Monday, February 25, 2013

Sequestration: What is All the Fuss Over? (Part I)

If the sequestration cuts are such a big deal and opposed by both Democrats and Republicans alike, then why hasn’t the President met with congressional leaders? Why did Congress and the President (golfing with womanizer Tiger Woods – but it is Republicans that are at war with women) go on vacation this past week? In the real world (private sector), when we face deadlines – there is no vacation time. Hence, if sequestration happens (and I hope it does – explained below), Washington politicians have no one to blame but themselves.

The sequester was originally passed as part of the Budget Control Act of 2011 (BCA), better known as the debt ceiling compromise. It was intended to serve as incentive for the Joint Select Committee on Deficit Reduction (aka the “Super Committee – Simpson - Bowles”) to come to a deal to cut $1.5 trillion over 10 years. If the committee had done so, and Congress had passed it by Dec. 23, 2011, then the sequester would have been averted. This did not happen, but in the fiscal cliff negotiations a new tax deal was obtained, but a ruling on sequestration was postponed until March 1, 2013.

The cuts are evenly split between domestic and defense programs, with half affecting defense discretionary spending (weapons purchases, base operations, construction work, etc.) and the rest affecting both mandatory (which generally means regular payouts like Social Security or Medicaid) and discretionary domestic spending. Only a few mandatory programs, like the unemployment trust fund and, most notably, Medicare (more specifically its provider payments) are affected.

The sequestration does not eliminate any programs and most entitlement and anti-poverty programs are exempt from cuts. Social Security, food stamps, low income housing, Medicaid, and many of the fastest growing entitlement programs are exempt from cuts.

The 2013 sequester includes:

§ $42.7 billion in defense cuts (a 7.9 percent cut).

§ $28.7 billion in domestic discretionary cuts (a 5.3 percent cut).

§ $9.9 billion in Medicare cuts (a 2 percent cut).

§ $4 billion in other mandatory cuts (a 5.8 percent cut to nondefense programs, and a 7.8 percent cut to mandatory defense programs).

That amounts to a total of $85.4 billion in cuts. Over 10 years these cuts would amount to 1.2 trillion dollars. More specifically, the cuts breakdown as follows:

1 comment:

  1. There are no-nil-nada-zero-zip-zilch spending cuts in the sequester. None has been proposed by anyone, and none will.