most unequal place in America." And until somewhat recently, the poor side of town was invisible on Google Street View.
September 29, 2014 -- Updated 1311 GMT (2111 HKT)
Julian Zelizer says in the run up to the 2016 election the party faces divisions on its approach to the U.S.'s place in the world
September 29, 2014 -- Updated 1419 GMT (2219 HKT)
Ruben Navarrette says Common Core supporters can't devise a new set of standards and then fail to effectively sell it.
September 30, 2014 -- Updated 1329 GMT (2129 HKT)
Earlier this month, Kenyans commemorated the heinous attack on the Westgate Mall in Nairobi.
September 30, 2014 -- Updated 1859 GMT (0259 HKT)
David Wheeler says Colorado students are right to protest curriculum changes that downplays civil disobedience.
September 27, 2014 -- Updated 0158 GMT (0958 HKT)
Sally Kohn says when people click on hacked celebrity photos or ISIS videos, they are encouraging the bad guys.
September 26, 2014 -- Updated 1155 GMT (1955 HKT)
Loren Bunche says she walked by a homeless man every day and felt bad about it -- until one day she paused to get to know him
September 30, 2014 -- Updated 1332 GMT (2132 HKT)
ISIS grabs headlines on social media, but hateful speech is no match for moderate voices, says Nadia Oweidat.
September 29, 2014 -- Updated 1233 GMT (2033 HKT)
A new report counts jihadists fighting globally. The verdict? The threat isn't that big, says Peter Bergen.
September 23, 2014 -- Updated 2137 GMT (0537 HKT)
Ebola could become the biggest humanitarian disaster in a generation, writes former British Prime Minister Tony Blair
September 26, 2014 -- Updated 1658 GMT (0058 HKT)
ISIS has shocked the world. But will releasing videos of executions backfire? Four experts give their take.
September 26, 2014 -- Updated 1439 GMT (2239 HKT)
Eric Holder kicked off his stormy tenure as attorney general with a challenge to the public that set tone for six turbulent years as top law-enforcement officer.
September 26, 2014 -- Updated 1309 GMT (2109 HKT)
LZ Granderson says Obama was elected as a war-ending change agent, not a leader who would leave behind for his successor new engagement in Iraq and Syria. Is he as disappointed as the rest of us?
September 24, 2014 -- Updated 0910 GMT (1710 HKT)
Gayle Lemmon says the question now is how to translate all the high-profile feminizing into real gains for women
ADVERTISEMENT