Your family is in deep financial trouble. You're about to hit your credit limit again after raising it multiple times over just the past two years.
The last time you raised your credit limit, you sat down as a family and said: "Look, we can't keep going like this. We're not even slowing the pace at which we're increasing our expenses. Something has to give."
You decided it was too difficult to prioritize your family spending. (All that arguing back and forth over what's essential and what isn't who needs that?). So you simply agreed to cap part of your budget for 10 years to save about half of what you needed to borrow immediately, and tasked Uncle Johnny and Aunt Claire with finding the rest of the savings. To motivate them, you gave them an ultimatum: Figure out where to cut intelligently, or you'll reduce spending across three categories indiscriminately.
But Uncle Johnny and Aunt Claire — who had never gotten along particularly well — let the family down. The time came for you to make good on the ultimatum.
Then the finger-pointing began. Whose idea was this ultimatum anyway? Why can't we just keep spending on a credit card forever?
Aunty Mary, responsible as always, replied: "Because bills have to be paid sometime, and I don't want to stick the kids with the tab for my self-indulgence. And what if the credit card company decides to stop lending to us? What if the interest rate goes up? We'll be in much bigger trouble then."
But Aunty Mary's reasoning didn't convince everyone. The first year, they found ways to spend more than they had agreed on by exploiting loopholes set aside for emergencies. Others tried to make their spending cuts as painful as possible for the whole family, in the hopes they would be told to forget about cutting.
By the second year, things were no better. As the family sat down to figure out how to reduce spending to the levels they had agreed on earlier, Aunt Claire proposed scrapping the second half of the agreement. That touched of another long argument. And in the midst of that battle, they got a letter notifying them that they had hit their credit card limit — again.
This is the story of sequestration.
Congress hit the debt ceiling in the summer of 2011. In the Budget Control Act, they agreed to raise the ceiling, in three installments, for a total increase of $2.1 trillion. (That's a $17,000 increase in debt for every household in America.) They also agreed to find $2.1 trillion in "matching" budget savings.
To hit the savings targets, lawmakers imposed caps on discretionary spending that would save $900 billion over 10 years. They then tasked a bipartisan "supercommittee" with identifying at least $1.2 trillion in additional savings. The supercommittee failed, triggering automatic across-the-board reductions to defense spending, nondefense discretionary accounts, and mandatory spending in 2013 — sequestration. Lawmakers exploited a loophole preserved for emergencies to fund a number of projects only in the guise of assisting the victims of Hurricane Sandy.
Every year, Congress must enact spending bills for discretionary programs such as defense, highway construction and agency operating budgets by Sept. 30 to avoid a government shutdown. And already a budgetary battle royal is looming over next year's spending.
House appropriators are preparing to write spending bills that will meet the sequestration target: $967 billion in total discretionary spending. However, Senate Appropriations Chairwoman Barbara A. Mikulski, Maryland Democrat, plans to have the Senate write bills as if the sequester did not exist. She aims to spend $91 billion more on discretionary programs.
Meanwhile, Washington hit the debt ceiling Sunday. It will run up against a hard limit later this fall when the Treasury runs out of extraordinary measures that keep the dollars flowing out the door.
It's going to be a hot summer.
• Romina Boccia is assistant director of the Thomas A. Roe Institute for Economic Policy Studies at the Heritage Foundation.