A Win-Win on Sequestration?

By Davis George

Recently, NBC news quoted a pilot telling his passengers: “we’re being delayed an hour and 15 minutes”. In an utterly unrelated sector, the National Archives Records Administration (NARA) just released a memo stating that they will be forced to defer the preservation, conservation, and transcription of several texts that are currently only available in obsolete formats.
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What could possibly connect these two unfortunate events?

The words of that same pilot actually noted that the delay was due to the “sequester”, which also forced NARA to cut back. In fact, the Huffington Post notes that between the two agencies, the FAA had to furlough – give temporary unpaid leave to – several employees while the NARA had to reduce the number of hours worked, ending in costly delay and program inefficiency. In reality, sequestration has far reaching externalities that affect each and every American.
What exactly is sequestration, and what does it do to the US economy? The Washington Post explains that the sequester is a series of spending cuts, a failsafe part of the Budget Control Act, which cuts $1.2 trillion dollars federal spending between 2013 and 2021. The sequester is divided fairly equally between domestic discretionary cuts and decreases in defense spending. Unfortunately, the Congressional Budget Office estimates that of the 1.5% decrease in economic growth that the US will experience in 2013, about 0.56% will be due to the cutting of various spending programs which normally promulgate aggregate demand within the economy.

However, despite the plans for sequestration, several Congressmen have had second thoughts after experiencing the backlash which accompanied cuts such as the Federal Aviation Administration furloughs. David Lawder of Reuters reports that Congress gave the airline industry a break following cuts, allowing them to shift funds within their budget to avoid further delays which, naturally, would correlate to further economic slowdown. Furthermore, the Pentagon is currently preparing to plead with Congress for leeway regarding its own reductions, requesting space to allow the military to take the cuts in stride. The Justice Department has also been allowed to shift its decreases, moving 313 million dollars to other parts of the budget to avoid placing additional burdens on employees. Clearly, the onslaught of spending reductions has quickly expanded to public outrage, even before the true burden of the sequester hits. In fact, although Lawder furthers that the military is likely to get approval for monetary shifts, several other programs have no such privilege. Take, for instance, the small education improvement program “Head Start”, which gives underprivileged children an earlier start at school in order to foster better learning habits. This program is experiencing cuts which will prevent roughly 70,000 children from benefitting from this program. Overall, economist Stephen Fuller of George Mason University estimates that in addition to losing beneficiaries of these programs, nearly 2.14 million jobs will be lost due to sequestration, a 1.5% increase in unemployment.

Many would cite the sequester as a necessary measure to rein in government spending, and when considering the general concept of cutting spending, they would be correct in saying that it is vital to reduce the deficit we create each year. However, sequestration is a brutal, devastating financial restraint on our economy, and in contrast to sequestration, the Federal Reserve proposes a policy of increased spending. According to an article written by Dominic Rushe of The Guardian on March 20th, the Federal Reserve believes that continued financial stimulus into bonds and mortgage backed securities will solve the issue over time. They cite Congress as the problem, stating that Congress is pushing for a type of unrealistic austerity, and proposing to continue their $85 billion dollar a month stimulus package. However, the issue with this is that not only does an increase in monetary circulation cause hyper inflation, but the interest on the borrowed currency threatens to overtake us with more debt. In fact, according to the Congressional Research Service, by 2025, entitlement programs, along with the interest on the debt taken to keep them solvent, will take over 100% of current federal spending.

Fortunately, the problem of the debt can be solved without painful cuts or the increased burden of additional debt. Brianna Ehley of the Washington Times reports that government waste is extremely high, especially regarding programs such as catfish inspection, where repeated inspection costs the government 30 million dollars. The Government Accountability Office has already submitted a report to Congress regarding the waste in our government. This waste is cumulatively expressed in 31 areas of overlap, and possible cost savings through streamlining of roughly 95 billion dollars, 10 billion dollars more than sequestration. Unfortunately, as Senator Tom Coburn explains, Congress fails to address these areas of waste and continues to push for policies that only hurt their constituents.

Overall, the streamlining of our debt definitely has importance, though the methodology of those solutions must be taken into serious scrutiny. The sequester is clearly not the correct avenue for a reduction in annual government spending, especially when the government already wastes so much on overlapping programs. When these programs are cut, we will not only reduce our deficit, but also give the FAA room to transport people to where they need to be without any delay in air traffic. The option of cutting out waste is really the only way that we can have our cake, and eat it too.

1.http://www.thefiscaltimes.com/Articles/2013/04/14/Government-Wastes-More-than-the-Cost-of-the-Sequester.aspx#page1
2.http://www.washingtonpost.com/blogs/wonkblog/wp/2013/02/20/the-sequester-absolutely-everything-you-could-possibly-need-to-know-in-one-faq/
3.http://news.yahoo.com/blogs/ticket/lawmakers-fix-flight-delays-caused-sequestration-going-airport-164454939.html
4.http://www.huffingtonpost.com/2013/05/01/sequester-victims-nara_n_3194085.html
5.http://www.reuters.com/article/2013/05/01/us-usa-fiscal-defense-idUSBRE94016S20130501
6.http://www.guardian.co.uk/business/2013/mar/20/federal-reserve-stimulus-interest-rates