Government Spending

Sequester Cuts Biggest Anticlimax Since Release of Segway, Final Fatima Revelation, Last Two Matrix Movies

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For all the talk about whether the Super Colossal Super Committee will reach any sort of consensus to avoid "triggering" "automatic" "cuts" (quotes denote falsehoods here), it's worth pausing to see just how bad the supposedly draconian reductions in spending would be if the mandatory "sequestration" would take place. As you may recall, as part of the debt-ceiling deal reached in August, Congress pulled together a rag-tag group of misfits to come up with some measly cuts spread over a decade to off-set a bump in the debt the government can take on through 2012. The committee is supposed to offer up $1.5 trillion in cuts over the next decade by the end of November, and the government has to sign off on them by year's end. Otherwise, an additional $1.2 trillion bucks will be phased in over 10 years, starting in 2013.

So what would it look like if Congress—the same group that hasn't managed to pass a budget in a historically long period of time—fails this test? What would an additional $1.2 trillion cuts spread over a decade look like compared to projected spending without the trims? Remember that we're spending on the order of $3.5 trillion to $3.8 trillion a year right now.

Reason columnist and Mercatus Center economist Veronique de Rugy supplies a chart that is as underwhelming as it is nausea-inducing. De Rugy explains:

The sequester is an automatic budget enforcement mechanism triggered when the Joint Select Committee on Deficit Reduction fails to enact legislation to reduce the deficit by $1.2 trillion over ten years. Instead of simply passing appropriated funds to the agencies, the U.S. Treasury "sequesters" the difference between the cap set in the BCA and the amount appropriated.

The whole idea of the sequester threat, of course, is precisely that it is so awful it will compel the committee's participants and warring Democrats and Republicans to work together. The sequester needs to be that outer-space alien invasion that Paul Krugman and others steeped in Watchmen comics envision as the way to bring unity out of dischord.

But it turns out that the sword of Damocles hanging over the heads of such great statesmen as John Kerry, Patty Murray, Fred Upton, and Jon Kyl is about as threatening as an infant's fingernail clipper:

Changes in spending from sequestration result in new budget projections below the CBO's baseline projection of spending based on current law. The federal government would spend $3.62 trillion in the first year with sequestration versus the $3.69 trillion projected by CBO. By 2021, the government would spend $5.26 trillion versus the $5.41 trillion projected. Overall, without a sequester, federal spending would increase $1.7 trillion over those ten years (blue line). With a sequester, federal spending would increase over ten years by $1.6 trillion (red line).

More here.

Does anyone seriously wonder why we are so out of money?

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  1. But if you’re a government worker and you see your paycheck increase by 5% after you requested an 8% raise, your larger paycheck represents a 3% cut in pay.

  2. Say it ain’t so, Joe. Please, say it ain’t so!

  3. Let’s make a charitable assumption that deficits will decline by 1/3 over the next decade all by themselves. Under that assumption, our FY 2011 deficit of $1.3 drops all the way to $850BB in FY 2021.

    Total deficits over the next decade would be around, lets say a nice even $10TT.

    So, Congress is locking up on cuts that are between 12 and 15% of the deficit.

    So doomed. So very, very doomed.

    1. Put another way:

      Let’s assume (fairly charitably, again) that total spending over the next 10 years will be $40TT. This will require a significant slowdown in the rate of increase, BTW.

      That means Congress is locking up on cuts that are between 3% and 4% of total projected spending. And aren’t really cuts (as the graph shows) at all.

      So doomed, etc.

      1. I can’t understand the graph without the alt-text.

  4. Notice how the Right and Left are playing in harmony, both wailing about how terrible these “cuts” would be.

    The Right: “Our military defenses would be gutted! Our country will be overrun by scimitar-waving Mooslims! They’ll kill us all and then make us read the Koran!”

    The Left: “Agh, like that matters! The social safety net will be gutted! We’ll all be starving in the streets–and the streets will be falling apart!”

    The sad thing is that this ridiculous song-and-dance works on so many people.

  5. We can’t possibly cut spending during a bad economy. Think about the children!

    So if you can’t cut on the way up and you can’t cut on the way down, I guess you just have to wait until it’s too late, and the markets ride roughshod right over your ass…

    We are gonna need a new term for the ‘developed world’.

    1. We are gonna need a new term for the ‘developed world’.

      Radioactive wasteland?

  6. Those cuts would look a lot more draconian if you just zoomed in the graph to the upper right part.

    1. You mean like they do on CNBC?

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