The sequester, however, drives discretionary spending to less than 6 percent of gross domestic product in five years — 30 percent below its 40-year historical average. Those low levels of spending will be difficult to sustain if for no other reason than strong public sentiment, and harder still without the flexibility to implement cuts intelligently. With the sequester likely to be the only practical vehicle available to limit spending increases, Republicans should use what little negotiating leverage they have to make the sequester as sustainable as possible.
Federal spending has grown twice as fast as GDP over the past 10 years. Despite marginal tax rates that are higher than those during the Clinton administration, this level of spending has opened up a projected $650 billion per year deficit, nearly a hundred billion dollars more without an expected one-time increase in reimbursements from Fannie Mae and Freddie Mac, and hundreds of billions of dollars more at normalized interest rates.
Federal debt relative to GDP has risen to nearly twice its 40-year historical average — a level that threatens U.S. prosperity — with no end in sight. Nevertheless, the president and the Democrats refuse to modify entitlement spending, are eager to unwind the sequester, and have proposed further increases in spending.
Americans are depending on Republicans to use their negotiating leverage to slow the rate of spending increases. But they are also depending on Republicans to negotiate responsibly. Given the public’s insistence that negotiations not jeopardize government operations, the only proposals likely to succeed are ones that paint the president and his party as unreasonable if they reject them — like one that grants the president greater flexibility to implement sequester cuts. And even then, the odds may be long.
Edward Conard, a former managing director at Bain Capital, is a visiting scholar at the American Enterprise Institute. He’s the author of “Unintended Consequences: Why Everything You’ve Been Told About the Economy Is Wrong.”