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Posts Tagged ‘Sequester’

There’s a saying in the sports world about how last-minute comebacks are examples of “snatching victory from the jaws of defeat.”

I don’t like that phrase because it reminds me of the painful way my beloved Georgia Bulldogs were defeated a couple of weeks ago by Auburn.

But I also don’t like the saying because it describes what Obama and other advocates of big government must be thinking now that Republicans apparently are about to do the opposite and “snatch defeat from the jaws of victory.”

More specifically, the GOP appears willing to give away the sequester’s real and meaningful spending restraint and replace that fiscal discipline with a package of gimmicks and new revenues.

I warned last month that something bad might happen to the sequester, but even a pessimist like me didn’t envision such a big defeat for fiscal responsibility.

You may be thinking to yourself that even the “stupid party” couldn’t be foolish enough to save Obama from his biggest defeat, but check out these excerpts from a Wall Street Journal report.

Sen. Patty Murray (D., Wash.) and Rep. Paul Ryan (R., Wis.), chief negotiators for their parties, are closing in on a deal… At issue are efforts to craft a compromise that would ease across-the-board spending cuts due to take effect in January, known as the sequester, and replace them with a mix of increased fees and cuts in mandatory spending programs.

But the supposed cuts wouldn’t include any genuine entitlement reform. And there would be back-door tax hikes.

Officials familiar with the talks say negotiators are stitching together a package of offsets to the planned sequester cuts that would include none of the major cuts in Medicare or other entitlement programs that Mr. Ryan has wanted… Instead, it would include more targeted and arcane measures, such as increased fees for airport-security and federal guarantees of private pensions.

But the package may get even worse before the ink is dry.

Democrats on Thursday stepped up their demands in advance of the closing days of negotiations between Ms. Murray and Mr. Ryan. House Democratic Leader Nancy Pelosi (D., Calif.) brought a fresh demand to the table by saying she wouldn’t support any budget deal unless in included or was accompanied by an agreement to renew expanded unemployment benefits that expire before the end of the year—which would be a major threat to any deal.

Gee, wouldn’t that be wonderful. Not only may GOPers surrender the sequester and acquiesce to some tax hikes, but they might also condemn unemployed people to further joblessness and despair.

That’s even worse than the part of the plan that would increase taxes on airline travel to further subsidize the Keystone Cops of the TSA.

But look at the bright side…at least for DC insiders. If the sequester is gutted, that will be a big victory for lobbyists. That means they’ll get larger bonuses, which means their kids will have even more presents under the Christmas tree.

As for the rest of the nation? Well, you can’t make an omelet without scrambling a few eggs.

P.S. I suppose we should consider ourselves lucky that this looming agreement isn’t as bad as some past budget deals, such as the read-my-lips fiasco of 1990.

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There’s a joke in Washington that Democrats are the evil party and Republicans are the stupid party.

Except this joke isn’t very funny since a lot of bad policy occurs when gullible GOPers get lured into “bipartisan” deals that expand government. Consider, for example, all the tax-hiking budget deals – such as the “read my lips” capitulation of the first President Bush – that enable more spending.

To be fair, sometimes Republicans are placed in a no-win situation. During the “fiscal cliff” discussions last year, Obama held the upper hand since he would get a huge automatic tax hike if nothing happened. So the final agreement, which resulted in a smaller tax increase, was actually better (or, to be more accurate, less worse) than I was expecting.

But in other cases, Republicans should prevail because they have the stronger hand. That’s the situation we’re in today with the automatic spending cuts known as sequestration.

The sequester, which resulted from the 2011 debt-limit fight, was an unambiguous defeat for Obama and a significant victory for advocates of smaller government. And it was a defeat for all the lobbyists, special interests, and crony capitalists that get rich when there’s more money in Washington.

Though I don’t want to exaggerate. The “cuts” merely reduce the projected growth of federal spending.

But after years of unconstrained spending by both Bush and Obama, any fiscal restraint is a welcome development. Indeed, the sequester helps to explain why we’ve seen two consecutive years of lower spending in Washington for the first time since the 1950s.

No wonder Obama is desperate to cancel sequestration, even to the point of making himself a laughingstock to cartoonists.

But maybe Obama will have the last laugh because some Republicans are negotiating with Democrats to undo some of the benefits of sequestration. Here are some excerpts from a Politico report.

…an agreement may not be so elusive after all. Hopes are growing that Ryan and Murray could reach a narrow deal to replace a portion of the automatic spending cuts known as sequestration, according to lawmakers and senior aides involved in the discussions. …On Tuesday, several key lawmakers and aides said there was about a 50-50 chance, if not better, that a small deal could be reached — a much better prognosis than many had anticipated. Murray said in an interview Tuesday that she’s in “very good conversations” with Ryan. “The goal here is to replace sequestration with responsible spending cuts and revenue,” Murray said.

I shudder to think what Senator Murray means by “responsible spending cuts.” Presumably gimmicks.

But we don’t need a vivid imagination to know what she means by “revenue.” The real question is why Republicans would be willing to “feed the beast” with more revenue, particularly when it means eviscerating the genuine spending restraint imposed by sequestration.

It even appears as if Republicans are willing to increase unemployment as part of a bad deal.

House and Senate appropriators are putting major pressure on Murray and Ryan… Revenue raisers being discussed include increased Transportation Security Administration fees… As an extra bargaining chip, Republicans would consider including an extension of extended unemployment benefits, which expire on Dec. 28. …Murray has made clear she won’t agree to any structural changes to Medicare or Social Security, particularly without significant revenue increases.

So let’s summarize this issue.

Current law is the sequester, which is a big victory.

