Sequestration - June 2013

By now, all of us have heard about some of the impacts the sequestration process has allegedly caused.  The Forest Service asked for several million dollars back from the state of Wyoming because of the sequestration and the federal government is refusing to send Wyoming some money from federal mineral royalties because of the sequestration.

There have been stories coming out of Washington, D.C. that tours of the White House have been canceled because money to pay tour guides was no longer there.  In February, Senator Mike Enzi mentioned that sequestration would probably be used to cut the most visible programs so that alarm could be generated to get folks to force politicians to do something about the cuts.

A couple of years ago, I talked to members about what would happen if the IRS sent us a receipt for our taxes, outlining where the money we sent to the U.S. Treasury was spent.  The biggest expenditures were for Social Security, Medicare/Medicaid, the military and the national debt.   Under sequestration the required cuts came out of the discretionary portion of the budget with two percent coming out of Medicare.  In other words, more than 60% of the budget ($3.778 trillion for 2014) was off limits to the sequestration process because they were identified by Congress in past years as mandatory.  Two of the programs that make up the largest amounts on the receipt from your taxes are Social Security ($860 billion) and Medicare/Medicaid ($828 billion).  Because of the authorization language those programs are virtually untouchable unless Congress changes the authorization language; which is not likely to occur.  Of the remaining $1.242 trillion in the discretionary category roughly half is for military spending.

The point of all of this is to show that while the sequestration required an $85 billion cut from federal spending in 2013, there isn't much that can come out of the mandatory areas of the budget which make up over 60 percent of the spending.  Most has to come from the discretionary aspects of the budget.  In addition to not being able to come out of the entire budget, the spending cuts need to come out of seven months instead of 12 months.  Still the spending cuts amount to about seven percent of the discretionary spending and over the last few years, the state of Wyoming has had to cut its budget by those amounts.  In addition, there certainly seems to be some merit in the argument raised by Sen. Enzi.  In a New York Times article on the furloughs and layoffs by the Federal Aviation Administration, airline officials privately said the agency was seeking to impose the maximum possible pain for passengers to make a political point.  Whether that was F.A.A.’s intention or not, it resulted in quick reaction by Congress and the President.

It is obvious from watching the process that the federal government isn't very good at being able to decide what to cut from their budgets.  Part of that is because they have never had to do it.  Over the years we have been treated to a redefining of terms.  Increases in spending less than wanted were called budget cuts.  Federal agencies have not had to sit down and do a good analysis of their core programs to see which ones need to be done and which ones are merely nice to have done.

What is needed is a concerted effort.  In an article in Imprimis, author Amity Shlaes talks about how President Coolidge was noted for his ability to say no.  Shortly after taking office following Warren Harding's death, Coolidge's budget director Herbert Lord established a “Two Percent Club” for executive branch staffers who managed to save two percent of their budgets.  Coolidge himself continually looked for ways to save money and stated once that, “We must have no carelessness in our dealings with public property or the expenditure of public money.”

I can only imagine what the talking heads would have to say if a “Two Percent Club” was established today.  Given the budgetary issues we are facing, perhaps it is time to find out.