Sequester ‘Armageddon’ Has Been President Obama’s Y2K (Forbes.com) May 13, 2013

You’d have to say we’ve dodged a couple of big mythical bullets in the last few months. The world did not end on December 21, 2012, as some forecast from a Mayan myth. And the federal budget sequester did not cause the sky to fall as predicted by Washington, D.C. Double whew!

Do you remember what was said when the budget sequester took effect more than two months ago? President Obama warned in February that, thanks to sequestration, “all our economic progress could be put at risk.” I guess the operative word was “could,” like the weather reporter’s 10% chance of rain that actually occurs. Cabinet officers issued such dire warnings that Transportation Secretary Ray LaHood felt obligated to add: “We are not making this up.” John Adler, president of the Federal Law Enforcement Officers Association put in his two cents: “The road to a lawless society is currently being paved by the congressional sequester.” Even this week Treasury Secretary Jack Lew was still referring to the “reckless across-the-board cuts” of the sequester.

It turns out that, like Chicken Little’s fear that the sky was falling when it was only an acorn hitting his head, the sequester has been a bit of a non-event. The 2013 automatic cuts of $85 billion are less than 2% of the federal budget. And what senior manager of a large organization (almost certainly with a lot less fat than the federal government) hasn’t survived the implementation of far deeper cuts than that? Not only has the economy survived, but housing prices are up, jobs are still growing modestly, and the stock market (including government contractors expected to be hurt the most) is at all-time highs. A recent Gallup Poll indicates that most people don’t even know whether the sequester has helped or hurt, or even whether they have been impacted by it. Representative Billy Long of Missouri says his constituents actually want more sequestration, not less.

So policy-wise, what happened here? Was this just another Y2K problem that was over-hyped and never played out? As usual in Washington, it was a lot of things. Some of it was simply overheated political rhetoric to try to avoid the sequester through negotiations. You do know that Washington, D.C. is the one place where sound travels faster than light? And it is also true that there have been impacts in local social programs such as Head Start, senior services, and others. And some of the cuts were delayed, so there will still be some impact down the road if there are no further fixes.

Plus several things happened that Washington just didn’t anticipate or admit. The private sector stepped up to save some key services and events such as the White House Easter Egg hunt, or keeping open some of our national parks. Fifty percent of the cuts are to be absorbed by the Department of Defense, where the reductions will not be as obvious to the general public.

But the big change was that, in this game of political chicken, both sides gave in, pulling much of the sting from the sequester. The most famous example, of course, was the air traffic controllers, who were spared cuts when Congress gave them permission to use their deep capital expenditure budgets to fund current operations and prevent flight delays. Law enforcement was also bailed out when Congress gave the Justice Department authority to shift money around and avoid furloughs and job cuts in the FBI; similarly no furloughs or cuts in Customs and Border Protection (and plenty of other agencies). Even the meat inspectors’ union arm wrestled an exception to keep the supply of meat moving. Recently a Republican member of Congress suggested Head Start should receive similar assistance, and the Defense Department is preparing its own request for flexibility.

All this shifting around means, in the end, that the sequester will not cause enough visible pain to force Congress and the President to enact permanent budget reductions, which was the whole point. Perhaps only in Washington would they pass a bill to drive the federal budget off a cliff if cuts weren’t agreed to, then drive off the cliff but give key agencies wings for a soft landing, and think that’s governing. But stay tuned—if the first round has been underwhelming, there are doubtless more sequester games to come.

Please click on the link to view the article on Forbes.com: http://www.forbes.com/sites/daviddavenport/2013/05/13/sequester-armageddon-has-been-president-obamas-y2k/