Monday, February 18, 2013

“Sequester”

Sydney M. Williams

Thought of the Day
“Sequester”
February 19, 2013

Sequester: legal: To remove (property) temporarily from the possession of the owner;
seize and hold, as the property and income of a debtor, until legal claims are satisfied.
                                                                                                                 The Random House Dictionary
                                                                                                                 Second Edition, unabridged

The seemingly inevitability of sequester is in direct contrast for its raison d’être. It was passed and signed into law with expectations that it never would go into effect. The possibility that it will is a manifestation of failed leadership in the White House and Congress. The idea of sequester for political purposes was first conceived in 1985 with the passage of the Balanced Budget and Emergency Control Act of 1985. The Budget Control Act of 2011 specifically required Congress to ready a plan that would reduce the annual deficit by $1.2 trillion over ten years beginning in fiscal 2012. Failure to do so would trigger automatic budget cuts starting with the 2013 budget. The Office of Management and Budget was provided authority to carry out sequester. Now we are fast approaching an event no one thought would happen.

Sequester was approved by Mr. Obama as a quid pro quo. It was seen as a way of forcing Congress to implement $1.2 trillion in reductions to the deficit over ten years, in exchange for an increase in the debt ceiling. A super committee was formed to come up with proposals. They gathered with great fanfare and collapsed ignominiously a few months later. Their failure triggered sequestration. A $2.1 trillion increase in the debt ceiling (the quid) was approved by Congress in 2011. Now fiscally conservative Congressional members are demanding the quo (sequester.) The “fiscal cliff” agreement last December did nothing more than postpone the inevitable for two months. The Budget Control Act of 2011, which created this monstrosity, was passed with rare bipartisan majorities in both the House and the Senate. It was signed into law by President Obama. With the March 1st deadline, and with a new debt ceiling fast approaching, the necessity of acting is imminent; otherwise another debt downgrade is possible for U.S. securities.

According to the Bipartisan Policy Center, of the $1.2 trillion required by sequester, $216 billion will come from assumed interest savings. For the balance ($984 billion,) cuts would be evenly divided between each of the remaining nine sequester years, or $109 billion per year. Annual cuts would be evenly divided between the non-exempt portions of defense and non-exempt, non-defense spending. Money’s spent on wars are exempt, as is most mandatory spending, including Social Security, retirement programs, veteran’s benefits, Medicaid, CHIP, food stamps, unemployment insurance, etc. Keep in mind, the annual budget for 2013 is expected to be $3.8 trillion, of which defense would be 24%, or about $950 billion. In other words, Defense, which would be hit harder than most other departments would lose approximately six percent of their 2012 revenues – a number that, while perhaps undesirable, should be manageable.

The battle over sequestration is what makes Washington so frustrating for citizens, yet what provides so much material to comedians and commentators. A majority of Democrats in the Senate voted for Sequestration, as did a majority of Republicans in the House. This was one bill that truly received bipartisan support. It did so in large measure, I assume, because a year and a half is a lifetime in the nation’s capital. It should also be remembered sequestration received the full endorsement of the President. In fact, on November 21, 2011, when it became obvious that the super committee had failed, Forbes quoted Mr. Obama: “I will veto any effort to get rid of these automatic spending cuts,” adding, “the only way to get rid of these cuts is for Congress to come together and work a deal.” Now that sequestration seems inevitable, responsibility is being passed around Washington like a hot potato, with everyone denying paternity.

Popular legislation has multiple fathers, but when a law goes sour it becomes an orphan. Less than a year after his fervid boast, Mr. Obama was singing a different tune. Last October, in response to criticism from Mitt Romney that American security is at risk if defense cuts are triggered by sequester, he said: “First of all, sequester is not something I proposed, it’s something that Congress proposed. It will not happen.” In his State of the Union, the President claims that sequester was a bad idea and cited a litany of programs that would be cut, most of which are exempt from the law’s provisions. In his book, The Price of Politics, Bob Woodward claims differently. It was the White House, Mr. Woodward alleges, that first suggested the concept of some kind of triggered spending cuts as part of a compromise to get more borrowing capacity. Honor has little meaning to too many politicians cavorting around Washington on our dime. Despite the omnipresence of YouTube, persistent denial still serves as a politician’s best friend.

Republicans are equally guilty. They accepted sequestration as the price for granting more borrowing power to the profligate Mr. Obama. Following passage of the legislation in 2011, John Boehner was quoted as saying he got 98% of what he wanted.

What once seemed a harmless nudge to wrest reason from an unreasonable Congress is now being touted as everyone’s worst nightmare. Mr. Obama has had his cabinet in attack mode. The President has made it clear that such cuts will harm the poor, the elderly and of course the middle class, his current favorite constituency. They won’t, however, as mandated programs are largely exempt. Our new Secretary of State, John Kerry, on Friday, said, “These cuts would severely impair our efforts to enhance the security of U.S. government facilities overseas and ensure the safety of the thousands of U.S. diplomats serving the American people abroad.” (It was the failure to deploy assets – not their absence – that resulted in the tragedies in Benghazi.) Defense Secretary Leon Panetta has said that sequester would be “shameful” and would “hollow out the force and inflict severe damage to our national defense.” The headline in Friday’s The Day, (New London, Connecticut’s daily paper and which serves as my local paper) reads: “Napolitano: Looming Cuts Imperil Coast Guard.” The Secretary for Homeland Security spoke of how sequestration would disrupt her department and the nation’s security. Where were these people a year and a half ago? One of them, John Kerry as Massachusetts’ senior Senator, voted in favor of sequester.

When you listen to the blather and lies of these bloviating politicians, keep in mind that cuts of this magnitude for the most part represent cuts in the rate of growth, not in actual spending. Unlike most household budgets, government ones have built-in growth assumptions. It is true that some departments will be hurt, but as John Makin wrote in last Thursday’s Wall Street Journal, “Fear mongering aside, the sequester is more paring knife than meat axe.” Tax increases on the highest earning Americans, which were not part of the Budget Control Act of 2011, were put into effect on January 1st alleviating some fiscal pressure. It is not as though government will starve.

A $109 billion annual reduction in spending out of a proposed $3.8 trillion budget for fiscal 2013 represents a 2.9% cut. Sequestration would not have been most of our preferred venue, but if it focuses attention on our rapidly increasing debt it will have served its purpose.

No comments:

Post a Comment