Tag Archives: Sequestration

Sequestration: Impacts

Fiscal Cliff

The cuts are becoming more pronounced now.  The mandatory budget cuts are kicking in and the public is starting to feel the impact.  Perhaps the most visible example are the flight delays:

WASHINGTON (CNNMoney)

Air travelers headed into New York’s LaGuardia Airport were facing two hour delays on Tuesday morning.  By Tuesday afternoon La Guardia’s delays had improved by as much as an hour for some flights.

With fewer air traffic controllers showing up to work, the government has warned of problems at several large airports including those in the New York area, Los Angeles, Dallas-Ft. Worth and Las Vegas. The Department of Transportation warned that those airports are facing “staffing challenges” on Tuesday.

However, Sequestration not impacts the public, it impacts the folks being furloughed.   And the other day, Reuters had a story on just such events:

(Reuters) – The government’s effort at cutting spending across the board is hurting a population once considered among the most financially stable – dual income families where both partners are government employees.

Starting on Monday, employees at agencies such as the Federal Aviation Administration and the Office of Management and Budget will be required to take unpaid days off – a consequence of the U.S. government’s sequestration budget cuts. These forced furloughs come on top of the first round of cuts that began on March 1, and they will reduce some workers pay by as much as 12 percent a month.

Twelve percent is a sizable amount, to be sure.  And it’s ballpark correct.  I mean, if folks are being given 1 day off every other week, that’s 2 days a month, maybe a little more over time.  And with about 4 weeks per month, that comes to about 20 working days per month, add 1 for love and ya get 21.  2 out of 21 is about 10%, a little less.  So yeah, maybe 12% is high, but not by much.

However, the specific example cited by Reuters struck me as strange:

The cuts, which include decreased work hours for federal employees, hiring and pay freezes and layoffs, hit hard couples like Laurie and Jack Swensen, FAA employees in Kansas City, Missouri. When they both start furloughs next week, the couple will earn $1,900 less every month. The cuts come just as they were making moves to buy a house, said Laurie Swensen.

So, if the Swensens are among the hardest hit, taking 12% of their salary, that means they normally bring home $15,833.  A MONTH!  That’s an annual take home of $190,000.  I’m not sure that using a couple in the top 5% of American take home pay is the subject for such sorrow.

But it continues:

With six family members, including their eldest son and his pregnant wife, living in a two-bedroom rental home, the Swensens were eager to move. But the furloughs and subsequent pay freezes have forced the family to reconsider.

We have 4, FOUR, working age adults living in a single 2-bedroom home.  We know that the two parents bring home near 200k a year and who knows how much the kids make.  And we’re somehow supposed to feel a tug?

At least I’m not the only one who noticed, the article is getting hammered in the comments.

Joe Biden: Personal Wealth

Joe Biden

Second only to democrats coming out in support of gay marriage, all the rage in Washington is for officials to take a pay cut in support of government officials who may face a furlough.

Obama and several other cabinet members rushed this week to day they would turn back some of their salary to the U.S. Treasury as a gesture of solidarity with federal workers facing furloughs. So far, Secretary of State John Kerry, Attorney General Eric Holder, Defense Secretary Chuck Hagel, Treasury Secretary Jack Lew, and Homeland Security Secretary Janet Napolitano have all said publicly that they would be giving back portions of their $200,000 salaries.

A nice gesture, I have to admit.  Something that I think helps in regards to the optics of the whole situation.  However, Joe Biden isn’t all in, yet:

Others, like Biden, have said they will return a portion commiserate with the number of days their department’s employees are furloughed.

But Biden’s decision not to follow Obama’s lead and return a flat portion of his salary — and the possibility that nobody on the vice president’s staff will be furloughed — has already prompted speculation in the media that Biden was looking to sidestep the pay cut.

I think that there are two reasons for Biden holding onto his money – actually three:

  1. He’s a democrat.  And democrats don’t like to part with their money for charitable reasons.
  2. He rightly thinks that he’s earned the money and has a right to keep it.
  3. He doesn’t have a lot of money and so a $11k cut would hurt.

Actually, I suspect all three reasons contribute to Biden’s reluctance to subject himself to a voluntary tax, but The Hill takes the high road and points out that Joe isn’t independently wealthy:

Unlike some members of the Obama Cabinet, he is not independently wealthy.

