February 21, 2013
The President proposed it, Congress voted for it, and the President signed it. They can blame whomever they want, but they all own it. (I assume they are aware of this.) For the rest of us …
The Center on Budget and Policy Priorities explains How the Across-the-Board Cuts in the Budget Control Act Will Work in accessible yet detailed language. The bottom line:
The $984 billion in budget cuts is spread in equal dollar amounts over each of the nine years 2013-2021, or $109.3 billion per year. Those cuts themselves are divided equally between the “national defense” budget function and all other budget functions: $54.7 billion per year in defense and $54.7 billion per year in non-defense programs.
For perspective, you’ll find a breakdown of actual government spending here. The federal government has spent over $3.5 trillion each year for the past four years. So the ratio for the annual cuts would be approx. $109,000,000,000 to $3,500,000,000,000 or 109/3500 or 3%.
Sequestration would result in about a 3% cut in annual spending.
Now, because these cuts are not targeted, but “across the board,” Sequestration would most likely result in a “spending gap” triggering a temporary government shut down of non-essential services. This would be the 18th time the US government has shut down since 1976. (A good history of these can be found here.)
The longest shut down happened in 1996, lasted 21 days and furloughed 800K federal workers for that period. Parks, museums, and monuments were closed. Applications for visas, passports, as well as alcohol, tobacco, firearms, and explosives applications were not processed. Services through the NIH, CDC, Superfund and Veteran’s Services were suspended. About 20% of federal contractors were adversely affected by the shut down.
Sequestration would result in a temporary government “shut down” of non-essential services and furlough affected federal employees.
All this could have been avoided in 2010 when the President and Congress were negotiating the budget. The White House organized a bi-partisan panel, chaired by Erskine Bowles and Alan Simpson, who proposed a fiscal plan for budget development and deficit reduction. This proposal was rejected by the White House and not offered to Congress. However, this panel is still active, and has presented a second approach to avoiding sequestration.
A balanced, bipartisan approach to budget development and deficit reduction has been made available to the President and Congress.
Will the President reconsider the Bowles-Simpson plan? Is Congress willing to negotiate the tax-related elements of this plan (primarily closing loop holes)? We will see. But given that the President has spent trillion dollar deficits each year he has been president, and given that the Senate hasn’t even had a budget for the last 3+ years, it seems that their interest in responsible budgeting and fiscal management is not strong.
Some are saying that Sequestration may be the only way to reduce our deficits and begin to control our exploding debt. After the “great shut down” of 1996, President Clinton and Congress were able to negotiate a balanced budget for 1997 and the next few years. It would be nice to think that something positive could come out of this self-inflicted crisis.
November 28, 2012
The National Debt (the amount our government owes) is at $16.3 Trillion and growing. But it isn’t just our politicians who are borrowing to spend on what they can’t afford.
American Household Debt is currently $11.3 Trillion. Most of that is Mortgage Debt ($8.3 Trillion), but we owe $956 Billion in outstanding Student Loans, $768 Billion in Auto Loans and a whopping $852 Billion in Credit Card Loans, with an average credit card balance of $15, 328. Our default rate is about 11% (up about 1% since 2010).
As taxpayers and consumers, we owe more than $27 Trillion. Sure, we can raise taxes or get a second job to help pay off a little, but until we deal with our reckless spending habits, both personal and political, we cannot fix this problem.
November 8, 2012
Republicans and Democrats alike have a range of reasons why President Obama won reelection on Tuesday. Obama ran a permanent and better campaign; Mainstream Media was heavily biased and actively backed Obama; Hurricane Sandy helped the President to look “presidential” while taking Romney off the front page; the “War on Women” meme worked; Millenials and minorities turned out for Obama in record numbers (again); we have become a “Dependency Majority” reliant upon Big Government for our way of life; and, of course, revenge!
All of these no doubt played into Obama’s victory. But these are really observations of the “How,” not the “Why.” Why did the President get the vast majority of the African-American and Hispanic votes once again? Why did youth turn out again for Obama? How could $16 Trillion in National Debt and four consecutive years of $1+ Trillion deficits not matter? What about the failed stimulus? Why didn’t four years of “recovery” with unemployment higher than during the recession make a difference? Why didn’t years of decreasing income and rising costs of living change voters’ minds?
This election, like all elections, was about values. And to a (slight) majority of voters, Obama best represented their values. They are not really concerned about debt. They are not really concerned about jobs. They believe the nation’s problems can best be solved by government, not by business, religion or the individual. The cost of government programs and sources of funding for those programs do not concern them much. Taxes should be raised for whomever can afford to pay more taxes. On social issues, relativism is the norm while legalism is anachronistic. Any restriction on immigration or alternative lifestyles is a bias from previous generations. For these voters, free healthcare, free education and free social services trump economic growth.
In short, Obama offered them everything they want at a price that someone else will pay. Now we’ll see if he can deliver on that promise and what the consequences will be.
I’ll give you 44 guesses.
For an official history of deficits (with an occasional surplus) in real dollars, see the OMB Historical Budget Tables. (You can compare administrations. I bet you are surprised by the Clinton – Bush – Obama numbers. Don’t forget Harding – Coolidge.)
June 7, 2012
How does President Obama compare to other presidents’ spending?