Sunday, February 24, 2013

Sequester the Future

The looming sequester is a cynical political game. Shrinking government is hard to do. Across the board cuts will bring pain and trauma. After them Congress will make itself to be our heroic saviors as they put band-aids on the most bloody parts of the spending cuts.

It is common wisdom that governments fund boondoggles. Examples are given that can make some of us angry. We do not always like the ways our government spends our taxes. Fury and fist shaking abound as we feel that our money is misspent. Obsolete programs, misunderstood research, and failed institutions are paid for with tax money and borrowing.

The Budget

A huge chunk of our federal spending is on social programs. Medicare, Medicaid and safety net programs like unemployment compensation, food stamps and housing assistance make up the majority of expenditures.

United States Federal Spending
Defense is our single largest category of spending. 

Our military budget is larger than China, Russia, England, France and the next ten countries combined.

The 'everything else' part of the chart includes the rest of government.  It counts education, science, NASA, energy, natural resources, Justice, agriculture, FBI, FDA, border security, National Parks, Coast Guard, highways and all the many programs the federal government has.

The interest on the debt is large, but not yet unmanageable.  Its growth is still relatively small compared to the size of the budgetary pie.

Election Fight

Last August, Congress decided to wait until after the election to deal with budget issues. They gave themselves a 'fiscal cliff' so they would not run over it like lemmings. The 8% shrinking of military spending and 5% across the board cuts to all other kinds has become known as 'sequestration'.

Sequestration Cuts
The sequestration idea was to make across the board cuts to most government spending if no other law was enacted. The theory was that if they made the alternative really bad, a compromise would be found.

The Republicans were convinced they would win the Presidency and control the government. They reasoned that after winning they would be able act as they wished. Having lost the election, they found themselves unable to work their will.

The Democrats pressed their electoral advantage. The Republicans feeling their back against the wall are standing firm to not let the Democrats have their way. So here, my friends, comes the austerity!

Immediate Consequences

Funding for many programs we depend upon will be arbitrarily cut. Spending on wildfire fighting to aircraft carrier maintenance is effected. Air travel will be disrupted by less controllers being available and less guards on duty to process passengers through security. Inspection of the food and drug supply will slow down.

There will be less prison guards on duty. Over half a million women and children will lose nutrition assistance. The disabled will be receive less support, financial and otherwise.

Furloughs will happen to FBI agents, Defense Department employees, and Border Patrol agents. U.S. Attorneys will take 2,600 few cases. Training for veterans, small business loans, National Parks, and Nuclear cleanup will all suffer.

Cynical Congress

Some pundits taking the Chicken Little view saying the sky is falling. Others are being Pollyanna about the cuts thinking all will be wonderful.

It is clear that there will be pain for some, especially the most needy. Most will at least be inconvenienced by lack of or slower services. All will be threatened by a weaker military.

After the cuts, the federal government will be in the position of having to spend money to fill in the holes left by the sequestration. Those places where the most pain is felt, or at least that have the squeakiest wheels, will have new funds made available.

I want to be your hero!
It is always easier to add new spending than to cut. This is just human nature. Our system of constant elections makes politicians aware that they must bring home the bacon for their local districts. Cutting the bacon is bad for their re-election chances.

Fixing what Congress broke will allow them to make believe they are heroes, come to save the day from the previous Congress. Spending money to strengthen ailing systems will look good in the press. The fact they are mostly the ones who broke it in the first place will be forgotten in two years when election time comes.

Austerity Is Bad Idea

I am not convinced that this is the right time for austerity. The world wide global recession has been going for almost five years now and no end is in sight. Cutting government spending means shrinking the economy in the short run. Spending less money slows the economy.

There will be no savings to taxes, so no more money will be spent by other sectors like business or consumers. Cutting government spending will shrink the economy, not grow it.

A strong middle class could
help pay down the debt.
Those countries that have cut their spending are hurting worse than those who have not. Austerity, budget cut backs, are going to hurt us.

Government spending does need to be cut in the long term. The level of spending is unsustainable.

We must find ways to get our middle class wages growing again. The engine of the U.S. economy is consumer spending by the middle class. These tax payers are hurting. Less middle class income means less middle class taxes. Cutting government spending will not help the middle class.

Many citizens confuse their personal experience of microeconomics with societies practice of macroeconomics. The rules for these two spheres of economy are different. Balanced budgets are good for microeconomics but not as wise in macroeconomics.

Deficit spending in recessions has a long track record of being beneficial in the long run.

Austerity in recessions has a long track record of being disastrous in the short run.

Given Congress's current direction to make austerity real, we are in for a bumpy ride.

Numbers for the charts were gathered from the Office of Management and Budget and the Congressional Budget Office.

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1 comment:

  1. Great article. I will be one of the ones that feel the crunch. As of April 22nd I will go to a 32 hour work week. Actually I have real world skills and plan to move on but not everyone can do this and I hate to see it. Once this happens and over 3 million employees tighten their belts we will see a complete recession take place.