It is doubtful that Congress and the White House will reach a budget agreement in time to avoid the deep mandatory cuts, known as the "sequester", from going into effect at the end of next week. The consequences, according to many economists, could be disastrous for the already anemic American economy.
Conventional wisdom currently is that the sequester deadline will pass and then Washington will come up with some sort of compromise solution. Perhaps just in time for the next self-inflicted crisis, the threat of a federal government shutdown on March 27 if Congress does not approve funding.
At the heart of this crisis is the debate over how to reduce the annual deficits that Washington continues to rack up. The national debt is currently $16.5 trillion, or about $50,000 for each citizen.
On Tuesday, Erskine Bowles and former Wyoming Senator Alan Simpson released their new deficit reduction plan, which they say splits the difference between President Barack Obama and House Republicans. Their plan would reduce the deficit by $2.4 trillion dollars over the next decade.
Bowles worked in the Clinton administration, and Simpson was a highly respected Republican Senator. They served as co-chairmen of the White House's 2010 deficit-reduction panel, which put together a bipartisan package of tax and spending changes that was rejected by both the administration and Congressional Republicans.
The Bowles-Simpson plan includes $600 billion in cuts from Medicare and Medicaid, $600 billion in new tax revenue from ending or reducing deductions and breaks, and $1.2 trillion in cuts to discretionary spending, along with cuts in cost-of-living increases for Social Security, the farm program and civilian and defense retirement programs. Bowles-Simpson 2.0, as it is being called, sharply reduced tax revenues from their original plan, perhaps in an effort to win over some Republicans.
In the current deficit debate, the White House favors a $1.5 trillion package that includes smaller cuts in social programs, investments in education, new technologies and infrastructure, and additional revenues achieved by closing tax loopholes. Republicans say they will propose a $4 trillion package of cuts that they claim will result in a balanced budget in 10 years, although they have not provided details. But Republicans have ruled out any further tax revenues.
Meanwhile, some economists question making deep cuts in federal spending at a time when the nation's economic recovery is so weak. They point to failed austerity measures in European countries, like England, which slipped back into another recession.
A compromise like the Bowles-Simpson plan seems appropriate for the country to avoid further calamity. "Our plan is not perfect, but it can serve, we believe, as a mark for a bipartisan deal," Mr. Bowles told reporters Tuesday morning. However, it is unlikely that the plan will receive any traction in Washington.
So, at the end of next week, the sequester is likely to go into effect. It calls for $85 billion in across the board cuts, and gives the government little discretion in how to enact them. The president called it a "meat cleaver" approach, warning that national security and vital services will be reduced, resulting in furloughs for border patrol agents, first responders, teachers and air traffic controllers.
With Congress on a break, no negotiations are underway. Instead, Congressional leaders are pointing fingers and playing the blame game. On Tuesday, House Speaker John Boehner said, "Words alone won't avert it. Replacing the president's sequester will require a plan to cut spending that will put us on the path to a budget that is balanced in 10 years. To keep these first responders on the job, what other spending is the president willing to cut?"
No wonder a recent Quinnipiac poll showed that 72% of American registered voters disapprove of the way Congressional Republicans are doing their job. And now Republicans are ready to bring the country to its knees rather than compromise on a more balanced budget deal to avert the latest Washington manufactured crisis. This is insanity.