Sequester’s cuts will endure because of budget war
There’s an ancient adage that in war, truth is the first casualty. The war being waged over the federal budget, mostly by Republicans fighting with themselves, is a perfect example.
The biggest untruth may be that by pressing their demands the Republicans are destined to lose the budget battle. The truth is that they’ve won a most important victory: No one is talking anymore about ending the sequester.
Even the “clean” funding bill — the technical term is a “continuing resolution,” or CR — that most rational members of Congress are hoping will emerge from the current standoff would enshrine the harsh spending cuts imposed by the 2011 sequester legislation for weeks, months, or most likely another year or more. (“Clean” means it’s stripped of efforts to hobble the Affordable Care Act.)
It was not that many weeks ago that congressional negotiators were talking about compromises that might lift the 10-year sequester for a couple of years so its baleful effects on the economy might at least be moderated.
The clean CR that was most recently on the table at the House of Representatives would incorporate 100% of next year’s sequester cuts in nondefense spending and 60% of the cuts in the defense budget. If that’s the price of avoiding a lengthy government shutdown or a breach of the debt limit, congressional negotiators and the White House would probably count themselves lucky to get it.
It’s proper to recall the sequester’s devastating effects on millions of Americans, keeping in mind that it was created only to settle a major debt-limit fight in 2011.
As we reported in August, sequestration will pare as much as 1.2% off gross domestic product — after inflation — through this year and next, according to the Congressional Budget Office. It will cost as many as 1.6 million jobs over that time frame, the CBO says.
Just as the government shutdown leaves congressional pay and benefits intact, so does the sequester. The damage is all done at the opposite end of the economic scale.
Thousands of low-income residents of public housing will be thrown out of their homes. Public housing authorities that managed to stave off evictions this year say they will be out of options next year, when the cuts go deeper.
Tens of thousands of 3- and 4-year-olds will be barred from Head Start, perpetuating the vicious cycle of poverty and poor educational attainment faced by those families. Unemployment benefits will continue to be cut by an average of 15% nationwide. And of course job growth will be worse because of the sequester. That’s a great one-two punch Congress has landed on the jobless.
Yet the best we can hope for is that the sequester continues, and doesn’t get worse.
The pretext for the shutdown and debt-limit war, of course, is the Affordable Care Act, or Obamacare. Truth has also been a casualty in the Republicans’ discussions of the Affordable Care Act, which shock troops in the House GOP wish to defund, gut, delay, or otherwise hobble as their price for funding the entire government (this week) or raising the federal debt ceiling (a couple of weeks from now).
The best clue to the poverty of the Republican anti-Obamacare argument is the breadth of the lies told to justify it. Here’s Sen. Ted Cruz (R-Texas) on “Meet the Press”: “People all over the country, they’re losing their jobs, they’re being forced into part-time work, they’re facing skyrocketing health insurance premiums, and they’re losing their health insurance.”
That would be a pretty damning indictment of the Affordable Care Act, if any of it were true. But it’s not true. There is absolutely no evidence that any workers have lost their jobs because of the reform act.
Part-time work? The idea that employers around the country are cutting workers’ hours to part-time levels so they don’t have to pay for their health insurance is one of the most popular GOP tropes about the effect of the law, but it’s not supported by jobs data.
Over the last year, during which 2 million net new jobs have been created, nearly 86% of them have been full-time; the share of total employment represented by part-time jobs nationwide has actually fallen slightly (from 19.49% to 19.41%).
Moreover, only a small minority of those jobs are part-time for “economic reasons,” such as cutbacks in hours. Most are for noneconomic reasons, among which are child-care problems, family obligations, school commitments or limitations on earnings from government programs like Social Security. Noneconomic part-timers always account for the vast majority in the category, but their relative ranks have grown slightly over the last year.
A few big companies have cut workplace hours and pointed the finger at Obamacare — UPS and Sea World are often mentioned — but whether they’re telling the truth is questionable. Big business will always seize on a pretext to explain away bad news; in this case they may well be using Obamacare as a whipping boy to avoid the impression that they’re just being cheap, especially if their part-time workforce leads to lousy customer service.
As for “skyrocketing” healthcare premiums, they’re nowhere in sight. Last week the Department of Health and Human Services released its survey of premiums charged across the nation for the insurance plans available for enrollment starting this week; they came in at 16% below previous estimates.
For some applicants they may be higher than prices that could be found in commercial brokerages. But that’s highly misleading. For one thing, Obamacare offers premium subsidies for moderate- and low-income buyers; as many as 26 million Americans may be eligible for the price break, according to some estimates. For another, the prices cited on commercial websites have been unattainable for millions of applicants with preexisting conditions, who would be paying much higher prices, if they could get insurance at all.
One big lie has been attached to the GOP’s determination to overturn a tax on medical devices, which was enacted to generate $30 billion over 10 years to fund the Affordable Care Act. House Republicans have swallowed whole the device industry’s claim that this tax — 2.3% on the sale price of medical devices, with consumer goods such as eyeglasses, wheelchairs and hearing aids exempted — is costing jobs.
But as we showed back in May, no objective data support that claim — all the numbers come from studies the industry commissioned or from libertarian think tanks that would oppose any tax.
In any case, the medical device tax is one of a clutch of taxes and fees enacted to keep Obamacare revenue-neutral, which was a conservative demand.
To pay for the program, Congress imposed new taxes on more generous “Cadillac-plan” health insurance policies, new annual fees on health insurers and pharmaceutical manufacturers, even a tax on indoor tanning services.
No one likes any of those, but there’s no reason why one stakeholder should be exempt — especially medical device makers, whose market will expand by as many as 30 million new customers as Obamacare takes hold. Tellingly, when I asked an industry spokesman how Congress should make up the $30 billion a device tax repeal would cost, he shrugged, figuratively. (We were on the phone.) “We’re looking to Congress to replace the revenue and if so, how,” he said. “The ball’s not really in our court.”
It’s hard to find a better example of the mind-set that has brought us to this impasse. The players are all out for themselves — their profits, their ideology, their TV time. The real-world effect of their actions? That ball isn’t in their court.
Michael Hiltzik’s column appears Sundays and Wednesdays. Read his new blog, “The Economy Hub,” at latimes.com/business/hiltzik, reach him at email@example.com, check out facebook.com/hiltzik and follow @hiltzikm on Twitter.
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