THE TRILLION DOLLAR COIN AND THE SEQUESTER
     
 
The Sequester:

Harmful automatic cuts — known as the sequester — take effect, threatening hundreds of thousands of jobs, and cutting vital services for children, seniors, people with mental illness and our men and women in uniform. To prevent a costly, self-inflicted wound to our economy and middle class families, President Obama put forward a plan to avoid these cuts and reduce the deficit by cutting spending and closing tax loopholes. Now it's up to Congress to act. 

Still have questions about what the sequester is, and why American famillies and our national economy face this threat? Here is put together the explainer below using some helpful background information President Obama laid out in a statement on Tuesday. Check it out:

$2.5 Trillion in Deficit Reduction
Over the last few years, both parties have worked together to reduce our deficits by more than $2.5 trillion. More than two-thirds of that was through some pretty tough spending cuts. The rest of it was through raising taxes — tax rates on the wealthiest 1 percent of Americans. And together, when you take the spending cuts and the increased tax rates on the top 1 percent, it puts us more than halfway towards the goal of $4 trillion in deficit reduction that economists say we need to stabilize our finances."

So What's the Sequester? Why Now?
"Now, Congress, back in 2011, also passed a law saying that if both parties couldn’t agree on a plan to reach that $4 trillion goal, about a trillion dollars of additional, arbitrary budget cuts would start to take effect this year. And by the way, the whole design of these arbitrary cuts was to make them so unattractive and unappealing that Democrats and Republicans would actually get together and find a good compromise of sensible cuts as well as closing taxloopholes and so forth. And so this was all designed to say we can't do these bad cuts; let’s do something smarter. That was the whole point of this so-called sequestration."

"Unfortunately, Congress didn’t compromise. They haven't come together and done their jobs, and so as a consequence, we've got these automatic, brutal spending cuts that are poised to happen next Friday."

"Now, if Congress allows this meat-cleaver approach to take place, it will jeopardize our military readiness; it will eviscerate job-creating investments in education and energy and medical research. It won’t consider whether we’re cutting some bloated program that has outlived its usefulness, or a vital service that Americans depend on every single day. It doesn’t make those distinctions."

A Way Forward, A Balanced Approach
"There is a smarter way to do this –- to reduce our deficits without harming our economy. But Congress has to act in order for that to happen."

"Now, for two years, I’ve offered a balanced approach to deficit reduction that would prevent these harmful cuts..."

"I am willing to cut more spending that we don’t need, get rid of programs that aren’t working. I’ve laid out specific reforms to our entitlement programs that can achieve the same amount of health care savings by the beginning of the next decade as the reforms that were proposed by the bipartisan Simpson-Bowles commission."

I’m willing to save hundreds of billions of dollars by enacting comprehensive tax reform that gets rid of tax loopholes and deductions for the well off and well connected, without raising tax rates."

"I believe such a balanced approach that combines tax reform with some additional spending reforms, done in a smart, thoughtful way is the best way to finish the job of deficit reduction and avoid these cuts once and for all that could hurt our economy, slow our recovery, put people out of work. And most Americans agree with me."

Statement by the President on the Sequester

James S. Brady Press Briefing Room, March 01, 2013, 11:39 A.M. EST

THE PRESIDENT:  Good morning, everybody.  As you know, I just met with leaders of both parties to discuss a way forward in light of the severe budget cuts that start to take effect today.  I told them these cuts will hurt our economy.  They will cost us jobs.  And to set it right, both sides need to be willing to compromise.

The good news is the American people are strong and they’re resilient.  They fought hard to recover from the worst economic crisis since the Great Depression, and we will get through this as well.  Even with these cuts in place, folks all across this country will work hard to make sure that we keep the recovery going.  But Washington sure isn’t making it easy.  At a time when our businesses have finally begun to get some traction -- hiring new workers, bringing jobs back to America -- we shouldn’t be making a series of dumb, arbitrary cuts to things that businesses depend on and workers depend on, like education, and research, and infrastructure and defense.  It’s unnecessary.  And at a time when too many Americans are still looking for work, it’s inexcusable.

