The chart is an illustration comparing expected spending over the years 2013 through 2022 of about $47 Trillion and threatened sequester cuts, over that same period of time, of $1.2T or about 2.5% of the total. Granted, some of the spending, Social Security and veterans' benefits, for example, is off limits for sequester cuts, but that restriction was agreed to by all parties involved. That requirement could be changed anytime. As a matter of fact, the whole sequester agreement, even if it goes into effect, can still be changed anytime.
Even with those areas off limits, cuts of the size proposed will be a problem only if the administration chooses to make the cuts in more critical and more visible budget items rather than in less critical items. It seems that the president is now threatening to do the former in order to goad congress into action, but I suspect that, if the cuts have to be made, they will be made in the least critical areas. Nobody is suggesting that the president is not a very smart guy, but he is a tough negotiator.
The projected spending tabulation from www.whitehouse.gov is presented below also. Note that large deficits continue annually, the debt is projected to approach $20T, and the GDP growth projections are pretty bullish at around 4% per year. The impact of the proposed sequester cuts on the projected deficits and debt would be trivial. I understand that the government is operating without an approved budget in place, but this was the White House proposal.
Let's try the sequester out and see how it works. Then we will know for sure whether or not it was a good idea.
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It should be noted that the national debt shown on the White House table, while accurately labeled as “Debt held by the public,” is misleadingly low because it does not include the debt owed to the Social Security and Medicare Trust Funds. The total national debt is currently $16.4T rather than the $12.6T noted on the White House tabulation. You can read the details here: http://www.treasurydirect.gov/govt/reports/pd/mspd/2013/2013_jan.htm
ReplyDeleteSequestration was designed to be unthinkable because it is unthinkable. By law all of the entitlement programs - Medicare, Medicaid, Social Security are off the table. The budget custs will come out of a reduced piece of the budget pie. I'ts a lot easier to "try" sequester when you may not have considered the actual effects. There will be a 10% decrease in an already decreasing defense budget, and it has to be accomplised in about 7 months since we are 5 months into the fiscal year (more like a 29% cut). For example, Federal employees in the defense department have already been told that they will be required to take 22 days of unpaid leave - a 20% pay cut for the rest of the year. The defense traing budget will be decimated. Private sector jobs are at significant risk as we move to much less efficient production rates. I could go on but anyone interested can find the unbiased conclusions on the effects of the sequestration. Other accounts, inwhat is considered discretionary, will be severly affected as well. If sequestration is not stopped d or remedied in the short term, I would suggest moving out of the capital markets, as we have a reasonable chance of another recession, more unemployment, and negative growth.
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