Saturday, February 16, 2013

Sequester: How to take action by inaction or how Congress seems to work now

Government domestic and military budgets will be slashed by a total of $1.2 trillion ($109.33 Billion per year) with cuts coming as soon as March 1, 2013 for some areas.  The automatic cuts will come as a 50/50 blend between defense and non defense spending.  This means $54.667 billion per year for each of these categories.

Although it was never intended to occur, it is nearly a certainty that the sequester will occur.  With the date quickly arriving, the Republicans in Congress have decided to go on recess for the next ten days and will not return in time to do much of anything to avert sequester.

Although Republicans blame President Obama for the sequester, in August of 2011 bipartisan majorities in the House and Senate voted to allow the threat of sequestration to force Congress to act on deficit reduction.  It was thought that the drastic, across the board cuts would be viewed as something that Congress would want to avoid at all costs, thereby forcing them to compromise in a bipartisan way to identify and agree on deficit reduction actions.  This proved to be misplaced optimism.

Recently both parties have put forth proposals to avert the sequester.  House Budget Committee ranking Democrat member Chris Van Hollen has offered an alternate plan that would eliminate excessive agriculture subsidies; apply the Buffett Rule (making 30% a minimum income tax rate on the wealthy) and eliminate tax breaks for big oil.

The Republicans have refused any deal that means an increase in taxes or revenue increases from reduction of special interest tax breaks.  The Republican's alternative to sequestration has proposed strict social program cuts and Corporate tax breaks in exchange for  plugging some tax loop holes. This offer doesn't sit well with Democrats and the President who insist on a balanced approach that includes revenue increases as well as spending cuts.  So we are in a stalemate that will result in sequester.

Some areas of government are exempt from sequester.  These include entitlements such as social security, railroad retirement benefits, Department of Veterans Affairs, pension and special compensation programs.  The Farm Credit System Administration and crop insurance and the FDIC Deposit Fund are exempt.  Some low income assistance programs are exempt such as ACG/SMART Grants, Child Care entitlement grants to States, All Child Nutrition (except special milk programs), Children's Health Insurance Program, Some Pell grants (for first year of cuts only), Medicaid, Supplemental Nutrition Assistance Program, Supplemental Security Income Program, Temporary Assistance for Needy Families.  Medicare cuts are limited but not absent.

Military Sequester
All other areas of government are impacted.  The sequester percentage cuts applied across all remaining government accounts is between 7.6% and 9.4% of their existing budgets.   The military takes huge cuts in all branches of service.   These cuts are sure to impact defense industry contracts, cause lay-offs of civilian labor, the closing of bases, etc.

Social safety net programs such as Special Supplemental Nutrition Program for Woman Infants and Children (WIC) will eliminate $543 million per year and in effect remove hundreds of thousands of families from the rolls.  Low Income Home energy assistance reduction of $285 million will leave hundreds of thousands of elderly and poor Americans fending for themselves to keep warm during the winter months.  The list goes on and on.

Democrats have published a listing of the effects they believe the sequester will have.  See that report here.  The obvious effect of the sequester is that government services will be reduced.  The government has indicated that 750,000 jobs could be affected.  Some economists have stated that the stock market may be affected.

Once the domestic program cuts go into effect I believe they will be here to stay.  I do not see our Congress working out any compromise deal at a later date.  I say this based on Congress' proven lack of ability to do their jobs and their propensity for taking time off.  More importantly Republicans know they would never get Democrats to cut the social safety net so severely  in any other way and they are not going to start being concerned about the poor or helpless now.  That is their mantra.  Only the wealthy deserve entitlements.

There is a very good likelihood that Republicans will re-introduce bills to return military budgets back to pre-sequester levels and Democrats may be forced into voting for the increases either through fear of public embarrassment or falling for Republican false promises for future tax loop hole legislation.  I know that the President will continue to push for tax law reform, but believe it will never happen given the nature of our obstructionist Republicans in Congress and their uncompromising defense of the wealthy, even at the expense of the less fortunate.

The less apparent effect of the sequester is going to be the magnitude of the down-stream effects that these budget cuts will have on our economy and the adverse effect on Americans who depend on government services that will be cut.  We are about to find out.

Whatever happens, remember this day if you are still a member of American society during the 2014 Congressional elections.  In our vote is the power to reverse the damage done.  It is time for middle-class Republicans to voice their opposition to the leadership of their party which has proven that they do not represent you.

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