Richmond Times-Dispatch: As new Congress debates debt ceiling, Va. fears another sequestration

RICHMOND TIMES-DISPATCH, MICHAEL MARTZ

Twelve years ago, Rep. Rob Wittman, R-1st, got some advice from then-Rep. Randy Forbes, R-4th, about a pending deal in the U.S. House of Representatives to raise the federal debt ceiling in exchange for the creation of a super-committee to cut spending and reduce the federal budget deficit.

The Budget Control Act of 2011 also included provisions to make automatic cuts to federal defense and domestic spending through a process called budget sequestration if the super-committee failed to do the job.

“He said, ‘Rob, I’m telling you, don’t vote for it because the promises that are made are not going to be kept,’ “ Wittman recalled in an interview of his conversation with Forbes, who would leave Congress in 2016.

With another fight looming this year over the debt ceiling and federal spending in a newly elected Republican majority in the House, some elected officials in Virginia are wary of the ghost of sequestration, which imposed budget caps in 2013 that hit the state’s economy hard because of its reliance on federal spending for military and defense contracts, especially in Northern Virginia and Hampton Roads.

“Sequestration was devastating to Virginia,” said state Sen. George Barker, D-Fairfax, co-chairman of the Senate Finance and Appropriations Committee. “It did significant damage to Virginia’s economy.”

Wittman voted for the deal in 2011, after then-House Speaker John Boehner, R-Ohio, assured him and other members of the House Armed Services Committee that the super-committee would make the necessary decisions to reduce the budget deficit without resorting to deep, automatic cuts in defense spending through sequestration.

“I was naive enough to believe that if somebody told me this is what they’re going to do, that this is what they’re going to do,” he said.

It didn’t happen. The special committee failed to agree by the deadline of Jan. 12, 2012, on $2 trillion in spending cuts over 10 years, and the next year brought the imposition of budget caps that initially reduced spending by $85 billion, despite the first of three additional bills to delay the spending caps over the next three years.

‘We will not and cannot cut defense’

Wittman says he is confident that it won’t happen again this year, despite the historic 15-ballot battle over election of Speaker Kevin McCarthy, R-Calif., who promised conservative Republican holdouts that he would agree to concessions that included a cap on budget spending at fiscal year 2022 levels. The cap would roll back spending increases the previous, Democratic-controlled Congress approved last year in a $1.7 trillion budget bill.

The Committee for a Responsible Federal Budget estimates the difference in top-line budget numbers at about $130 billion, including more than $70 billion for defense.

“Everybody I’ve talked to, including appropriators, say, ‘no, we will not and cannot cut defense,’ “ said Wittman, who hopes to be appointed vice chairman of the Armed Services Committee and chairman of its Tactical Air and Land Subcommittee this week.

He called the process of electing a speaker both “noisy” and “tumultuous,” but said, “I don’t think it was a bad process.”

Wittman now represents western parts of Chesterfield and Henrico counties in the newly drawn 1st District, as well as part of Hanover County. Rep. Bob Good, R-5th, represents part of Hanover and all of Goochland, Powhatan, Amelia, Louisa and Nottoway counties. The 4th District seat, representing 15 localities from Richmond and its suburbs to the North Caroline line, is vacant after the Nov. 28 death of Rep. Donald McEachin, D-4th, pending a special election on Feb. 21.

Good was one of 20 House Republicans who held out against Rep. Kevin McCarthy’s election as speaker in a protracted, four-day battle. He was one of six who ultimately voted “present” in the final ballot that elected McCarthy early on Jan. 7 after forcing him to make concessions on House operating rules and other, unreleased agreements on reducing the budget and raising the debt ceiling.

“You saw 20 individuals — right, wrong or indifferent, depending on your perspective — willing to risk what was in their political interest … and we would not have had the changes we have without that,” Good said in an interview in his House office on Thursday.

“The reality is that we are heading for fiscal reckoning, if we don’t begin to cut spending, if we don’t begin to balance the budget,” he said.

Good contends that the way to do that is by using the debt ceiling as leverage for spending cuts.

“We have got to marry together the need to increase the debt ceiling with cuts to spending that put us on a path to fiscal responsibility,” he said.

