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| Sequester Q&A with Heidi Moore and Todd Zwillich: the highlights | Sequester Q&A with Heidi Moore and Todd Zwillich: the highlights |
| (about 1 month later) | |
| We have formatted some of the questions and answers from Thursday's Q&A with Heidi Moore, the US finance and economics editor of the Guardian, and Todd Zwillich, of The Takeaway on WNYC radio in New York. In some cases the questions have been paraphrased. We've credited the questions to the usernames that were used during the chat. Click the link through to the question to join the discussion, or jump into the comments below. | We have formatted some of the questions and answers from Thursday's Q&A with Heidi Moore, the US finance and economics editor of the Guardian, and Todd Zwillich, of The Takeaway on WNYC radio in New York. In some cases the questions have been paraphrased. We've credited the questions to the usernames that were used during the chat. Click the link through to the question to join the discussion, or jump into the comments below. |
| On a last minute sequester solution | On a last minute sequester solution |
| What do you think are the chances for a last minute negotiation before we start seeing the effects of the sequester? – Nim | What do you think are the chances for a last minute negotiation before we start seeing the effects of the sequester? – Nim |
| Todd: | Todd: |
| There is next to no chance of any kind of deal between now and Friday when sequestration hits. Some of the effects of the cuts will be immediate, but the full effects of the cuts on employment etc will take some time to materialize. There is always the chance of dealmaking in the coming weeks, but don't expect much of anything until we're at least close to 27 March, when the government funding expires and Congress negotiates further on spending. | There is next to no chance of any kind of deal between now and Friday when sequestration hits. Some of the effects of the cuts will be immediate, but the full effects of the cuts on employment etc will take some time to materialize. There is always the chance of dealmaking in the coming weeks, but don't expect much of anything until we're at least close to 27 March, when the government funding expires and Congress negotiates further on spending. |
| Heidi: | Heidi: |
| Unfortunately, the chances are about zero. There is no expectation from anyone – in Congress, on Wall Street, watching the economy – that there will somehow get to be a big break in the negotiations. Partly that's because the issue isn't very pressing: we can go a week, or two, or even a month, into the sequester without seeing really horrible effects. After that, the expectations get a little dodgy. We've seen with this Congress that they respond best to last minute negotiations and brinkmanship. | Unfortunately, the chances are about zero. There is no expectation from anyone – in Congress, on Wall Street, watching the economy – that there will somehow get to be a big break in the negotiations. Partly that's because the issue isn't very pressing: we can go a week, or two, or even a month, into the sequester without seeing really horrible effects. After that, the expectations get a little dodgy. We've seen with this Congress that they respond best to last minute negotiations and brinkmanship. |
| On sequestration and law | On sequestration and law |
| Why won't Congress pass another law, repealing sequestration? – Gustavo | Why won't Congress pass another law, repealing sequestration? – Gustavo |
| Heidi: | Heidi: |
| You've nailed it: the only way to stop sequestration is to pass a law changing it. That is the subject of the debate now in Washington. Republicans don't want to change the law to stop sequestration because they cannot come to an agreement with the White House on larger issues of what the deficit should look like, how taxes will be treated, and so on. While there's fear that sequestration will hurt our economy, Republicans are arguing that there are bigger principles at stake. | You've nailed it: the only way to stop sequestration is to pass a law changing it. That is the subject of the debate now in Washington. Republicans don't want to change the law to stop sequestration because they cannot come to an agreement with the White House on larger issues of what the deficit should look like, how taxes will be treated, and so on. While there's fear that sequestration will hurt our economy, Republicans are arguing that there are bigger principles at stake. |
| On spending cuts | On spending cuts |
| Do we need the cuts, or don't we? These do very little to combat the growing deficit. – Guest | Do we need the cuts, or don't we? These do very little to combat the growing deficit. – Guest |
| Heidi: | Heidi: |
