Sequestration is the most glaring example of the raw political power of finance capital in recent American history. Every other sector of the American capitalist class has arrayed its political power against sequestration - including lobbying giants like the U.S. Chamber of Commernce, the National Association of Manufacturers, Northrop Grumman, the Areospace Industries Association, and the American Farm Bureau Federation.
Essentially, what amounts to most of the leading organizations of the manufacturing, defense, commercial and retail real estate, construction, wholesale and retail trade, health care, and accommodation and food service sectors. Only the finance and insurance sectors have strongly pressed for the measure - especially expressing such support in the traditional voices of finance capital, such as the Wall Street Journal and Forbes. More impressive still is the way finance capital has monopolized politicians of both parties on this issue, including politicians who have at times previously been more answerable to other sectors of American capital.
Sequestration is sometimes called the "poison pill" of American politics. It is often said that the members of Congress and the Obama administration who agreed to it never expected the measure to come into effect. However, it is difficult to imagine a national elected official who did not expect the Republican-controlled House and Democratic-controlled Senate to fail to reach compromise on fundamental budget issues. Indeed, a more plausible case can be made that both the administration and Congress were seeking cover of exactly such a "poison pill" on which to blame austerity measures - which Congressional Democrats could never otherwise support, given their constituencies, who vehemently oppose austerity measures. This is itself a measure of the power of finance capital in the current configuration of capitalist forces. By following the capitalists' lead, the Congressional Democrats risk alienating their bases. If the base stops believing in accidental austerity, the jig is up. To their credit, the Congressional Progressive Caucus has stated that we should just end the sequester.
Frequently we misattribute the interests of major funders of ALEC and the Tea Party - the Koch brothers, for example - as leading figures in the extractive (oil, natural gas, and coal) sector. However, while their extractive holdings are considerable, they derive more of their revenue from the finance sector. Therefore, they have been at the center of the movement to deliver political outcomes which overwhelmingly favor finance capital, even if to the detriment of other sectors in which they hold interests.
It is rare to have the AFL-CIO on the same side of an issue with the U.S. Chamber of Commerce and the National Association of Manufacturers. Only the extraordinary amount of pressure brought by finance capital for austerity policies, which injure other sectors of American capital, can account for this - and for the willingness of politicians who are otherwise beholden to several sectors of capital for campaign financial support to have voted for the sequestration measure in the first place.
The reason for the considerable push-back by sectors of capital which do not traditionally oppose the wishes of finance capital can be seen in the Obama administration's own Office of Management and Budget projections of the impact of sequester cuts on state and local budgets.
The sequester cuts take a hefty toll on contractors who are dependent at the federal, state, and local levels on contracts covered by sequestration reductions, as well as providers of manufactured goods for such contractors and those dependent on upturns in employment and overall economic activity which are likely to be adversely affected by the federal cuts. Indeed, the Congressional Budget Office estimates that the sequester would reduce 2013 economic growth by about 0.6 percentage points (from 2.0% to 1.4%) and adversely affect the creation or retention of about 750,000 jobs by year-end (economist-speak for 750,000 jobs being lost in 2013 alone). Even the International Monetary Fund plans to lower its 2013 GDP growth forecast for the U.S. from 2.0% to 1.5% if the sequester is implemented.
So manufacturers and contractors have every reason to be worried. And that's just the start: Over the 2014-2023 period, the sequester would reduce planned spending outlays by $995 billion with interest savings of $228 billion or a total of over $1.2 trillion in debt reduction.
Of course, sequester cuts affect the entire budget across the board, and that includes research and development, scientific and technological enterprises, social services, and earned benefits. With a 2% cut in Medicare spending and much higher cuts in R&D funding, we have an explanation for an alliance between healthcare and the defense industry against sequestration, even if we do not take into account defense-related cuts of up to 9.3%. But the likelihood is that push-back from defense contractors will reduce cuts to the discretionary defense budget, which House Republicans have already pushed back against. No such favoritism will be shown by Republicans to cuts in domestic spending - sequestration will fall most drastically on those who are least able to deal with cuts: the poor, the elderly, children, and people of color.
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