Rep. Abigail Spanberger, D-7th, whose district moved from the Richmond suburbs to Northern Virginia and the Fredericksburg area, does not see the standoff as a good model for governing, especially in risking a default on the country’s debt by tying the debt ceiling to deep budget cuts.

“The bottom line is, if we’re at that level of brinksmanship over a debt ceiling deal, that in and of itself has significant financial and economic implications,” she said in an interview in her House office on Thursday.

“There needs to be people saying, under no circumstance we will allow the U.S. to lose its footing on the global economic stage,” Spanberger said. “I just haven’t heard it. That’s concerning for me.”

She added: “We as Americans benefit dramatically from the financial standing of the United States of America. If we are downgraded … it impacts us as individual borrowers.”

The default factor

U.S. Treasury Secretary Janet Yellen raised the stakes on Friday, when she notified Congress that the U.S. is projected to reach its debt limit on Thursday and will then resort to “extraordinary measures” to avoid default. Those measures include delaying some payments, such as contributions to federal employees’ retirement plans, to make room for other payments that are deemed essential, including those for Social Security and debt instruments, according to The Associated Press.

“Failure to meet the government’s obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability,” Yellen said in a letter to Congress. “Indeed, in the past, even threats that the U.S. government might fail to meet its obligations have caused real harms, including the only credit rating downgrade in the history of our nation in 2011.”

Wittman was in Congress when that happened, and Boehner made a deal that the Virginia congressman said “was destined to fail” because the speaker, whom Republicans forced out of office in 2015, did not live up to the commitments he had made.

“I don’t think we will be in the same track with this,” he said.

With the debt ceiling, Wittman said, “I think we have an obligation to make sure to do our job that doesn’t put the U.S. in jeopardy, especially the economy in jeopardy. We all know the outcome if we don’t increase the debt ceiling.”

U.S. Sen. Tim Kaine, D-Va., first elected to the Senate in 2012 at the beginning of sequestration, does not have the same confidence.

“It is basically bringing sequestration back,” Kaine said in a news briefing on Wednesday. “I would hope that instead of budgeting by random numbers, we budget by what the need is.”

“I really resent people using America’s creditworthiness as sort of a hostage-taking exercise,” he said.

So does Spanberger, a former CIA operations officer whose programs were not affected by cuts under sequestration, but who remembers the turmoil they caused. “All around, it’s just a swirl of uncertainty,” she said.

The effects of sequestration in Virginia were worst at the beginning, when the state saw an 8% decline in federal contracts in 2012 and 11% in 2013. The state was the largest recipient of procurement spending, which flows through private businesses and employees. In the last half of 2014, the state recorded sharp declines in wages, salaries and personal income, which reduced expected revenues from taxes on income, sales and court filings related to housing.

“People don’t always understand the value of the contract,” Spanberger said. “It’s jobs and wages … taxpayer money coming in.”

Good contends that the overriding need is reducing a national debt that exceeds $31 trillion. In the first week of his second term, he introduced a package of four bills and resolutions aimed at reducing spending and regulation, including one to require a nickel reduction for every new dollar in spending.

“I would like for us to be more strategic than broad-based,” he said. “However, the pressure of broad-based cuts may effectively force us to appropriately prioritize where we should cut and where we shouldn’t.”

Defense spending accounts for 19% of Virginia’s economy, according to a recent state report, but Good does not intend to exempt the military from cuts. He wants to eliminate funding for any agency or program that promotes diversity, equity and inclusion, “critical race theory” or transgender rights. He opposes any spending to combat climate change, including the introduction of electric vehicles or sustainable fuels for military aircraft.

“Not even the defense industry ought to get a blank check that’s not accountable for how we spend taxpayer resources,” he said. “And that spending should be based on military effectiveness to prevent, and when necessary, to win conflicts, not based on just a blind subordination to the military industrial complex, not based on sustaining jobs, not based on whose district it’s in.”

In Virginia, House Appropriations Chairman Barry Knight, R-Virginia Beach, objects strongly to congressional proposals to cut spending on the military and defense, which rely on aircraft carriers and submarines built in Hampton Roads, the region he represents.

“It’s very short-sighted to reduce our military force in view of all that’s happening in the world,” Knight said.