On March 1st, 2013, a blunt-edged, slasher-movie, automatic $85 billion cut in the USA’s budget is scheduled to be implemented. Roughly half of that cut will come from discretionary defense spending and the other half from discretionary domestic spending. “Safety net” programs such as social security, medicare and medicaid are exempt, although medicare providers like doctors, clinics and labs will see a 2% reduction in medicare payments received.
This exercise in shooting a mosquito with an assault rifle is called “Sequestration“, which was meant to address the”spending cuts” half of the fiscal cliff. The other half of the fiscal cliff was the tax increases on everyone when the Bush tax cuts finally expired on December 31, 2012. Because of the last minute agreement between the republicans and the Obama administration that made those tax cuts permanent for those making less than $400,00o a year (while allowing them to expire for those making $400,000 a year or more), the American Taxpayer Relief Act of 2012 was signed into law in early January 2013. That delayed implementation of the “spending cuts” portion (sequestration) of the cliff until march 1, 2013, to allow congress to negotiate a bipartisan agreement to avoid the meat-ax impact of blunt and indiscriminate budget cuts.
All of this resulted from the passage of the Budget Control Act of 2011, which itself was caused by the republicans’ initial refusal to raise the idiotic debt ceiling. Raising the debt ceiling does nothing more than authorize the USA to pay its bills for goods and services ALREADY BOUGHT but not yet paid for. The USA and Denmark are the ONLY countries with such a stupid law. The debt ceiling debate in the summer of 2011 produced nothing more than the Budget Control Act, and the downgrading of the USA’s international credit rating. It also pissed off Wall Street.
The sequestration was designed to be so painful that both political sides would be forced to compromise on tax increases and spending cuts. Ultimately, sequestration would force $1.2 trillion in cuts over 10 years, with $85 billion in 2013. However, most reputable economists are advocating that in order for the USA to get its fiscal house in order, it requires a 10-year deficit reduction of $4 trillion. Even with the full unbridled implementation of sequestration, there would still have to be a further deficit reduction of $2.8 trillion, more than double what a very painful sequestration would provide.
According to many sources, the Obama administration has already reduced the 10 year deficit by $2.5 trillion, both in actual spending reductions and with the expiration of the Bush tax cuts on the highest earning 1%. If true, than to meet the $4 trillion target only requires another $1.5 trillion in deficit reduction. Sequestration would accomplish much of that, but with a huge price tag in terms of reduced government services including defense spending (the sacred cow of the GOP), aviation security, food inspections and other things Americans take for granted. So why is the sequestration probably going to take effect anyway?
Despite its embarrassing election losses in November, the GOP is back to its “my way or no way” mantra. Republicans insist that the entire deficit reduction must be accomplished ONLY with spending cuts and completely without revenue increase. They don’t want defense spending touched in an way. Instead, they really want to target the safety net programs. They believe the American people will side with them on this, all evidence to the contrary.
Conversely, the democrats want “hands off” regarding social security, medicare and medicaid. They’re not against spending cuts, but they want the safety net programs fenced. They want significant defense spending reductions. And they want the rich to pay more in taxes by closing the loopholes that the rich use to reduce their tax rates to less than many middle class taxpayers.
It seems incredible that this totally manufactured crisis hasn’t already been resolved through honest compromise. You know…like the way congress used to work before the loonies “sequestered” the mainstream republican party away in the batshit-mobile?
Incredibly, some conservative tea party congresspeople see the sequester as a good thing. They want smaller government, they don’t care how, so let’s do it even if it causes another recession or a stock market crash.
On the other hand, since most safety net programs are exempt from the sequester, some congressional democrats see the sequester as the only realistic opportunity they’ll ever have to significantly reduce defense spending. No one is budging, and in fact, congress is on vacation! So the smart money is on the sequester actually happening (unless Obama can pull one more rabbit out of the hat)
In fact, congress has its own safety net, don’cha know. It will take a month for the sequester to really start being felt. That provides congress cover to work something out before the final hammer falls.
Maybe, for the good of the country, they’ll do that.
Yeah, and maybe the tooth fairy will visit you tonight.