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President Barack Obama meets with bipartisan House and Senate Leadership in the Cabinet Room of the White House to discuss his upcoming fiscal policy speech, April 13, 2011. Seated with the President from left are: Sen. Dick Durbin, D-Ill.; Sen. Mitch McC
Cliff diving?
Here's a brief recap of how we did get here, on the verge of stepping off the fiscal cliff curb. Republicans took the global economy hostage back in the summer of 2011 by refusing the increase the debt ceiling, a completely unprecedented action that resulted in a lot of really bad stuff. Like the United States losing its AAA credit rating from Standard & Poors. But what it also resulted in was the Budget Control Act, which set out two choices for Congress: create a Super Congress to come up with produce a deficit reduction bill with at least $1.2 trillion in cuts and revenue or accept automatic, across-the-board cuts known as "sequestration," to take effect Jan. 2, 2013.

Of course, the Super Congress couldn't come up with those cuts. It was bipartisan. So now we're facing down those sequestration cuts, which as a whole aren't great, but isolated from other factors aren't so bad.

  • Non-exempt defense discretionary funding sees a 9.4 percent spending reduction. This covers things, such as keeping military bases open, paying salaries and research and development.
  • Non-exempt mandatory defense spending sees the biggest cut of 10 percent.
  • Non-exempt, non-defense discretionary funding gets cut by 8.2 percent. This includes anything that Congress has to authorize each year, so programs like Head Start and AIDS assistance.
  • Non-exempt, non-defense mandatory programs see a 7.6 percent reduction. There’s not, however, much left to cut in this category because the large mandatory programs were largely shielded from the cuts. More on that right below.
  • Medicare is, well, Medicare – the health insurance program for America’s seniors. The sequester specifically limited Medicare cuts to 2 percent of the program’s budget.
The administration worked out a plan to achieve those cuts. Key, though, to the sequestration is the fact that the most vulnerable people were largely shielded from harm. That's why many of us argued that the Super Congress shouldn't do anything—that was our best bet for protecting the big three: Social Security, Medicare and Medicaid. And, it was the only way that the defense budget would actually get hit. Of course, because defense cuts were in the mix and pain for old and poor people wasn't, the chances the sequester would just be allowed to happen were always slim, so here we are.

That's the sequester in isolation. But of course, it doesn't exist in isolation because it was scheduled to take effect at the same time that a raft of programs and tax cuts expired, setting us all up for the kind of grand mean bargaining we're seeing now. Just a reminder of what doing nothing about the combination of the sequester and the expiring tax cuts looks like for the deficit, this:

Chart showing $7.1 trillion in deficit reduction if sequester and expiration of Bush tax cuts are allowed to happen,

That's $7.1 trillion in deficit reduction, more deficit reduction than the Catfood Commission came up with. The difficulty with doing nothing, of course, is that some of the expirations hurt. Unemployment insurance, tax credits for the working poor, the payroll tax cut also expire. On the other hand, all of those things can be dealt with retroactively, after the Bush tax cuts for the wealthy and the defense cuts from the sequester kick in. President Obama and Democrats would indeed be in a much stronger bargaining position, though they might have a hard time realizing that. At least, they will be if Obama reverts to his previous position of taking the debt ceiling off of the negotiating table entirely. Which was a damned good idea while it lasted.

That's if the stalemate holds for the next two weeks and we go off the curb. But that is by no means a given. What the Republicans want to avoid—expiring tax cuts—and what a lot of members in both parties want to avoid—defense cuts—means that one way or another, old people and/or poor people are probably going to get it.

Same as it ever was.

Originally posted to Joan McCarter on Thu Dec 20, 2012 at 12:51 PM PST.

Also republished by Daily Kos.

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