Obama’s net worth is estimated at between $3 million and $8 million and Secretary of State John Kerry’s wealth is in the range of $200 million according to The Hill’s “50 wealthiest lawmakers: list.

Biden’s net worth in comparison, according to the Center for Responsive Politics, is around $230,000, an amount roughly equivalent to his annual salary.

When I first read that this afternoon I kinda nodded and was like, “yeah, that makes sense.  He should be expected to give up 5% of his net wealth in a show of support.”  However, it then hit me, how does a senator who makes north of $150,000 a year, and now a Vice President who makes north of $220,000 have a net worth of only $230,000?

How is that possible?

If this is true, it means that the Vice-President of The United States of America is almost living hand to mouth.

Fascinating.

What Does Compromise Look Like In The Budget Debate

Compromise

The headlines this week are going to focus on “compromise”.  What each party thinks that means, for themselves and for the other guys, is going to be interesting.  And will be at the heart of the conflict.

In the over-arching context, compromise refers to the effort to reduce the deficit so that we can begin to work on reducing the debt.  And the whole concept of compromise is the smaller individual effort to accomplish this goal by either increasing revenue or reducing spending.  Or, a third method, which is that the whole framing of the “problem” isn’t correct.  That is, while we do have a debt and a deficit, any conversation should be couched in our ability to carry, or repay, each.  However, I would suggest that such a take on the subject is awfully “inside baseball” and is even further removed from common understanding than such basic concepts as debt, deficit, baseline budgeting and “cuts”.

With the failure of Washington to stop the Sequestration, the conversation switches to:

  1. What can we do to prevent further cuts?
  2. How are we going to deal with the expiration of the continuing resolution on March 27?

And right now, the conflict between the democrats and the republicans is the whole idea of compromise.  One one side you will hear that any spending decrease will have to be matched by a conversation that discusses an increase of revenues through the tax code.  And on the other?  You’re gonna hear that revenues have already been addressed during the legislation that handled the expiration of the Bush Tax Cuts.

So, if I was the President of the United States or, if I was just a manager tasked with handling this budgetary effort, how would I guide the parties forward?

First, I would establish that for this effort, I was the President of the United States, not the President of the Democrat Party.  In other words, Obama has got to stop the party politics and blaming of the republicans.

I acknowledge that this is near impossible and why I would suck at politics.  Obama was elected because he is a democrat and he continues to receive the support he has because he’s expected to be a democrat president helping those same democrats take the House in 2014.  Which, by the way, puts him in a position that is firmly in his wheelhouse:  Campaigning.

I would approach the republicans and work on an idea that took two forms:

  1. We will reduce spending across the board; including and specifically the “entitlement” programs.
  2. We will increase revenues through tax reform – including a mix of ideas contained within Romney’s plan AND by ending tax subsidies to energy firms.

After speaking with the republicans I would approach the democrats and work on that same idea giving them:

  1. Tax benefits to oil and gas companies.
  2. Smart reforms to entitlements that ensure they continue to remain strong and viable.

In order to accomplish this plan, the main components of my plan would include:

  1. Let both sides claim victory.  Only in Washington can you INCREASE spending on programs and claim to cut them at the same time.  In other words, allow the entitlement programs to grow, but grow more slowly.
  2. Acknowledge that ALL forms of government must subscribe to the cuts, including defense and border protection.
  3. Remove “loopholes” for energy companies; oil, gas and coal BUT include alternative “green energy” firms in the legislation.  Again, this should be a win for both sides.
  4. Reduce the corporate tax in exchange for the removal of the energy legislation.
  5. Increase tax revenues by limiting deductions in exchange for a reduction in tax rates.

Items 1-4 above should be straight forward and relatively easy; the 5th is a tougher sell.   The republicans are against any revenue increase and the democrats can’t let go of the class warfare and are intransigent on the issue of tax rates; specifically on the wealthy.

 

 

Blantant Scaremongering

I’m not sure if she simply made a mistake, is truly that ignorant or is guilty of flat out scaring the living soul out of people:

An Impact Of Sequestration

Budget Cut

I’m more than a little annoyed that the whole sequestration process is refereed to as a cut in funding.  Washington is referring to the budget action in this manner and worse, the media is reporting as a cut in funding as well.  The truth is that spending will not be cut but will. in fact, increase.  The difference is that the level of increase is less than it might otherwise have been.

