Friday, February 22, 2013

Sequestration is upon us

It is fast approaching, the dreaded sequester, the sequester that was never to happen. The solution that we would never have to face because no group of politicians could ever be so dysfunctional. All the while the stock market is rising due to the Federal Reserve's economic stimulus programs known as quantitative easing, near zero interest rates and a lack of investing alternatives. The markets are not rising because of U.S. or global economic growth, but driven by money being printed by the Fed that is finding its way into the market rather than building factories or hiring workers

The President is scurrying to prevent the coming budget cuts, all while putting the blame on Republicans. "Emergency responders like the ones who are here today ‒ their ability to help communities respond to and recover from disasters will be degraded. Border Patrol agents will see their hours reduced. FBI agents will be furloughed. Air traffic controllers and airport security will see cutbacks, which means more delays at airports across the country. Thousands of teachers and educators will be laid off,” Obama said Tuesday.

The question Obama should address is why he proposed these cuts, and now goes on TV to argue against them? He signed the bill that created sequestration, and White House Press Secretary Jay Carney even admitted last week that “the sequester was one of the ideas put forward, yes by the president’s team.” When the Budget Control Act of 2011 called for the creation of a Super Committee to identify $1.2 trillion in cuts, Obama knew this new committee wouldn’t come to a comprise, given its even political split.

Fact is that the economy is dead in the water and massive fear exist as to what will happen if any government spending is cut.  Knowing this the fear mongers are out banging the drums hard, a article in the Washington Post starts out; Congress and the administration are down to their final week to strike a deal to avoid or delay the automatic budget cuts known as “sequestration,” and with both parties already pointing fingers rather than working on a compromise, the cutbacks appear inevitable.Should neither side budge, the federal government on March 1 must start making cuts that will slash spending over the next decade by $1.2 trillion.

Articles abound about how the one-day-a-week furloughs for civilian employees of the Pentagon will hurt people who work for Washington Headquarter Services. "This is a hard game to play for those of us who are concerned about our bills and our families,” said one employee. Furloughs from the sequestration would impact more than 750,000 workers in every state - from office staffers to teachers to aircraft maintenance workers. Virginia would get hit the hardest, with more than an estimated $661 million in lost pay. California would follow, and then Maryland.

Often these articles key in on which states will be hurt the most while quoting the amount of the cut back in "full decade" numbers to maximize the effect. The "tone" being all this money will be ripped out quickly leaving the government a hollow shell. Other then the pointing of fingers, and casting blame, in reality the sequester should be thought of as no big thing, 85 billion dollars of a 3.5 trillion dollar budget cannot be called a serious cut, and should over all have less impact then the recent payroll tax increase. The claim that it is across the board and not well focused is an exaggeration, some control over what is cut still exist.

While I have heard the coming cut described as "draconian" on more then one occasion, and it has caused anguish and the gashing of teeth, this minor cut in spending does not seem earth shattering. Many of those being hurt by this have made the mistake of putting themselves in that position by feeding at the government tit long after they were warned of their over-dependence and the risk they were taking. I say bring it on, this is only the first step down a long path to reality and spending reform.

Footnote; My January 1 post deals with what happens when the momentum ends.

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