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Rep. Moran: Sequestration Hinges on Outcome of Presidential Election

And the Northern Virginia economy hangs in the balance...

The likelihood of sequestration being triggered in January, will hinge on the outcome of next week's presidential election, according to Northern Virginia Congressman Jim Moran (D-8th).

Moran gives 50/50 odds that Congress will reallocate $1.2 trillion in debt reduction during a lame duck session. If they don't, then $492 billion in defense spending included in the Budget Control Act will be triggered, which could result in devastation for the Northern Virginia economy, which relies heavily on defense contracting.

Moran, who is running for reelection, sits on the House Committee on Appropriations, is Ranking Member on the Subcommittee on Interior, Environment and Related Agencies and is a member of the Defense and Military Construction, Veterans Affairs and Related Agencies subcommittees. He recently spoke to Patch from his office in Old Town Alexandria.

Patch: On sequestration, the President says it won't happen. He believes Congress will compromise on a plan to reduce the national debt by $1.2 trillion. But Congress remains polarized. If this going to be solved in lame duck, we're going to be dealing with the same members of Congress who created the situation. What's a solution going to look like?

Moran: In the first place, I think it's premature to suggest that the sequester will not happen. Most of the Congress thought that in voting for the Budget Control Act, that it wouldn't possibly happen, that the two sides would be able to work out a compromise and avoid sequestration, because it was so irrational. I voted against it because I didn't have that confidence, and I still don't have that confidence. I think that at this point the chances of the sequestration going into effect are about 50/50.  

Patch: You think there's a 50 percent chance of sequestration going into effect? 

Moran: Yes I do.  

Patch: Why is that? 

Moran: It's because of the gridlock, because of the intransigence of the majority on the House side, and the president will not accept any deal that does not increase revenue.  

Patch: And you have to raise taxes to do that? 

Moran: Or you eliminate subsidies. The problem is, at one point the president had agreed on a compromise with (House) Speaker Boehner — $10 in cuts for $1 in revenue increases and those debt revenue increases were really the lowest hanging fruit, as I understand it. Just take away the subsidies to the largest oil companies who are making unprecedented profit levels, but are still getting the kind of subsidies they were getting 100 years ago from the taxpayer. So, I would consider that to be low-hanging fruit. 

When Boehner went back to his Republican caucus, the Tea Party — well it wasn't just the Tea Party people — [Virginia Republican Rep. and House Majority Whip] Eric Cantor was with them — they had all taken a pledge to Grover Norquist not to raise revenue. He interpreted any change in deductions and credits and loopholes to be revenue increases. He had control over them, more than their constituents did. He dictated the terms of the deal which were no deal, no compromise.  

I don't see any kind of wave election that would bring in a Democratic majority in the House. I'm afraid you're still going to have a lot of those intransigent people,  many of whom would just assume that the government default on its debt and close shop. They're that radical. I don't trust the institution itself.  

Patch: But no one wants sequestration, right? 

Moran: The leadership doesn't, but there are members who - I remember during the debt ceiling debacle — weren't particularly concerned about the government defaulting on its debt. They understood the price of not compromising and yet they were willing to go in that direction. They're not people who have had any experience in civic leadership in the past — many of them… And their base is even more radicalized than they are.

So, I don't know. This has been a very disfunctional Congress. ... The one thing this Congress has proven it can do is nothing. If they do nothing, not only will the tax cuts all expire, so will the sequestration take place. 

Patch: Describe to me the impact of sequestration outside of defense jobs and services. I'm talking about deep cuts going to job training, medical research, worker safety, food safety...

Moran: I'll give you some examples of the irrationality of it. There are a number of agencies that are composed almost entirely of personnel. They don't have much in the way of buildings or capital assets. For example … federal meat inspectors: The sequestration goes through, you can't lay them off because of severance pay and other issues. The first year becomes more expensive for the federal government. So, what you have to do is to furlough them. And (sequestration) will furlough them for five weeks, approximately.

Patch: Five weeks?

Moran: What happens if you furlough meat inspectors for a month? How do people get their meat? You can't buy meat that hasn't been inspected. It's illegal to sell meat that isn't federally inspected. Then what happens to the grocery industry, and the implications for the economy? 

I'll give you another example: Air traffic controllers. It's all people. You're really going to lay off one month's worth of air traffic control? What would happen to the airlines? I could go down a long list of agencies that are personnel intensive. And yet, each one of them have to cut their annual spending by a twelfth. It's further exacerbated by the fact that the year's worth of cuts have to take effect in nine months. So, in other words you've got nine months within which to exact a year's worth of cuts. So, they'll be more severe in the first year, because Jan. 1, it's a fiscal year, so the first year of cuts have to be achieved by Sept. 30th.

So I think the impact could be devastating, I think there'll be about $8 billion of cuts to defense, and about $6 billion to domestic spending. Now, we did write a letter to [Virginia] Governor McDonnell in response to his letter, which suggested that the president should sign the Republican bill, which saved defense cuts, but at the expensive of non-defense domestic spending.

Patch: Right, the Sequestration Replacement Act. So, what's the Governor doing? 

Moran: Well he's playing politics The reason why this took place — because I was deeply involved in an alternative — was on whether the Appropriations Committee would simply add language to the continued resolution. Suspending the sequestration until the same date, March 27 (2013) when the government funding runs out. By then, the presidency would have been decided. You would have had some time to work this out rationally. All the tax cuts might have expired and so you've got as much revenue as you need already. So, it would have meant that the need for sequestration became moot. 

