Sequestageddon

Or, A Case Study of How Government Bureaucracies Defend Themselves Against Spending Cuts Reductions in Spending Increases

Yesterday's White House press conference featured the President of the United States speaking a bald-faced lie to the nation, capping off several months of over-the-top apocalyptic rhetoric from both the Obama administration and their erstwhile Republican opponents about the sequestration cuts.

First, as the President says, let's be clear: these "cuts" do not actually reduce federal spending (see Summary Table 1), which will continue to grow across the board. Even Think Progress was forced to admit this in the middle of their anti-Republican rhetoric:

Think Progress[/url]]3. The federal spending will still be higher next year. This claim is technically true, but only because the sequester target the growth of government programs: they will grow at a slower pace as a result of the spending reductions. This is simply how federal budgeting works. The sequester will reduce spending as percentage of the economy, lowering discretionary spending to historic lows.

They're right, of course - that is how federal budgeting works: under the assumption of constant, relentless increase, regardless of economic growth (or shrinkage). That's how federal government spending has doubled in the last ten years, far outpacing inflation and revenue. A chart from the Cato Institute shows just how preposterously tiny these reductions are in comparison to the total federal budget, and how little they affect its long-term growth:

IMAGE(http://www.cato.org/sites/cato.org/files/wp-content/uploads/sequester-2013.jpg)

Further examples of ... lets call it rhetorical overreach:

Teacher pink slips claim by the Secretary of Education not supported by evidence

OMB claims budget cuts will affect agency that no longer exists

New Secretary of Defense dampens "catastrophic" rhetoric from his predecessor

The sequester is like a CIA plot to destabilize the government

Embarrassingly, this coordinated all-out effort to scare people into opposing the sequester has resulted in most people either supporting the cuts or simply having no opinion. And Secretary Hagel's response to his predecessor's rhetoric on defense cuts points the way to what is really going to happen: nothing. Six months from now, these cuts will either be swept away by spending increases or simply ignored as inconsequential.

What this episode really highlights is how the federal bureaucracy defends itself from actual cuts, regardless of who is in charge or who has the political advantage. As usual, the entire framing of the argument is over a reduction in planned spending - not real cuts to total spending. The only reason some budgets are going slightly down in real terms is because the real elephants, entitlements, are immune to the so-called across-the-board cuts and continue to grow out of control. It also shows how really difficult it would be, even with popular support, to actually reduce the size of the federal government: all of government and most of both parties will reflexively oppose it. I can only expect that the real cuts - or just spending freezes - required to make the government solvent again would result in accusations of cannibalism or worse.

Cato's following the Republican talking points, comparing sequestration of fund from *discretionary* spending to the *entire* budget. I understand that both sides are spouting exaggerations and untruths, but you seem to have simply chosen one set of bad claims over another.

If you want to cut the growth of the budget, then address entitlements. Discretionary spending is much smaller. The sequester was designed to inflict pain in the way it is applied, and it will have effects beyond it's size. But the parties don't want to deal with entitlements, because that would require agreement between the parties, and right now, one of them does not want to show any signs of weakness for fear of losing the next election to people even further to the right than they are.

The sequester was intended to spark discussions on further, bigger reductions, but as usual, one side refuses to consider anything but what they want. This kind of thing is going to continue until that changes. Note that the effect of the sequestration is to pull $1.2T from the budget in the next ten years - the same amount that was settled on two years ago or so as a budget reduction target, but done in an exceptionally stupid way. With sequestration, cuts automatically apply at the program level, rather than being able to be allocated to take efficiency or importance of work into account.

So what's happening is that we're getting the *amount* of cuts that was desired, but in the worst possible way. Whether that's enough, that goes back to the failure of the Republicans to negotiate with all tools on the table. But the problem of it not being a giant cut, while literally true, ignores the hamhanded way it's done.

