Thursday, December 27, 2012

Thoughts on the Sequestion side of the Fiscal Cliff


            For the last few months, we have been hearing about how going over the so-called “fiscal cliff” would be really bad.  Generally speaking I think this has been blown out of proportions by the chattering class.  While I do think the scheduled tax increases present a possible serious problem, the budget sequestration side of the fiscal cliff is no more sound and fury that signifies damn little.  
While $110 Billion a year in cuts to our national budget sounds like a lot, in reality it is about 3% of the national budget.  Anyone who has had to cut up credit cards can understand the need to trim three cents on the dollar from their monthly expenses.  (110/3,796 = 2.8% using the 2012 authorized spending in billions).  This 3% cut is to continue for 10 years and Congress will have 10 different appropriation cycles to change the cuts if they prove to be too painful.   On October 26, 2011, the Director of the Congressional Budget Office testified before Congress1 on the effects of the sequestration on the spending that Congress has authority over. If I am understanding his testimony correctly, the net affect of the cuts will be that for 2013, the national government will spend about the same amount as it spend in 2011 and 2012 and after 2013, the amount of spending will continue to increase but only at a slower rate.  Thus the debt car will slow down but it won’t go into reverse, nor will it take the needed right turns to get our fiscal house back in shape so we can afford things like unexpected natural disasters or future benefits like funding research into new medical treatments or what ever cause is near and dear to your heart to the point that everyone should chip in and pay for it (for me it is space exploration but I’m a sci-fi nut). 
If the cuts were going to create a real, tangible hardship for typical Americans (or even for the special interests that fund political campaigns), every politician seriously worried about keeping his/her job would be willing for find some middle ground between their positions.  Instead we have a President who is making demands for more tax increases than he made last year when the last budget deal fell apart as well as asking Congress to surrender control over when the debt ceiling should be raised.2  At the same time we have a group of 30 – 40 House Republicans that will kill any tax increase that does not include a serious effort to reform the unsustainable spending habits of our national government.3 
The Democrats seem to believe that the structural reforms that the Republicans want to our national entitlement programs will be more harmful long term than any discomfort that people might experience if we go over this fiscal cliff.  Republicans seem to believe that the debt we are piling up is a greater threat than any discomfort that people might experience if we cut our national budget by 3% per year for 10 years. 
Both sides got us into the current debt problems and it will take both sides to get us out of this mess.  Both sides know this and if the fiscal cliff was a serious as some claim, then both sides would be working in good faith on a deal rather than trying to score political points with finger pointing and carefully scripted press releases. 
In short, we have 536 adults are playing chicken on tricycles while pretending to be driving mack trucks loaded with toxic chemicals.



  1. https://www.cbo.gov/sites/default/files/cbofiles/attachments/10-26-DiscretionarySpending_Testimony.pdf
  2. This later one is a major issue for me because while Congress can (and has) given up a lot of legislative power to the various federal agencies and to the President over the last 70 years, this seems a bit too much in that it comes pretty close to giving up one of the essential checks and balances of our system of divided government.  I hope my readers will allow a slight diversion while I explain that point a bit.  Under our national system, the President must ask Congress for permission to spend money and Congress must then authorize that expenditure.  Technically, Congress could give the power to unilaterally raise the debt ceiling to the President, but it certainly feels like giving the President the national credit cards and trusting that whoever holds that office now or in the future will use that credit wisely.  That seems a bit too much like undermining a fundamental part of our checks and balances that the Framers put in place to protect ourselves from ourselves. 
  3. Last I checked, both parties admit that we have do so something about our total debt and the fact that we are digging ourselves deeper every day – they just can not agree on who pay the price for the changes that we need to make.