Weaponized Keynesianism

Post #4 SequestrationSequestration. It’s a word few Americans had heard before 2011 when President Obama and Speaker of the HouseJohn Boehner failed to agree on a deal to curb the nation’s long-term deficit spending.

Sequestration – a legal-cum-legislative term for the seizure of government funds – was an incentive implemented in the 2011 Budget Control Act for Congress to get a deal done. If Congress was unable to pass a deficit reduction bill with $1.2 trillion in cuts or more, sequestration would have come on January 1, 2013 through across-the-board budget cuts amounting to that same number. Both mandatory and discretionary spending would be affected by the sequestration with the cuts eating into programs all the way into 2021.

Although a few areas of government spending, such as Social Security, weren’t affected, the cuts were made in such a way that both key Republican interests and Democrat interests will be affected. Half the cuts will come from defense (a Republican core interest) and half will come from domestic discretionary spending (a Democratic interest).

When January 1, 2013 approached and a deficit reduction bill wasn’t in the horizon, Washington did what it does best: it kicked the can down the road.

As part of the decision to lift the debt-ceiling, Congress has put off the sequester until March 1. Economists and politicians had feared that the sequester, in conjunction with the expiration of the Bush tax cuts, would push America back into recession.

Yet now that the sequestration is back on the table, Republicans – the so-called deficit hawks – have been increasingly vocal in calling against the cuts… as long as it’s only defense cuts.

Mitt Romney let the cat out of the bag, as the man is wont to do, when he announced in his RNC acceptance speech that Obama’s “trillion dollar cuts to our military will eliminate hundreds of thousands of jobs…”

As the judgment day nears, other Republicans have joined the chorus including foreign-policy heavyweights such as Senator John McCain, who admitted that defense cuts alone could lead to over 650,000 job losses.

So apparently cuts in the government can hurt the economy? This is not just a trivial point that the Republicans are conceding, but an implicit admission that – Keynesianism – the very economic philosophy they repudiated and Obama adopted throughout the 2012 campaign – is right.

Of course, Republicans are still pushing for social spending cuts, but that’s a contradiction. This concept of ‘weaponized Keynesianism’ – that the government only provides jobs when it comes to defense and only defense – as Paul Krugman dubs it doesn’t make sense. At least to this columnist, and it’s time for Republicans to clearly explain to voters why defense cuts hurt the economy whereas everything else has got to go.

More frustratingly, sequestration talks have demonstrated the continued bad faith and intransigence of the Republican Party. Defense cuts were implemented to incentivize Republicans to negotiate in the same way that social cuts incentivized Democrats. Yet Republicans are persisting on their hardline ways, with Senator Lindsey Graham promising that any deficit-reduction deal won’t come by “raising tax rates.”

Robert Gibbs, a White House political advisor, succinctly characterizes the Republican argument.  As he said, the GOP believes that Congress should “preserve the size of the Navy and the Air Force by giving out a tax cuts [sic] for millionaires and billionaires.”

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