Of course, you're a libertarian, so for you, there *are* no bad cuts. Good programs, bad programs, efficient ones and poor ones, they're all paid for using money extorted by threat of force. From that perspective, you're probably wishing for more. But consider the people about to be furloughed or laid off for no good reason before you dismiss this as painless, because there is not a worse way to allocate the cuts than the one we're facing now. Austerity is one thing, but causing unnecessary pain is far worse. Cooperation is what's needed, and until the Republicans decide to participate in government again, it's not what we're going to get.

Celebrating the lack of leadership seems to me to be ignoring the bigger problem that sequestration represents. We should be more alarmed by the actual failure of Congress to govern than the cuts themselves; this is a symptom of a far bigger problem.

Congress has governed. Congress and Obama agreed that these cuts were necessary by signing them into law. The rest of the noise coming out of Washington is political posturing.

Now they can work on comprehensive tax reform. The biggest question is if Democrats are going to fix social security.

Congress has governed. Congress and Obama agreed that these cuts were necessary by signing them into law.

That's an incredibly naive view, given that both sides stated that the cuts were intended to be so clumsy and painful that they'd force them to the table. I don't mean naive as an insult, but rather to reflect the idea that either side wanted this to happen when it was signed. Republicans have lost out to the radicals in their camp, so they've been forced to go with it, but that was not the original intent.

It's amazing to me that anyone regards the near-complete breakdown of cooperation between the parties in Congress as anything good at all. It's like two fire companies fighting over territory. As the city burns, the best they can say is that the ruins will be really hard to burn, so maybe they won't have as much work to do later.

The system is broken. That's nothing to celebrate.

Obama actually bought into the Republicans' proposed social security "reform" (in reality phased-in benefit cuts), but Republicans turned down Obama's proposed revenue increases that were part of the package. When one party refuses to use the available tools - no economy runs without taxes, which go up and down according to need in a rational economy - then it's foolish in the extreme to blame the other side for problems getting deals done.

Democrats are fine with spending cuts and revenue increases, even if they are small ones. Republicans simply can't do anything but cut taxes, and after 30 years of that without benefits to the economy, that's looking like a remarkably obstructuionist position.

The USA is a bureaucratic mess with far too many people chasing the same pieces of a shrinking pie. That's alright when you are the rising power with only room to grow the pie, but it is utter hell when you are in decline.

ZaneRockfist wrote:

The USA is a bureaucratic mess with far too many people chasing the same pieces of a shrinking pie. That's alright when you are the rising power with only room to grow the pie, but it is utter hell when you are in decline.

I'd say the problem is the USA is a country with too few hands on the pie cutter when it comes time to decide on the size of the pie pieces.

That too.

CheezePavilion wrote:
ZaneRockfist wrote:

The USA is a bureaucratic mess with far too many people chasing the same pieces of a shrinking pie. That's alright when you are the rising power with only room to grow the pie, but it is utter hell when you are in decline.

I'd say the problem is the USA is a country with too few hands on the pie cutter when it comes time to decide on the size of the pie pieces.

This is so sad that even though I'm hungry I'm still not in the mood for pie.
edit: also I work for a very large corporation which has government spending as half its revenue

One side refuses to slice the part of the pie that has not yet been allocated. They say the pie is too big, so we should keep as much of it as possible from the table, giving it back to the bakers, and always make it smaller in the future, so the bakers can keep more of their ingredients for themselves. Another side believes that we should make the good parts of the pie bigger, and the bad parts smaller. And there's a third group that simply insists that pie is evil and there should be none for us to eat at all.

And furthermore, the bakers did very little baking.

Five Myths About The Sequester. Note that while this comes from Brookings, one of the two authors is from the American Enterprise Institute, so this is as close to a bipartisan view as you'll see.

2. At least the automatic cuts will reduce runaway spending and begin to control the deficit.

What runaway spending? The $787 billion stimulus was a one-time expenditure that has come and gone. Under current law not including the sequester, non-defense discretionary spending as a share of the economy will shrink to a level not seen in 50 years. Defense spending grew substantially over the past decade, but that pattern has slowed and will soon end. Additional reductions must be achieved intelligently, tied to legitimate national security needs.