| The $8bn we're talking about is just one step of a 10-year plan that's supposed to reduce the deficit by $1.tn. Some economists, like Paul Krugman, argue that we should be cutting even more slowly than a decade. As for healthcare, Obamacare is currently still in the "simmering" stage, so we don't know the full economic effects until that takes place. As for entitlements, they are the third rail. Obama has said he will not cut them, under any circumstances. And indeed, it's hard for politicians making $150,000 and more a year in Washington – with paid healthcare and pensions – telling senior citizens that they can't have $14,000 a year to live on in Social Security. The "entitlements" battle is the BIG one. Everything leading up is just practice. | The $8bn we're talking about is just one step of a 10-year plan that's supposed to reduce the deficit by $1.tn. Some economists, like Paul Krugman, argue that we should be cutting even more slowly than a decade. As for healthcare, Obamacare is currently still in the "simmering" stage, so we don't know the full economic effects until that takes place. As for entitlements, they are the third rail. Obama has said he will not cut them, under any circumstances. And indeed, it's hard for politicians making $150,000 and more a year in Washington – with paid healthcare and pensions – telling senior citizens that they can't have $14,000 a year to live on in Social Security. The "entitlements" battle is the BIG one. Everything leading up is just practice. |
| Todd: | Todd: |
| The $2.2tn question!!! Everything you're seeing now is about gaining leverage in the very debate you're talking about. This $85bn is really very little in the grand scope. | The $2.2tn question!!! Everything you're seeing now is about gaining leverage in the very debate you're talking about. This $85bn is really very little in the grand scope. |
| On GDP | On GDP |
| Todd, you mentioned that sequestration "drags recovery 0.6% of the GDP". Could you please expand on that? – Nim | Todd, you mentioned that sequestration "drags recovery 0.6% of the GDP". Could you please expand on that? – Nim |
| Todd: | Todd: |
| 0.6% is the Congressional Budget Office estimate of the economic effect of the first 7 months ($85.2bn) of sequestration. We already saw a basically flat GDP last quarter, largely blamed on federal budget cutting and people in the economy sitting on their hands because of uncertainty over funding levels (will they / won't they on the sequester). I'm not an economist ... but CBO says DO expect 0.6% less GDP growth in the first year IF this stays in effect. | 0.6% is the Congressional Budget Office estimate of the economic effect of the first 7 months ($85.2bn) of sequestration. We already saw a basically flat GDP last quarter, largely blamed on federal budget cutting and people in the economy sitting on their hands because of uncertainty over funding levels (will they / won't they on the sequester). I'm not an economist ... but CBO says DO expect 0.6% less GDP growth in the first year IF this stays in effect. |
| Heidi: | Heidi: |
| to add to that, however, very few people think that the sequestration will be in effect for a whole year. The assumption is that it will be figured out before that. The shift Congress is trying to make is from "automatic" cuts – which make up the sequester – to intentional, prioritized, hand-chosen cuts. Either way, however, there are cuts coming. That is inevitable. | to add to that, however, very few people think that the sequestration will be in effect for a whole year. The assumption is that it will be figured out before that. The shift Congress is trying to make is from "automatic" cuts – which make up the sequester – to intentional, prioritized, hand-chosen cuts. Either way, however, there are cuts coming. That is inevitable. |
| On budgetary processes | On budgetary processes |
| There seems to be a risk of fatigue with "the latest fiscal deadline crisis", as we've had quite a few recently. Is there any way the budgetary process can change that could solve this (theoretically or realistically)? – Aglia | There seems to be a risk of fatigue with "the latest fiscal deadline crisis", as we've had quite a few recently. Is there any way the budgetary process can change that could solve this (theoretically or realistically)? – Aglia |
| Todd: | Todd: |
| There is some chance of that Aglia. One: both the House and Senate are committing to passing budget resolutions over the spring. While that doesn't bind them to any actual spending levels, it sets up a framework where a broader agreement on debt reduction can potentially reside. The chances of that are slim however. Both Dems and GOPs want to do broad tax reform over the summer as well. If GOPs and the president coalesce around some smaller version of the "grand bargain" they both say they're seeking, they could end this debate. | There is some chance of that Aglia. One: both the House and Senate are committing to passing budget resolutions over the spring. While that doesn't bind them to any actual spending levels, it sets up a framework where a broader agreement on debt reduction can potentially reside. The chances of that are slim however. Both Dems and GOPs want to do broad tax reform over the summer as well. If GOPs and the president coalesce around some smaller version of the "grand bargain" they both say they're seeking, they could end this debate. |
| On the congressional blame game | On the congressional blame game |
