- September 15, 2012 By: Robert Bowen
The White House Office of Management and Budget (OMB) released the details of how the budget cuts required under the Budget Control Act of 2011 (BCA) will be allocated. The $1 trillion in cuts, called the sequestration, over then next decade was passed by Congress to reduce the national debt. This is the second part of a two articles on the subject.
The Obama administration made a statement at the beginning of the OMB report about its beliefs about sequestration and what Congress should do to prevent these severe cuts from taking affect. Here is part of that statement:
“In August 2011, bipartisan majorities in both the House and Senate voted for the threat
of sequestration as a mechanism to force Congress to act on further deficit reduction. The specter of harmful across-the-board cuts to defense and nondefense programs was intended to drive both sides to compromise. The sequestration itself was never intended to be implemented. The Administration strongly believes that sequestration is bad policy, and that Congress can and should take action to avoid it by passing a comprehensive and balanced deficit reduction package.
As the Administration has made clear, no amount of planning can mitigate the effect of these cuts. Sequestration is a blunt and indiscriminate instrument. It is not the responsible way for our Nation to achieve deficit reduction. The President has already presented two proposals for balanced and comprehensive deficit reduction. It is time for Congress to act. Members of Congress should work together to produce a balanced plan that achieves at least the level of deficit reduction agreed to in the BCA that the President can sign to avoid sequestration.”
The report outlined the details of how the sequestration will be implemented.
The bill required a cut in the deficit of $1.2 trillion over 10 years. The OMB said $984 billion will come from program cuts; $216 trillion will come from interest savings. That works out to an annual cut of $109 billion $56.667 a year each from defense and other federal programs.
The defense cuts will come mostly from discretionary spending. Of the $56.667 billion a year, $56.6 comes from discretionary spending. The cuts amount to a 9.4% cut each year to all defense programs except those exempt from the sequestration law. A few Pentagon programs will get a 10% cut.
The Department of Defense would be able to shift funds around to ensure war fighting and critical military readiness capabilities are not degraded. However, sequestration would result in a reduction in the readiness of many non-deployed units, delays in investments in new equipment and facilities, cutbacks in equipment repairs, declines in military research and development efforts, and reductions in base services for military families according to the report.
When it comes to non-defense spending cuts, they will be wide-spread as the law requires. Medicare will be cut 2% which is the maximum the law allows Medicare to be cut. Other mandatory qualification-based domestic programs like Medicaid, Food Stamps, etc will be cut 7.6%.
Domestic discretionary programs such as scientific grants and Education Department programs will be subject to 8.2% cuts across the board. Congress and the White House also get their budgets cut. Pell grants, food safety, the FAA, FEMA, farm programs also get cut 8.2%. These cuts will hit nearly every agency of government.
Most people when asked are for spending cuts at least until the cuts affect a program they like or use. Then, the attitude changes. Cut everything else, leave my program alone.” When everyone says that, nothing gets cut. That is why we have the debt.
The problem with this plan, however, is two-fold. First, the cuts are not strategic. They are not based on the cost-effectiveness of a program. They are across the board.
Secondly, economists warn that austerity at this point in the recovery would cut GDP, slow the recovery, or perhaps send us back into recession. An average cut of 8.2% in federal salaries alone will mean tremendous layoffs. So will cuts by defense contractors. That will raise the unemployment rate, hurt consumer spending, stifle small business, and throw ice on the recovery.
Despite the severity of the problem, nothing will happen until after the election—if then.
Meanwhile, taxpayers are paying the salaries, expenses, and medical plans for Congress to do-nothing.