Across-the-board cuts can have perverse effects on deficits; as services are cut, the fees users pay for those services are lost. For example, sequester-driven furloughs of air-traffic controllers will lead to the number of flights being reduced.

The annual budget deficit is projected to fall by almost 50 percent in 2013 compared with the height of the recession. Reducing the deficit over the long term requires going where the money is—boosting economic growth, controlling health-care costs and increasing revenue to handle the expense of an aging population. Deeper discretionary-spending cuts are counterproductive; immediate cuts, as Europe has made recently, could lead to a recession and bigger deficits.

Robear, we have had this dialog of runaway spending, crippling debt, and the end of America for over 200 years right now. That drum gets beaten to death, re-skinned, and beat some more.

Andrew Jackson and Hoover got their way, and the US went into depressions.

Yes, I know, I'm against the austerity approach.

IMAGE(http://www.bigshinyrobot.com/reviews/wp-content/uploads/2011/05/seaquest-darwin.jpg)

Robear wrote:

Yes, I know, I'm against the austerity approach.

Well there is also this strange idea of taking economic advice from men who could not even manage their own finances-Jackson and Jefferson died in debt, and Jackson nearly went bust twice before his election. Jefferson's estate had to be sold off and still never satisfied the debts.

USA Today Article

Speaking of bakers and pie, an interesting article about how taxes paid by rich families are the highest they have been in over 30 years.

A new analysis, however, shows that average tax bills for high-income families rarely have been higher since the Congressional Budget Office began tracking the data in 1979. It's middle- and low-income families who aren't paying as much as they used to.

For 2013, families with incomes in the top 20% of the nation will pay an average of 27.2% of their income in federal taxes, according to projections by the Tax Policy Center, a research organization based in Washington. The top 1% of households, those with incomes averaging $1.4 million, will pay an average of 35.5%.

Those tax rates, which include income, payroll, corporate and estate taxes, are among the highest since 1979.

The average family in the bottom 20% of households won't pay any federal taxes. Instead, many families in this group will get payments from the federal government by claiming more in credits than they owe in taxes, including payroll taxes. That will give them a negative tax rate.

What if the DOE gave pure grants and scholarships, not backed loans? While not an express tax, middle class graduates pay a very tidy sum back to the federal government in student loans.

This is a small example of the larger problem of the back asswards and roundabout way that many civil services are funded. We have subsidized healthcare, energy, education with tax breaks, rather than direct funding and it is a very wasteful way of going about that.

Nomad wrote:

USA Today Article

Speaking of bakers and pie, an interesting article about how taxes paid by rich families are the highest they have been in over 30 years.

A new analysis, however, shows that average tax bills for high-income families rarely have been higher since the Congressional Budget Office began tracking the data in 1979. It's middle- and low-income families who aren't paying as much as they used to.

For 2013, families with incomes in the top 20% of the nation will pay an average of 27.2% of their income in federal taxes, according to projections by the Tax Policy Center, a research organization based in Washington. The top 1% of households, those with incomes averaging $1.4 million, will pay an average of 35.5%.

Those tax rates, which include income, payroll, corporate and estate taxes, are among the highest since 1979.

The average family in the bottom 20% of households won't pay any federal taxes. Instead, many families in this group will get payments from the federal government by claiming more in credits than they owe in taxes, including payroll taxes. That will give them a negative tax rate.

This is because the top 20% has all the money, while the bottom 20% has none of it. So the top 20% still isnt paying it's fair share.

NathanialG wrote:
Nomad wrote:

USA Today Article

Speaking of bakers and pie, an interesting article about how taxes paid by rich families are the highest they have been in over 30 years.

This is because the top 20% has all the money, while the bottom 20% has none of it. So the top 20% still isnt paying it's fair share.

Yeah, not a very interesting article at all if it's going to be quoted to us selectively to leave out things like:

For example, the Internal Revenue Service tracks tax returns for the 400 highest-paid filers each year. Those taxpayers made an average of $202 million in 2009, the latest year available. Their average federal income tax rate: 19.9%.