Now, what’s important to understand is that not everyone will feel the pain of these cuts right away.  The pain, though, will be real.  Beginning this week, many middle-class families will have their lives disrupted in significant ways.  Businesses that work with the military, like the Virginia shipbuilder that I visited on Tuesday, may have to lay folks off.  Communities near military bases will take a serious blow.  Hundreds of thousands of Americans who serve their country -- Border Patrol agents, FBI agents, civilians who work at the Pentagon -- all will suffer significant pay cuts and furloughs. 

All of this will cause a ripple effect throughout our economy.  Layoffs and pay cuts means that people have less money in their pockets, and that means that they have less money to spend at local businesses.  That means lower profits.  That means fewer hires.  The longer these cuts remain in place, the greater the damage to our economy -- a slow grind that will intensify with each passing day. 

So economists are estimating that as a consequence of this sequester, that we could see growth cut by over one-half of 1 percent.  It will cost about 750,000 jobs at a time when we should be growing jobs more quickly.  So every time that we get a piece of economic news, over the next month, next two months, next six months, as long as the sequester is in place, we’ll know that that economic news could have been better if Congress had not failed to act. 

And let’s be clear.  None of this is necessary.  It’s happening because of a choice that Republicans in Congress have made.  They’ve allowed these cuts to happen because they refuse to budge on closing a single wasteful loophole to help reduce the deficit.  As recently as yesterday, they decided to protect special interest tax breaks for the well-off and well-connected, and they think that that’s apparently more important than protecting our military or middle-class families from the pain of these cuts. 

I do believe that we can and must replace these cuts with a more balanced approach that asks something from everybody:  Smart spending cuts; entitlement reform; tax reform that makes the tax code more fair for families and businesses without raising tax rates --  all so that we can responsibly lower the deficit without laying off workers, or forcing parents to scramble for childcare, or slashing financial aid for college students.

I don’t think that’s too much to ask.  I don’t think that is partisan.  It’s the kind of approach that I’ve proposed for two years.  It’s what I ran on last year.  And the majority of the American people agree with me in this approach, including, by the way, a majority of Republicans.  We just need Republicans in Congress to catch up with their own party and their country on this.  And if they did so, we could make a lot of progress.

I do know that there are Republicans in Congress who privately, at least, say that they would rather close tax loopholes than let these cuts go through. 
I know that there are Democrats who’d rather do smart entitlement reform than let these cuts go through.  So there is a caucus of common sense up on Capitol Hill.  It’s just -- it’s a silent group right now, and we want to make sure that their voices start getting heard.

In the coming days and in the coming weeks I’m going to keep on reaching out to them, both individually and as groups of senators or members of the House, and say to them, let’s fix this -- not just for a month or two, but for years to come.  Because the greatest nation on Earth does not conduct its business in month-to-month increments, or by careening from crisis to crisis.  And America has got a lot more work to do.

In the meantime, we can’t let political gridlock around the budget stand in the way of other areas where we can make progress.  I was pleased to see that the House passed the Violence Against Women Act yesterday.  That is a big win for not just women but for families and for the American people.  It’s a law that’s going to save lives and help more Americans live free from fear.  It’s something that we’ve been pushing on for a long time.  I was glad to see that done.  And it’s an example of how we can still get some important bipartisan legislation through this Congress even though there is still these fiscal arguments taking place. 

And I think there are other areas where we can make progress even with the sequester unresolved.  I will continue to push for those initiatives.  I’m going to keep pushing for high-quality preschool for every family that wants it.  I’m going to keep pushing to make sure that we raise the minimum wage so that it’s one that families can live on.  I’m going to keep on pushing for immigration reform, and reform our voting system, and improvements on our transportation sector.  And I’m going to keep pushing for sensible gun reforms because I still think they deserve a vote.

This is the agenda that the American people voted for.  These are America’s priorities.  They are too important to go  unaddressed.  And I’m going to keep pushing to make sure that we see them through.