Sunday, February 24, 2013

Size of Sequester

Here and there the Media actually come close to discussing the size of the sequester looming on March 1, 2013. When they do, the total sequester ($85 billion) is expressed as a percent of the total federal budget ($3,600 billion)—2.36 percent (Columbus Dispatch,; the Baltimore Sun uses a federal budget figure of $3,803 billion, hence produces a lower percentage—2.24. In any case, we have a magnitude.

But things get complicated in a hurry. Social Security and Medicaid are exempted from the cuts; cuts in Medicare are limited. These three programs amount to about 57 percent of the total federal budget—which explains why the militant right wing demands cuts in “entitlements,” which these programs are said to represent.

Sticking with a $3.6 trillion budget, this means that the sequester must be taken out of $1.585 trillion†. When that is done, the percentage of the affected budget is 5.4 percent rather than 2.4. That’s still a small number.

Now Congress, while pretending to do a uniform across-the-board budget cut, almost immediately compromises things, thus muddying the waters. It exempts some programs fully, some partially. But let’s suppose that a genuine cut is needed. In that case, by all means let us cut the budget across-the-board. That would affect Brigitte and me, hence I’m advocating something that would hurt us; we are on Social Security and benefit from Medicare. But if all are guilty, all should pay at the same rate. The cuts should fall on all expenditures by the Federal Government, equally, and at the same rate. No one needs to be laid off—only to lose income at the 2.4 percent rate. Contractors? They should be paid 2.4 percent less. Electric power suppliers? Their bills should be “discounted” 2.4 percent. And so on down the line. Everyone benefiting from federal funds—a 2.4 percent cut.

Are you a beneficiary? Calculate the hit on yourself. And you could—if Congress were straight-forward about it. But, of course, the aim here, ultimately, was to cut “entitlements.” The militant right just didn’t have the power to get its way.

If the militant right did have its way, conditions quite similar to the early, read Dickensian, industrial revolution would return. An unfortunately large segment of the population would not save for its retirement or health care unless compelled to do so by wage deductions. Significant percentages of the public would indeed be unable to do so. The reason why these programs came into being in the first place was because the conditions of which Dickens wrote were not desirable for the nation as a whole.

P.S. It just occurred to me that, of course, a 2.4 percent tax hike would have the same laudable effect as a sequester. But never mind…
†3,600 * .57 = 2,052.  3,600 - 2,052 = 1,585.  85 / 1,585 = .0536.  .0536 * 100 = 5.36.  Rounded, 5.4 percent.

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