That's still higher than the tax rate paid by most middle-income families, but not by much.

Average after-tax incomes for the top 1% of households more than doubled from 1979 to 2009, increasing by 155%, according to the CBO. Average incomes for those in the middle increased by just 32% during the same period while those at the bottom saw their incomes go up by 45%.

That's what is actually interesting about the article.

CheezePavilion wrote:
NathanialG wrote:
Nomad wrote:

USA Today Article

Speaking of bakers and pie, an interesting article about how taxes paid by rich families are the highest they have been in over 30 years.

This is because the top 20% has all the money, while the bottom 20% has none of it. So the top 20% still isnt paying it's fair share.

Yeah, not a very interesting article at all if it's going to be quoted to us selectively to leave out things like:

For example, the Internal Revenue Service tracks tax returns for the 400 highest-paid filers each year. Those taxpayers made an average of $202 million in 2009, the latest year available. Their average federal income tax rate: 19.9%.

That's still higher than the tax rate paid by most middle-income families, but not by much.

Average after-tax incomes for the top 1% of households more than doubled from 1979 to 2009, increasing by 155%, according to the CBO. Average incomes for those in the middle increased by just 32% during the same period while those at the bottom saw their incomes go up by 45%.

That's what is actually interesting about the article.

Cut me some slack, I just pulled an article summary from the first few paragraphs. I didn't cherry pick sections and cobble together a misleading or "selective" quote. The article has many interesting facets, and not just the ones that happen to support whichever side of the argument you are on.

Nomad wrote:

Cut me some slack, I just pulled an article summary from the first few paragraphs. I didn't cherry pick sections and cobble together a misleading or "selective" quote. The article has many interesting facets, and not just the ones that happen to support whichever side of the argument you are on.

Sorry then, but the lesson is clear: don't pull an article summary from the first few paragraphs. Especially because I would say every facet of that article supports the side of the argument I am on.

Here's an actual CBO paper on income inequality, 1979-2009. Basically, the top quintile fared better than the other four in income gains over the period, while the top 1% saw 3x gains in after-tax income through 2007, after which they were hit by the recession, but seem to have started rebounding in 2010.

Unless their taxes also went up by 300% - and they didn't, as USAToday reported they are only now approaching the tax levels they had in 1979 - the top 1% are *far* better off than they were in 1979. The other 19% were somewhat better off, about a 55% gain in 30 years (a little under 2% per year). The middle 3 quartiles saw their after-tax income grow about 40% over the period (about 1% per year), while the bottom quartile did about the same. If you were in the bottom quartile, however, the recession didn't really change your income.

In only 7 of those 30 years was inflation under 2%. Inflation raised the cost of items by 195.5% during the period. That means that pretty much everyone but the top 2% or so *lost* money in those 30 years.

So the top 1% got about 6x increased after-tax income compared to the next lower 79%. Would it be a disaster to ask them to chip in a bit more? After all, another couple of percent won't kill them, and it certainly won't stall the economy. It might even provide services that could encourage and enable upwards mobility, and ultimately help to reduce the income inequality that the "taxes are evil" crowd has brought us.

Or is the answer to simply give them more of the nation's wealth, in return for whatever they've done that has made the last 30 years so successful for the US economy? Rewarding success, as it were?

I am not going to blame Nomad because USA Today buried the lead and was sloppy above the fold, Cheeze.

We have this ongoing problem of a federal government gridlocked by ideologues unwilling to ever spend money except to blow sh*t up. Raising taxes a little bit, while cutting spending with austerity is a recipe for disaster, not prosperity. But as I said before, some people seem to know better than FDR and Eisenhower, apparently they think that Herbert Hoover and Andrew Jackson are among those wiser than the former two.

So wanted to make a quick post about Harry Reid using the deaths of seven marines in a training accident to make a pont about the sequester. The Marine Corps and a number of conservative pundits are furious at him using the traning accident to score political points.

http://abcnews.go.com/blogs/politics...

