3 things the sequester can teach us

Americans say they want spending cuts in general, but aren't so good with specifics. These automatic cuts will show what government really does, and what could go.

By MSN Money Partner Feb 27, 2013 4:27PM

Image: Hand hiding banknotes under vest, studio shot © Mike Kemp/Rubberball/Getty ImagesBy Rick Newman for US News & World Report


A majority of Americans think the government is too big -- in the abstract. When you ask what should be cut, however, they have a hard time saying what should go.


The upcoming "sequester" ought to help taxpayers decide which parts of the government they like and which they could do without.


Starting March 1, most government agencies will have to cut their budgets by about 8%, as part of a 2011 deal to start paying down the national debt. President Barack Obama has warned that the spending cuts could cause hundreds of thousands of job losses, harm the national defense, snarl airline operations, slow emergency response time and hurt the economy in many other ways.


Yet politicians in Washington don't really seem that concerned. They've refused to come up with a better deal that would forestall the sequester and cut spending more sensibly.


So we're about to experience the most abrupt cutback in federal spending in years. Here are three things it ought to reveal:


Whether Washington doomsayers are telling the truth.

Will the government machinery really seize up, as Obama and others have warned? On one hand, policymakers are right to complain about cuts that take effect overnight, with no effort to prioritize which spending is most important. No well-run business would cut expenses by hacking every line in the budget equally, on an arbitrary deadline.


But the magnitude of the cuts isn't all that severe, especially in an era of widespread austerity. Many companies and families have had to cut spending to the same degree the sequester will require, if not more. In many cases, the adjustments forced by budget pressures have put businesses and families on sounder financial footing. If the government can't fulfill its basic obligations with a modest cutback in funding, it might be time to restructure the whole federal bureaucracy. And if the government does adjust, we'll know that Obama and his fellow doomsayers were exaggerating the dangers of spending cuts.


How vital the government really is.

Americans take many aspects of the federal government for granted, unaware, in many cases, that it's the government that keeps airplanes flying, monitors food safety, prevents terrorist attacks, underwrites most mortgage, and manages countless other things to keep society functioning. The problem is that for the past 12 years, Americans have been getting a lot more government than they've been paying for, with borrowed money financing the difference.


That has to end sooner or later, and modest cutbacks in government services are a good way to start testing how much government taxpayers are willing to pay for. The basic choice is to pay more for the government we have, through higher taxes, or pay the same for less government. Here's one example: The Department of Homeland Security has begun to release illegal immigrants held in various jails across the country, to help save money that will be cut from its budget by the sequester. Is that something we're willing to live with? Or should we come up with more money to prevent it from happening?


What else we might be able to cut.

For all the drama, the sequester will do very little to fix Washington's finances, because it doesn't really touch the biggest categories of government spending: entitlement programs such as Medicare, Medicaid and Social Security. Right-sizing the federal budget will require either big cuts in those programs, or thorough reforms that make the government far more efficient (but might be impossible).


So the sequester is really just a warm-up for the cuts it will take to truly shrink government spending enough to bring it in line with revenue. Are we ready for more spending cuts? Or will we suddenly decide we like big government a lot more than we thought? If the sequester provides some answers, maybe it will serve some purpose.


Rick Newman's latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.


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