President Barack Obama delivers his State of the Union address on Capitol Hill in Washington, Tuesday, Jan. 24, 2012. Listen in back are Vice President Joe Biden and House Speaker John Boehner, right. (AP Photo/Saul Loeb, Pool)
Back in 2011, few lawmakers, if any, thought deep and indiscriminate spending cuts, totaling about $85 billion and now starting to kick in, were a smart idea.
The across-the-board cuts, set up as a last-resort trigger and based on a mechanism used in the 1980s, are a reality largely because President Barack Obama and House Speaker John Boehner, R-Ohio, failed to find a way to stop them.
Republicans, influenced by tea party and other conservative factions, insisted on just spending cuts to narrow the deficit. Tax increases were out.
Obama and the Democratic-run Senate didn't budge from a mix of cuts and increased tax revenues.
"Arbitrary" and "stupid" Obama called the auto-pilot cuts, known as sequester.
But history shows a long trail of unintended consequences from government actions — or inaction:
—President Franklin D. Roosevelt, after a solid re-election victory in 1936, believed that the Great Depression was winding down. Unemployment was declining and economic activity was coming back.
Roosevelt and Congress believed it was time to cut free-flowing government spending and raise taxes. The Federal Reserve tightened its financial reins. But the fragile economy couldn't withstand the blows. The Depression roared back, lasting until the 1940s when U.S. involvement in World War II finally revived the economy.
—President Ronald Reagan's ambitious 1986 overhaul of the tax code simplified taxes and closed many loopholes, including repealing the popular tax deduction for credit-card interest. Then people started borrowing heavily against fast-rising equity in their homes; that interest still was deductible.
But the practice eventually helped put millions of homeowners under water on their mortgages when the housing bubble burst, contributing to the 2007-2009 recession.
—The Fed has kept short-term interest rates unusually low and printed money to keep downward pressure on longer-term rates, easing borrowing for businesses and individuals.
Yet retirees and other savers are earning near-zero interest on bonds and savings accounts, and many investors are jumping into riskier transactions in search of higher returns.
Fed Chairman Ben Bernanke and many mainstream economists argue that the Fed's stimulus policies have helped the housing and financial sectors recover and kept the downturn from getting worse.
One leading Fed critic Sen. Bob Corker, R-Tenn., accused Bernanke at a hearing last week of "throwing seniors under the bus" by driving down interest rates on their savings to almost nothing.
—The tax cuts of 2001 and 2003 were first proposed by Texas Gov. George W. Bush as he campaigned for president in 2000. At the time, the economy was enjoying rare multi-year budget surpluses and government economists were predicting surpluses well into the future. Bush told cheering audiences his tax cuts would return to taxpayers "what is rightfully yours."
Those cuts long have outlived the surpluses, which vanished in Bush's first year in office. Deficits returned with a vengeance and have grown ever since.
But most of them remain today, trimmed only slightly by the New Year's deal that ended Bush's tax breaks for households making over $450,000 a year.
Economists view those tax cuts as one of the biggest drains on the Treasury, and a major contributor to the spiraling government debt.
—Wars in Vietnam, Afghanistan and Iraq lasted far longer and cost much more, in terms of U.S. lives and dollars, than anticipated.
—Social Security has become one of the most expensive federal programs ever. When it was created in the 1930s, the average life expectancy was about 65. Longer life expectancies and the coming retirements of millions of baby boomers have put enormous strains on Social Security, as well as Medicare and Medicaid.
And now the sequester.
"It's not hard to come up with something better, yet all efforts to do so went down the toilet for various reasons," said economist Bruce Bartlett, who held economic posts in the Reagan and first Bush administrations.
"And I think people didn't realize how wedded Republicans are to not raising taxes."
Still, no one really thought the cuts would happen, he added.
Stan Collender, a former staffer on both the House and Senate budget committees, said Congress is "very short-term focused. The longer-term consequences are of very little concern to people who have to run for re-election every two years," said Collender, now a partner at Quorvis Communications, a financial consulting firm.
More House districts have been redrawn in recent years with political factors in mind, and that's tended to concentrate conservatives in Republican districts and liberals in Democratic ones.
And set the terms of the debate on Capitol Hill.
"If people in your district are hell bent on cutting spending, even if it hurts the economy, and applaud your intransigence, then that's going to be your priority and your vote, even if it's not necessarily good for the country," Collender said.
The sequester now in play is actually an updated version of the Gramm-Rudman-Hollings Act of 1985. There also was a small sequester in 1986, and a big one planned for 1990.
