To some extent it’s been comical to watch Washington hyperventilate over the Sequester and try to point fingers over who is responsible, what’s it going to do, and why it occurred. It would be really comical if these weren’t serious issues. Currently the White House is in a dustup with The Washington Post’s famed Watergate reporter Bob Woodward on trying to deny that it was originally their idea. Also it seems that EVERYONE in Washington thinks that the Sequester is the dumbest idea ever in the history of government. I don’t think I’ve heard ANYONE say that the way the Sequester is structured is a good thing, and nearly all think it’s a meat-cleaver approach. So what is the Sequester in number terms?
The Sequester is designed to cut $1.2 Trillion out of the Federal Budget over 10 Years. The 2013 numbers include a $42.7B cut from defense, and the rest from Non-Defense bringing the total cuts to $85.4B, only about half of which will occur in 2013. According to the Administration’s Office of Management and Budget the 2013 Federal Budget is estimated to be $3.8 Trillion, with a deficit of $900B. Just to fully put this in context however, we need to see what is happening to Federal Receipts (tax dollars coming into the government) and to the budget recently. The 2012 full estimated receipts are $2.468T and for 2013 are estimated to be at $2.901T. Why is this? Well, the economy has been improving modestly, so there are certainly going to be more taxes paid and money coming into the government. 2014 receipts are estimated to be $3.215T. So from 2012 to 2013 the government will make about roughly $433 B MORE in revenue due to taxes, and between 2013 and 2014 it is estimated to make $314B MORE. This is decent progress but could be better if we can get more pro-growth measures implemented.
The budget in 2012 was $3.795T. For 2013 $3.803T (with the Sequester). 2014 is estimated to be $3.883T (with the Sequester). Let’s also compare these numbers however to where they were in 2008 ($2.982T) and 2007 ($2.728T). So since the President’s first election in 2008 the budget has grown to a level roughly $1 TRILLION higher than where it was, or roughly a 27% increase over a little more than 1 term. Now to be sure there was a case to be made that due to the Recession there was a role for the government to step up infrastructure projects and other federal spending to pick up the slack in the economy, as well as the added spending of people on unemployment and food stamps etc. There have also been disasters like Hurricane Sandy. But let’s not forget that Bush had Katrina, and we finally now have major expenses due to the wars in Iraq and Afghanistan that should be dramatically winding down a lot of Federal spending.
So just strictly from a numbers perspective we’re talking about an $85.4B cut from a $3.888T original budget – 2.2%. Does this sound like a DRAMATIC cut in percentage terms? Keep in mind that the $3.803T budget number is REFLECTING the Sequester since it’s current law. The 2011 budget btw was $3.603T. So the Federal Budget, regardless and in spite of the Sequester, is going UP EVERY YEAR. Those are simply the raw numbers given by the Administration and OMB.
Now the President is out giving speeches painting a horribly dark picture of what will happen if the budget ONLY goes UP to $3.803T from the $3.603T it was at in 2011. Frankly, I have found the doomsday scenarios pretty distasteful. Supposedly due to the cuts, The Pentagon will not send an aircraft carrier to the Persian Gulf. So we’re to believe that of ALL the military spending that occurs, the Pentagon can’t find something else to delay or cut, rather than sending forces that are supposed to be sent to BY FAR THE MOST VOLATILE REGION IN THE WORLD? President Obama gave a speech saying, “Federal prosecutors will have to close cases and let criminals go.” WHAT???!!!! So the President is going to allow Federal prosecutors to “let criminals go” since the budget is being cut by 2.2% and is still HIGHER than what it was 2 years ago AND the year before! This is RIDICULOUS and is some of the worst kind of fear-mongering. New York City Mayor Michael Bloomberg, also one of the most successful billionaire-businessmen in the country, put it well by saying, “let’s get serious” and to “spare me” from the fear-mongering rhetoric.
Now, I’m not going to pretend that I’m an expert on the Sequester and how it is structured. I’m not a manager of any government departments and I’m quite sure that if nearly EVERYONE is saying how stupid the Sequester is structured, there must be a reason for it. But there are also many others pointing out the raw numbers that Federal spending is still going UP and this is only a 2.2% cut for how much MORE the budget was on schedule to go up. We need BIPARTISANSHIP on this issue. This was a product of President Obama and Congress agreeing to cut $1.2T over 10 years. Well now that that time has come to actually cut, it’s disingenuous to try to back out of the cuts now, or argue for tax INCREASES instead of spending CUTS which were agreed on.
If any Dow Jones or S&P 500 CEO couldn’t increase their budget overall, but couldn’t find 2.2% in cuts ANYWHERE from a higher spending level, they would be fired. In both of his books “Winning” and “Straight From The Gut”, famed former GE CEO Jack Welch explained his policy of “differentiation” where the bottom 10% of employees were routinely fired to make the company better and more efficient. I’m not advocating that the bottom 10% of Federal Workers should be fired, but the Feds should approach efficiency to their operations with a similar mindset. Now, they would have to prioritize some departments and programs over others, as any competent executive should. But then they would just get it done…smartly. The first best choice would be for bipartisanship and for Democrats and Republicans to come together to identify a better way to make these $1.2T in 10 year cuts if that’s what’s needed. The second best choice would be to give the Federal Bureaucracies a little wider latitude in identifying which departments to cut and by how much. But they SHOULD NOT back off in implementing the agreed upon levels. These cuts will FORCE department heads to be more diligent in their processes, more efficient, and more creative in how they do things – just like the private sector has to.
The President’s Fiscal Commission, more commonly known as Simpson-Bowles, originally advocated for $4T in deficit reduction in their original plan. They are set to issue details soon on cutting the deficit even more. Surely, Congress and the President can come together to find a way to cut 2.2% of the budget smartly…
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