Only slightly less annoying than this detail is the rhetoric coming out of the White House regarding the impacts of these cuts.  Everything from having to mothball an aircraft carrier to the FBI losing agents to DHS releasing illegal immigrants to teachers and first responders getting fired.  Heck, even traveling is going to get harder with TSA agents facing shortages.

I suspect precious little of this will actually occur.  Take for example, teachers:

http://www.youtube.com/watch?v=TjS0Qp5JiNI

The good part is at 1:30.

The sequestration is SO bad that teachers are already receiving pink slips; they are already being fired.

But, is it true:

Near the very end, the Secretary gets into a little detail.  The teachers in jeopardy of losing their jobs are Title I teachers; folks who are funded through the federal government. But right after that, at about 1:50, he also mentions a teeny tiny piece of information:

The cuts may not be related to sequestration.

Further information:

When he was pressed in a White House briefing Wednesday to come up with an example, Duncan named a single county in West Virginia and acknowledged, “whether it’s all sequester-related, I don’t know.”

And, as it turns out, it isn’t.

Officials in Kanawha County, West Virginia say that the “transfer notices” sent to at least 104 educators had more to do with a separate matter that involves a change in the way West Virginia allocates federal dollars designated for poor children.

The transfer notices are required by state law and give teachers a warning that they may be moved to a different position next school year. They don’t necessarily mean a teacher has been laid off, said Pam Padon, director of federal programs and Title 1 for the Kanawha County public schools. “It’s not like we’re cutting people’s jobs at this point.”

She said those 104 notices will ultimately result in the elimination of about five to six teaching jobs, which were likely to be cut regardless of the sequester.

“The major impact is not so much sequestration,” she said. “Those five or six jobs would already be gone regardless of sequestration.”

So we have increases in spending referred to as cuts in spending.  Then you have cuts in services turning out not to be true.  I’m beginning to believe the reports that more frightening to the democrats than the actual sequestration is that the impact won’t even be noticed.  America is going to wake up on Friday and realize that we can cut $85 billion and not even know we did it.

 

Barack Obama Commenting On Barack Obama’s Plan

Barack Obama commenting on the upcoming sequestration:

Let’s look at that again.  Here’s what he is saying will get cut:

  • Military Readiness
  • Job Creating Investments
  • Emergency responder’s ability to help communities to respond to and recover from disasters.
  • Border patrol agents
  • FBI Agents
  • Federal prosecutors
  • Air Traffic Controllers
  • Airport Security
  • Thousands of teachers and educators
  • Tens of thousands of parents who need childcare
  • Hundreds of thousands of Americans who need primary care and preventive care
  • Navy’s ability to deploy aircraft carriers to critical locations

This is an extraordinary laundry list.  Some thoughts:

  • Sequestration is NOT a cut in spending.  It is a reduction in the amount we are going to INCREASE spending.
  • Over a decade.
  • If this is the apocalyptic vision of America when we’re looking at $85 billion, what is that saying about our general overall financial health?
  • This might be minor, and he may means something else, but I don’t think the federal government pays teachers.

Spending Cuts

Before the compromise that pushed the sequestration out 3 months, I was in favor of allowing the cuts to take place.  I know that the result would have been recession but it would have been short and only technically accurate.  In reality the cuts would strengthen the economy and we would find ourselves better off.

However, the compromise isn’t such a bad thing.  On the one hand it forces the senate to actually take up a budget AND we still can let the cuts take place.

But are we serious?

“I think the sequester is going to happen,” Representative Paul Ryan, chairman of the House budget panel and the party’s 2012 vice presidential nominee, told the NBC program “Meet The Press.”

House Republicans, most of whom had strongly opposed any tax rate increases in the “fiscal cliff” debate, have now started to shift their focus away the issue of tax increases and toward the spending cuts.

“We think these sequesters will happen because the Democrats have opposed our efforts to replace those cuts with others and they’ve offered no alternative,” Ryan said.

I hope that this means the republicans are serious.  It’s very clear that, whether Obama really has capital or not, he THINKS he does, and isn’t going to negotiate.

Fine.

Time to take our medicine.