The latter was avoided only after President George H.W. Bush broke his "no new taxes" pledge to join Democrats in a deficit-reduction compromise that raised taxes.
There was a huge GOP backlash, one that many politicians believe contributed to Bush's 1992 re-election defeat to Democrat Bill Clinton.
Clearly not the consequence Bush had in mind
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Follow Tom Raum on Twitter: http://www.twitter.com/tomraum
Copyright 2013 The Associated Press.
If you insist on butting in, what is your opinion of the Norquist pledge?
And perhaps you've noticed...the Republican party does a perfectly fine job of making themselves look bad without anyone else's help.
Do you have something to say about the sequester (that's the way we spell it, friend) that transcends your theory of high school antics invading Washington?
Or even something fresh related to today's record breaking DOW closings?
Or about the lowest tax bills on the wealthy since 1950?
Or the national surplus prior to Dubya's sleepover at the White House?
Or maybe explain your reference to Kool-Aid, as I've seen that before (once or twice) and don't quite get the analogy.
In closing, it's very American of you to HOPE the sequester affects all of us Obama voters in some way. Would you also prefer we all contract malaria, or perhaps Ebola?
I for one hope the government can find common ground to help the American middle class. It's a big wish. A lot bigger than simply wishing ill-will on people who think differently from you, but a wish of mine still.
--stir often, so as not to let the noodles stick together.
I for one hope the government can find common ground to help the American middle class. It's a big wish. A lot bigger than simply wishing ill-will on people who think differently from you, but a wish of mine still.
Your reading comprehension needs a little help, noidea. If by voting for a person that I believe will work towards my wishes, I'm stupid...then by all means, cast your label. If you can refute any of the above statements INTELLIGENTLY, then please do so. Otherwise, call me stupid or ignorant again and allow everyone to read what you are about, rather than proving me wrong.
My wish has nothing to do with a party, and everything I said is fact.
--stir often so as not to let the noodles stick together.
The sequester was created with the idea that it was only a temporary problem. After all, Romney will win the election, Obamacare will be scratched, and we'll do what we need to avoid the sequester.
That's a big oops, huh? He didn't win and now we're faced with a president who will not bend because he has the nation behind him, and the House who will not bend because of hard-right conservatives who have signed the inane Grover Norquist pledge.
The word impasse is being redefined as we speak in Webster's to include a picture of Obama/Boehner.
Obama still has more money to spend this year than last-How many HOUSEHOLDS can make that claim?
Obama, folks, was offered the opportunity to be given full authority to pick and choose, on his own, the $85 billion to be cut. Our Non-commander-in-Chief, to no surprise, refused and turned the offer down. He doesn't want his name added to the list as being the one responsible for the cuts. He is our supposed LEADER who is anything but that....A LEADER.
We need a real man in the White House instead of what we've got. TRUE Democrats, like Harry Truman, who said "The Buck Stops Here!" as well as "If you can't take the heat, get out of the kitchen!" were my type of men...real leaders.
FDR during the Depression tried to CALM American's fears with his "Fireside Chats." Remember "The only thing we have to fear is fear itself?" Well, the current Bozo is dealing and thriving on fear, with more Doomsday Scenario's than the Mayans with their calendar could ever dream up!
JFK said "Ask not what your country can do for you...Ask what you can do for your country." Well, this sorry lowlife of a President has reversed the saying, adding millions to the government feed trough and requiring exactly zero in service for the benefits and slop. Incredible!
What the heck has happened to the Democrat Party? It aint worth "spit in the wind" anymore. Every democratric principle has gone down the drain and the party stands for absolutely nothing anymore.
Zell Miller summed it up best a few years back when he said, "When I die and go to see my momma in heaven, the first thing I'll say to her is, momma, I didn't desert the Democrat Party...it deserted me. I was born a Democrat and I died a Democrat."
Maybe we ought to be coming up with some incentives to not sneaking across our borders illegally. Maybe I ought to change that....Aint nobody "sneaking" across our borders anymore when you can boldly strut across in daylight any where any time nowadays.
Our borders are a mess, and they're never gonna be bgetting better, folks. Democrats in Washington aint ever met an illegal that they didn't like. Guess that one of these days when you head to the voting booth you'll be having to special order a ballot written in English.
I imagine I have a like-minded friend at the newspaper who saw the beauty in posting this article for those who believe that tax revenue is unneeded in our plan.
Great start to what is currently a snowy Sunday.
Solution? have a team of actuaries compute the governments liability to replace all the funds with interest that should have accrued since the fund was raided. Review every recipient of disability to determine the ability to work. Deny disability benefits to alcoholics and drug addicts. Then let's see how stable the fund will become.