So that all made sense. The Republican leadership did not want to do that, because they wanted the issue for the November elections, particularily in Virginia, which stands to lose so many defense jobs they thought that this would be a persuasive talking point.

Patch: What is the effect of Norquist's pledge (to not raise taxes)? 

Moran: More than 95 percent of the Republicans [in the House] have taken it.

Patch: Does that eliminate an avenue?

Moran: Well, if they're more loyal to Grover Norquist than they are to the country — then yes, it does. And many of them, I'm afraid are.

Patch: So, you think it does.

Moran: I think that despite what President Obama says, and my other colleagues who I have great confidence in, I think there's 50/50 chance this thing could happen.  

Patch: What do you think the impact of the election will be on sequestration?

Moran: I expect that President Obama will be re-elected. There's no way the Democrats are going to get the House back.  

Patch: But this is going to have to be solved in lame duck. Is the election going to have impact?

Moran: Yes, I think the lame duck has a lot of impact. It depends. If Gov. Romney is elected President, then I don't think we'll do much in the lame duck.  I think that they will wait until he's sworn in on January 20th. 

Patch: But Romney's not going to want this huge defeat as soon as he enters office, right? 

Moran: No, but the House Republican leadership will.  

Patch: So they're gonna try to paint this as Obama's final mistake, and then Romney gets in the office to take over? Is that what you're saying? 

Moran: That's correct. The House Republican leadership is vastly empowered if Romney is President. He showed that in Massachusetts. He will go with the most  conservative elemental legislature. I fully expect him to do the bidding for the Republican majority.

It will be blocked in the Senate, most likely. The Senate will mostly likely stay in Democratic hands. So, you'll have a continued stalemate. That's why I say, as ridiculous as this sequestration is, it nevertheless is possible, because of the disfunctionality of the legistlative branch.

Patch: So, your gut feeling says that if Obama is re-elected, we're going to put off the sequester. If Romney is elected we're going to go ahead and let it happen?

Moran: I think if Romney is elected the Republican leadership may very well let it happen..

Patch: Because…

Moran: Because they could then be pictured as coming in to save the day (when Romney takes office). And the other consideration would be that they would might let the (Bush) tax cuts expire, because extending them gives them no credit. If they expire, and then they reinstate them, they get credit for additional tax cuts.  And that's what their base is looking for.

Patch: This may get frustrating. 

Moran: It's going to be more than frustrating. It's going to be extraordinarily damaging to our security. And they'll be cutting areas like cyber security which is our great challenge in the national security area today.

Patch: Going back to one of my first questions - If a deal is going to be struck, what do you think it's going to look like?

Moran: I think that if the deal is gonna be struck they will suspend the sequester... In the meantime, try to come up with the big deal in the spring, which would be a rewrite of the tax code. 

They'll probably broaden the base which would mean people who are not paying taxes, will pay taxes. They will make some reforms to Medicare… I think there will be some continued shrinkage of domestic discretionary spending, a lesser shrinkage of the growth rate for defense — because defense is the one area where you do get bipartisan consensus. And I think that a lot of deductions that people count on today will be reduced, which is more likely to hit more of the middle class than the upper class.

Patch: Sequestration would result in estimated job losses of about 86,000 in Fairfax County and 449,773 in DC, Maryland and Virginia. Would it be un-American for Congress to let this happen? 

Moran: Oh, I think you're absolutely right. But it's un-American to question in front of the world whether or not we will pay our debts… President Reagan increased the debt ceiling 17 times, raised taxes 11 times. You do what you have to do to keep the government funded and to make sure that the rest of the world continues to have confidence in the U.S. dollar. But this Congress doesn't get that. I think it's wholly un-American to put a us in a situation where our credit was downgraded.  That's un-American.  

Patch: Do you take raising taxes off the table? 

Moran: If you take raising taxes off the table then you can't resolve this... If they're (Republicans) not willing to cut defense, they're not willing to cut entitlements, then there just isn't enough money in a domestic discretionary (spending). The only other thing you've got left is interest on the debt. The domestic discretionary is down to about nine percent of the budget, so there's just not enough money. When they start cutting NIH (National Institute of Health) cancer research and the like, I just don't think the American people will tolerate that. So, there's nowhere to go but to bring revenue back up to somewhere close to traditional levels.

Patch: You say that if Obama gets re-elected that Congress will suspend sequestration for an undetermined period of time, a few months. Why push it off? Why can't Congress get it solved in a month-and-a-half, versus solving it three months from then. You guys aren't writing a novel. 

Moran: I agree. I don't think we should push it off, I'm just telling you what I think will be done. If were up to the appropriators, we could sit down work this out in a couple of hours, and then have our staff fill in the details. But I think that instead you're going to see a lot of posturing for several weeks. 

It's very unfortunate. I've never been in such a disfunctional Congress. And it's because people were elected on the theory that they wouldn't compromise, that the government didn't work. So, once they're elected they're going to do everything they can to prove that it doesn't work.

Patch: A 50/50 chance sequestration happens, then. That's pretty close, just like the presidential election. 

Moran: That's correct. And there's a reason for that. There's a reason it correlates.  

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