TuckCenter for Global Business and Government

Slaughter & Rees Report - Sequestration and the Dinner Table

March 11, 2013 -- It has been 10 days since the onset of America’s fiscal “sequester”—that is, a cut of $85 billion in federal spending for the seven remaining months of fiscal 2013. Media coverage of the sequester has focused on assigning political blame or on prognosticating what next fiscal clash awaits Washington. The deeper issue at hand is what the sequester says about America’s fiscal values. Do they favor the country’s young and the future, or its old and the past?

For many years running, America’s fiscal values have steadily tilted toward the old. This can be seen in the expansion of Medicare, Medicaid, and Social Security, entitlement programs that accrue mainly to the old. It can also be seen in the entrenchment of overall fiscal deficits, which impose tax liabilities on future—and thus younger—citizens. In fiscal 2012, about $2.08 trillion of the total $3.5 trillion in federal spending—about 59 percent—was accounted for by the three major entitlement programs, plus interest on the debt. The fiscal challenge that confronts America in the next generation will only sharpen the young-versus-old tradeoff, because that challenge will be driven almost entirely by spending on the old as entitlement spending mushrooms with the aging baby boomers.

So what is the sequester cutting? Almost nothing from these entitlement programs that favor the old. Rather, it is imposing a 13-percent reduction in non-exempt defense spending and a 9-percent reduction in non-exempt non-defense spending. Virtually all of the key spending by America on its future, such as funding for research and development, infrastructure spending, and financial aid for higher education, falls into the category of non-defense discretionary spending. NASA, the National Science Foundation, National Infrastructure Investments, the Army Corps of Engineers—all federal programs that build the foundation of America’s future, all being cut.

Even before the sequester—and before the looming demographic pressures to come—the share of the federal budget accounted for by non-defense discretionary spending was at about a 50-year low. The sequester will drive it even lower.

America’s sequester has made a quiet, yet undeniable, statement about the country’s collective values moving even further from the young and toward the old. Amidst all of the finger pointing in Washington, this is the critical issue. Left overlooked for too long, it is destined to start coming up at dinner tables in households across America, as the “kids” challenge their parents and grandparents on America’s fiscal future. Here’s hoping Congress and the executive branch can reach a long-term budget agreement that truly invests in the future—and prevents intergenerational food fights along the way.

Articles © 2013 Matthew Slaughter and Matthew Rees.  All rights reserved.
Publication © 2013 Trustees of Dartmouth College.  All rights reserved.

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