I haven’t written in a while because there has not been much to write about. The president gives a full-throated defense of classic Democratic Liberal positions in his Inaugural Address but the media coverage is dominated by “Beyonce-Gate”. I watched the inauguration. The oratory was not soaring, the themes were tired, and the message both stale and confrontational. No wonder Beyonce’s “did she or didn’t she sing live” stole the show – and no, I do not blame her for the Superdome Blackout.
I confess I could not watch the State of the Union. I am tired of speeches with laundry lists of wants and an absence of solutions. It’s like a Seinfeld episode: “Mr. Speaker, the President of the United States and yada, yada, yada, God Bless the United States of America”. Been there, done that, have the t-shirt and now I am so terribly bored by it all.
Which brings me to Hagel, Lew and Sequestration. At the very least this has been interesting.
Hagel was beyond awful at his confirmation hearing. Yes, the President has the right to pick his team, but only with the advice and consent of the Senate. If you want to be the Secretary of Defense then you ought to be able to (1) articulate the President’s policies and (2) string together cogent sentences. It’s really not that high of a bar and yet I am not sure Hagel cleared it. I respect his service (and understand how that colors his worldview and have no issue with that), but being an enlisted man is no more dispositive of being a good Secretary of Defense than being an officer is. Chuck Hagel will be confirmed, but not in the bipartisan way John Kerry was confirmed. As an aside you have to love Kerry coming out and saying he was asked to take the job before Susan Rice publicly withdrew. If you are going to throw someone under the bus, it is always a good policy to be driving the bus when you do it. But back to Hagel. He will be confirmed but the process has weakened him, not the Republican opposition but the lack of strong support from the Democratic caucus.
Now to Mr. Lew. There is a delicious irony in hearing Democrats who criticized Romney’s overseas investments come to Lew’s defense over his Cayman investments. Lew even channeled Romney when he insisted he had paid all taxes that were owed. Frankly, I don’t care where you invest your money – it is your money! I am far more concerned that as the head of OMB he failed to respond to the Medicare Trigger. Federal law states that ‘If there is a Medicare funding warning under section 801(a)(2) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 made in a year, the President shall submit to Congress, within the 15-day period beginning on the date of the budget submission to Congress under subsection (a) for the succeeding year, proposed legislation to respond to such a warning.’ OMB has the requirement to submit fiscal proposals to Congress, and yet this did not happen while he was the OMB Director. I don’t care how much money he made at Citigroup (although can you imagine the fun the Democrats would be having with this subject if he was a Bush appointee???). I do care, though, that a Cabinet Secretary well and faithfully execute the laws of the country, even ones that are inconvenient politically and fiscally.
So, this leaves Sequestration. As described, this evil entity is the budgetary equivalent of an amalgamation of Freddy, the Friday the 13th dude, Predator and Aliens. On March 1, if you listen to the pundits, the world, as we know it will cease to exist. The White House (including the President and Jack Lew) devised this budgetary trigger because they thought the other side would blink. In some respects, the other side thinks it did blink when it formalized the new tax rates and as a result increased revenue by $600 billion over the next decade or so.
As a quick aside, I don’t agree they raised taxes because the Bush rates, which were never permanent, had expired. In fact, they were able to make most of the Bush rates permanent and thus established a common budgeting baseline moving forward. Republicans need to learn to take a win where they can. The facts are the facts. The Bush rates had expired and those who voted against the American Taxpayer Relief Act were actually voting for tax increases when they voted “no”. Am I happy about the weird and wacky giveaways hidden in the bill? Nope. But given the alternative I think this was a good compromise, especially because it decoupled taxes and the borrowing limit from Sequestration. After all, how do you eat an elephant? One bite at a time.
So the losing approach in the Sequestration battle when the other side thinks it blinked is to go back to the revenue well again without a serious commitment to spending/entitlement reform. Or, as anyone knows who has ever watched a “Die Hard” movie, if you are going to play chicken you had better make sure the other guy is going to swerve first. The White House has overplayed their hand and the Republican are in no mood to compromise. The only way many Republican’s feel they can get spending cuts from this administration is to let Sequestration kick in. It is telling that Republicans are willing to let these cuts hit the Defense Department as the cost of getting budgetary reform and spending reduction on the table. Will it be painful? Maybe, but many entitlement programs are exempted from the mandatory cuts. Is it permanent? Nope – future budgets can restore the cuts. Will anyone outside the Beltway actually notice? Don’t know, but I suspect the doomsayers have probably exaggerated a bit. The good news is this will create a budget baseline that has been missing since the Government has been running on continuing resolutions for years. Maybe the Senate will finally pass a budget.
I remember the shrill warnings about Y2K. It’s hard for me to get worked up about Sequestration –although the perfect storm might be in the mixing of Hagel, Lew and the demon Sequestration.
Small Politics 
Thanks for your comments.
I think it is a mistake to assume the sequestration will somehow be harmless. It was designed to be bad policy, bad enough to get congress to compromise. If the Republicans hold that doing nothing accomplishes their goal of reducing spending, than that strikes me as irresponsible and frankly politically stupid. The CBO notes that the cuts in sequestration are the primary driver in reduced economic growth for this year. The cuts are indiscriminate and will effect important public programs, not to mention arbitrarily cutting defense spending. It’s dumb policy and, more importantly, it does nothing to solve our long term deficit which is driven by rising health costs and an aging population.
What we need is a deal that stabilizes our long term deficit, which means we need to address health care costs in the long term. Simpson Bowles* recently came out with an updated version of their deal to stabilize our debt in the long term and includes many of the same spending cuts and revenue generators as the president has been pushing for. The SB plan assumes the full implementation of the ACA and embraces its attempts to slow health spending and cuts to Medicare. Additionally, it does not make immediate cuts to spending because of the detrimental effects that would have on a slow economy.
Republicans do not have a plan on health reform, which means they don’t have a realistic plan for our long term deficit. They are very good at articulating what they’re against, but not what they’re for. A policy oriented Republican party, something conservative intellectuals like Ross Douthat, David Frum, Ramesh Ponnuru, and Josh Barro have been pushing for, would be jumping at the opportunity to work with the president to avoid the sequestration and come up with a plan to stabilize the long term debt while meeting current policy priorities , even if that means raising some revenue.
Matt
* I use Simpson Bowles as a guidepost because I assume it’s a framework we both can agree on. But I could be wrong, there is alot not to like about the SB plans from both perspectives.