Budget Sequestration

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Budget sequestration, or simply "sequestration," is an Executive Order issued by the U.S. President that authorizes automatic reductions in planned spending by the federal government set to begin March 1, 2013. These cuts total merely $1.2 trillion over 10 years, which would barely affect the overall national debt of $16 trillion. Moreover, the cuts are primarily to planned growth in future spending, and may not reduce current spending levels much at all. These cuts are to be divided 50% for domestic discretionary spending (not affecting entitlement programs like Social Security), and 50% for defence spending.

The term is formally defined in the Budget Enforcement Act (BEA) as the cancellation of budgetary resources provided by discretionary appropriations or direct spending laws. New budget authority, unobligated balances, direct spending authority, and obligation limitations are “sequestrable” resources; that is, they may be subject to reduction or cancellation under a presidential sequester order. [1]

Contents

Background

The Executive impoundment of Congressionally mandated funds, i.e., a president's refusal to spend money appropriated by Congress, had a long history. But after President Richard Nixon refused to spend money appropriated by Congress for Johnson-era Great Society programs, Democratic President Jimmy Carter signed legislation passed by the Democratic controlled Congress making it illegal for a president not to spend money appropriated by Congress. By 1985 it became apparent some form of budgetary restraint was necessary. Sequestration was designed as a deficit-reduction forcing mechanism, so that unless the President and Congress cooperate each year to reduce the deficit by prescribed amounts, a “sequestration” order would reduce funds down to a mandated figure.[2]

2013 Obama sequester

President Obama's sequester originated as a proposal by Obama to Senate Democrat Majority Leader Harry Reid relayed by then White House budget director Jack Lew to cut entitlement and defence spending[3] effective January 1, 2013. The idea was to break the deadlock over a federal debt ceiling debate in the summer of 2011 and "kick the can down the road" past the 2012 Presidential election over ways to pay for Obama's stimulus spending and "healthcare reform" during his first term.

Critics warned Obama's economic plan would create massive unemployment and a recession. Obama repeatedly claimed tax increases on the rich would pay for his plan, and Republicans compromised by voting for tax increases for the first time in two decades. As part of the deal, Obama's sequester cuts were delayed 60 days to avoid the inevitable fiscal cliff of his plan.

Specifics of Obama's plan

The Obama plan called for the President to issue Executive Orders for immediate cuts totally $85 billion to be divided equally between defence spending and programs such as Medicare and Social security for the remainder of fiscal year 2013. On the employment side, defence cuts are reflected in lost payrolls totalling half of the sequester, or $42.5 billion; this is essentially $10,000,000 per hour in reduced payroll spending[4] by the federal government for individuals employed mostly as civilian contractors. Many will see permanent jobloss. A ripple effect, or "trickle down" effect will been seen soon thereafter in lesser paying retail positions.

Defence cuts

Upon President Barack Obama's election in 2008, self-identified communist and Progressive activist Mark Rudd observed,

Obama is a very strategic thinker. He knew precisely what it would take to get elected and didn't blow it. He used community organizing methods... And I agree with this strategy. Anything else will court sure defeat. Move on the stuff you can to a small but significant extent, gain support and confidence. Leave the military alone because they're way too powerful. For now, until enough momentum is raised. By the second or third year of this recession, when stimulus is needed at the bottom, people may begin to discuss cutting the military budget... [5]

On December 5, 2012 it was reported that the Pentagon on instructions from the White House Office of Management and Budget began planning to use sequestration to cut Congressionally mandated military and defence spending.[6][7]

Democratic reactions

The Democrats are said to be planning calls for more extended unemployment benefits and infrastructure projects, which is of course, what the sequester is paying for from Obama's first term. Infrastructure projects do nothing to solve the underlying problem of unemployment, leaving workers unemployed, again, once the project is completed or government funding runs out.[8] Likewise, extended unemployment benefits do nothing to address the problem of job creation.

See also

References

  1. A Glossary of Terms Used in the Federal Budget Process, pg. 94, pdf. www.gao.gov
  2. http://law.justia.com/constitution/us/article-2/37-impoundment-of-appropriated-funds.html
  3. Obama’s sequester deal-changer, By Bob Woodward, Washington Post, February 22, 2013.
  4. a classic picture of what is meant by the term, "economic contraction".
  5. http://theragblog.blogspot.com/2008/11/mark-rudd-lets-get-smart-about-obama.html
  6. http://www.defense.gov/news/newsarticle.aspx?id=118712
  7. http://www.govexec.com/defense/2012/12/furloughs-hiring-freeze-table-defense-begins-sequester-planning/59968/
  8. There is a limit to how many highways, bridges, and public buildings can be built. And it is States and localities that must pay the cost of permanently maintaining them. Many states and localities are already struggling to maintain basic services like police, fire, and teachers. As FDR discovered, "infrastructure" is just a campaign slogan that only prolongs the crisis and extends the suffering.
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