I think the backlash against Reid is overblown, but unless funding for critical military training and safety is actually being cut significantly, then IMHO he was wrong to use this tragedy the way he did.

jdzappa wrote:

So wanted to make a quick post about Harry Reid using the deaths of seven marines in a training accident to make a pont about the sequester. The Marine Corps and a number of conservative pundits are furious at him using the traning accident to score political points.

http://abcnews.go.com/blogs/politics...

I think the backlash against Reid is overblown, but unless funding for critical military training and safety is actually being cut significantly, then IMHO he was wrong to use this tragedy the way he did.

The whole thing is political theater. Reid's comment, the backlash both, even the sequester. Ironically, I can only say these folks are treating the sequestration with the level of seriousness they should.

That being said, Reid is a moron, and I'm sad to see yet another "but the troops!" attention grab.

Well, JD, what did you think when John Boehner admitted that there *is* no imminent debt crisis; that is, that the current issue was manufactured by the Republicans for political purposes?

The country isn’t facing an immediate debt crisis, House Speaker John Boehner (R-Ohio) said Sunday, but he argued that Congress and the president must reform entitlements to avert one that lies dead ahead.

“We all know that we have one looming,” Boehner said on ABC’s “This Week”. “And we have one looming because we have entitlement programs that are not sustainable in their current form. They’re going to go bankrupt.”

Boehner expressed agreement with Obama's statement in an ABC interview the other day that the debt doesn't present "an immediate crisis."

And yet, the largest focus by Republicans is to cut discretionary spending on policies and programs that they don't like, in spite of that being a tiny percentage of the budget compared to entitlements. I remember having this conversation with co-workers in the 90's, and pointing out that small changes to entitlements really add up over time, meaning that we have time to fix them without a huge disruption. But for the last 20 years, Republicans have been screaming that "government spending" on things unrelated to entitlements are the problem; well, except with entitlements they don't like, which they say *can't* be fixed; they should be gotten rid of through voucher systems or private funds.

This just underlines the fact that Republicans have deliberately chosen non-cooperation and non-governance to try to prevent Obama getting anything meaningful done. They are creating crises where actually only easily-handled problems exist, with the same goal as before - no compromise in working to eliminate things they don't agree with.

I miss the Reagan Republicans; even they knew that cooperation and compromise was best. Since the late 80's, the "my way or the highway" approach coupled with an increasingly radical agenda has done tremendous damage to the country, and it's on Republican's shoulders.

So how do you feel about the party that's held the entire *economy* for ransom for nothing more than political gain? The sequester and the previous issues we've had are down to Republican policies and politicking, and it's past time they give it up and start playing ball with the rest of the country.

@Robear, I agree with you that the Republicans need to be more bipartisan and that gradual cuts make more sense than across the board pain. What I don't agree with is that there is no crisis in the near future. I look at fresh crisises like Cyprus and can't help but feel we're living on borrowed time. Balancing the budget and starting to pay down our debt is the only sensible thing to do.

jdzappa wrote:

Balancing the budget and starting to pay down our debt is the only sensible thing to do.

In the intermediate- and long-term, yes. But it's moronic to do those things now when the spending cuts would tip us back into recession. Get the economy rolling again and then deal with balancing the budget. Waiting a bit also means that you'll have millions of additional taxpayers and a whole lot more tax revenue to work with when you balance the budget.

jdzappa wrote:

@Robear, I agree with you that the Republicans need to be more bipartisan and that gradual cuts make more sense than across the board pain. What I don't agree with is that there is no crisis in the near future. I look at fresh crisises like Cyprus and can't help but feel we're living on borrowed time. Balancing the budget and starting to pay down our debt is the only sensible thing to do.

Possibly, but Republicans can't even argue this when they talk about how they need tax breaks in deals for the wealthiest Americans because... it didn't work the last couple of times, but we're pretty sure it will this time.