| Question from Twitter: "What's with the sequester blame game"? | Question from Twitter: "What's with the sequester blame game"? |
| Heidi: | Heidi: |
| The sequester blame game is really the biggest time-waster around this. While there are real impacts from the sequester that will hurt real jobs, Washington politicians have made it all about them. Numerous polls show that Americans have more negative views of Republicans for the sequester, and part of the blame game may be an attempt by some Republicans to reverse that image. That's why there has been a big push to point out that President Obama came up with the sequester. Again, this is about positioning for the current negotiation – if public image is on one side, it increases their chances of winning the negotiation or at least maintaining the upper hand for a while. | The sequester blame game is really the biggest time-waster around this. While there are real impacts from the sequester that will hurt real jobs, Washington politicians have made it all about them. Numerous polls show that Americans have more negative views of Republicans for the sequester, and part of the blame game may be an attempt by some Republicans to reverse that image. That's why there has been a big push to point out that President Obama came up with the sequester. Again, this is about positioning for the current negotiation – if public image is on one side, it increases their chances of winning the negotiation or at least maintaining the upper hand for a while. |
| Todd: | Todd: |
| The blame game is testament to the fact both sides have known for ages that sequestration is inevitable (because they weren't dealing). So instead they set about trying to make sure the other side got blame for the pain. Remind you at all of the government shutdowns of the mid-1990s? | The blame game is testament to the fact both sides have known for ages that sequestration is inevitable (because they weren't dealing). So instead they set about trying to make sure the other side got blame for the pain. Remind you at all of the government shutdowns of the mid-1990s? |
| Heidi: | Heidi: |
| To Todd's point in his answer about the blame game, let's not forget that last time, Congress missed the crisis deadline. It was only solved by Joe Biden's intervention as a mediator. Without another mediator like him involved, it's not clear that there's any real push to get a negotiation going here. | To Todd's point in his answer about the blame game, let's not forget that last time, Congress missed the crisis deadline. It was only solved by Joe Biden's intervention as a mediator. Without another mediator like him involved, it's not clear that there's any real push to get a negotiation going here. |
| On life after the sequester | On life after the sequester |
| Is the sequester the last of the fiscal issues we'll have to deal with this year? Or is it just the beginning? What's the next big fiscal issue you think we'll face? – Ruth Spencer | Is the sequester the last of the fiscal issues we'll have to deal with this year? Or is it just the beginning? What's the next big fiscal issue you think we'll face? – Ruth Spencer |
| Heidi: | Heidi: |
| Oh, it's just the beginning. On 27 March we're facing a government shutdown. | Oh, it's just the beginning. On 27 March we're facing a government shutdown. |
| Todd: | Todd: |
| The next page is the government shutdown fight of 27 March. A shutdown is highly UNLIKELY at this point (no one wants to wade into that tar pit) ... but then you have budget resolution, MAYBE (doubtful) tax reform deal, and further negotiations between Obama and GOP over the second half of debt reduction. | The next page is the government shutdown fight of 27 March. A shutdown is highly UNLIKELY at this point (no one wants to wade into that tar pit) ... but then you have budget resolution, MAYBE (doubtful) tax reform deal, and further negotiations between Obama and GOP over the second half of debt reduction. |
| Todd: | Todd: |
| Look at it this way: The economists et al have said we need to reduce the national debt a little over $4tn to get on a sustainable debt-to-GDP footing. Though it doesnt seem like Washington has really done anything, it in fact has done a lot! Cut roughly $2.2tn so far from the debt when you take the Budget Control Act, Fiscal cliff, domestic spending fitghts, and tax increases altogether. Half way there. But the hard part is to come. Entitlements, medicare, social sec, medicaid and defense and taxes (via loophole closures, but taxes nonetheless.) | Look at it this way: The economists et al have said we need to reduce the national debt a little over $4tn to get on a sustainable debt-to-GDP footing. Though it doesnt seem like Washington has really done anything, it in fact has done a lot! Cut roughly $2.2tn so far from the debt when you take the Budget Control Act, Fiscal cliff, domestic spending fitghts, and tax increases altogether. Half way there. But the hard part is to come. Entitlements, medicare, social sec, medicaid and defense and taxes (via loophole closures, but taxes nonetheless.) |
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