The big spenders understandably want to eliminate or weaken the sequester, and would be especially happy to get more revenue coming to Washington.

Paul Ryan and the other Republican negotiators have the upper hand since the sequester continues if there’s no agreement.

So we have to ask ourselves why GOPers are even bothering to negotiate. There are two possible answers.

1. The “stupid party” joke actually is an accurate assessment of mental ability and Republicans are easy to trick because of their developmental challenges.

2. Republicans pretend to be fiscal conservatives when talking to voters but secretly want to enable more spending by sabotaging the sequester.

I’m actually being a bit unfair. What’s really happening is that there are divisions inside the GOP. A majority of the Republican caucus presumably understands that they hold a winning hand and they’re content to maintain current law and let the sequester continue.

But the Republicans on the Appropriations Committee tend to dislike the sequester since it reduces their ability to spend other people’s money in exchange for political support.

They correctly complain that America’s main fiscal problem is entitlement spending, so you can understand why they’re a bit irked that their programs are being restrained while boondoggles such as Obamacare are putting us deeper in a fiscal hole.

But that’s not an argument to waste money on so-called discretionary programs. Moreover, the appropriators are wildly wrong when they assert that appropriations spending already has been “cut to the bone.”

There are also some hawks who accurately complain that defense spending incurs a disproportionate share of the sequester, but they are wrong when they say this endangers national security. After all, defense spending still grows under sequestration and America will still account for nearly 50 percent of the world’s military spending.

So what’s the bottom line?

In an ideal world, policy makers would focus first on desperately needed entitlement reform. And I suspect many members of the Appropriations and Defense Committees would grumble a lot less about restraints on discretionary spending if real structural reforms to so-called mandatory programs were being implemented.

But we don’t live in that world. The sad reality of Washington is that genuine entitlement reform won’t happen with Obama in the White House. But that’s not an argument for surrendering on sequestration and allowing discretionary spending to climb at a faster rate.

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I recently gave five reasons why the shutdown fight was worthwhile and my number one reason was that it’s better to be on offense than defense.

It seems I’m not the only one to reach this sensible conclusion. Here’s some of what Fred Barnes wrote today for the Wall Street Journal.

In the deal that ended the government shutdown, Republicans…got almost nothing they’d sought. But what has been largely overlooked is that the deal didn’t curtail, much less end, the automatic spending cuts known as the budget sequester. And undoing the sequester is what President Obama and Democrats wanted most of all. The survival of the automatic spending cuts gives Republicans the upper hand in confronting the White House and congressional Democrats on budget issues… For Republicans eager to corral federal spending—and that’s most of them—the sequester is a gift that keeps on giving. …Democrats, especially Senate Majority Leader Harry Reid, are fit to be tied as they watch cherished social programs gradually shrink.

Other than the assertion that social programs are shrinking (they’re simply not growing as fast), Barnes is right. By going on offense on Obamacare, Ted Cruz and his allies put the left on defense and prevented them from successfully organizing to undo the sequester.

Kudos to the Tea Party for being willing to do the right thing against uphill odds.

In his column, Barnes explains that the sequester has been great news.

To say the sequester has backfired for Democrats is putting it mildly. …The sequester is cuts and only cuts. As a result, Senate Minority Leader Mitch McConnell noted proudly last week when announcing the end of the shutdown that “government spending has declined for two years in a row [for] the first time in 50 years.” …Saving the sequester “has been a top priority for me and my Republican colleagues throughout the debate” about the shutdown, Mr. McConnell said. …Republicans can sit on their hands and experience the joy of trimming the size of government and, thanks to the sequester, watching Democrats gripe about it.

Spot on. The sequester was a major defeat for Obama (and also a big loss to the Washington establishment).

Moreover, Senator McConnell is correct about government spending actually declining for two consecutive years, which is a remarkable achievement and a sign that the Tea Party has made a difference (though I explained in my post on presidential spending performance that it’s not as impressive as it sounds because of the way TARP money is measured).

So let’s hope Republicans don’t fumble away the sequester as part of some tax-hiking grand bargain that will enable bigger government.

Since we’re doing some after-the-fact analysis of the shutdown fight, this gives me an opportunity to belatedly share some great shutdown images from Buzzfeed. There are about 20 of these, all of which are worth seeing. Here are my three favorite ones.

We’ll start with some horrid anarchists disobeying the government.

Buzzfeed Shutdown 3

Here we have some radicals, probably from the Tea Party.

Buzzfeed Shutdown 2

Last but not least, here are WWII vets who failed to obey the statist clowns at the National Park Service.

Buzzfeed Shutdown 1

P.S. Speaking of WWII vets, I shared an inspirational video about how they are being brought to their memorial in “honor flights.” Here’s a new video on younger vets “twerking” to publicize their Defend Freedom tour.

Good to know that there are still lots of Americans who think there’s something still worth defending.

P.P.S. Previous examples of government shutdown humor can be enjoyed by clicking here, hereherehere, and here.

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Why does the Tea Party attract such vitriolic opposition, whether from Obama’s IRS or big-government Republicans like Karl Rove?

The answer is simple. People in Washington don’t like the Tea Party because this citizen uprising is making it difficult to engage in business-as-usual shenanigans.

I shared a couple of columns (here and here) back before the 2010 elections about the potential impact of the Tea Party, but it wasn’t until earlier this year that I put together some hard numbers showing that this small-government movement has made a difference.

Simply stated, Washington’s spending trajectory is still headed in the wrong direction, but we’re becoming Greece (or Portugal, Spain, Italy, etc) at a significantly slower pace.

That’s hardly libertarian Nirvana, to be sure, but let’s remember the golden rule, which is that fiscal policy is headed in the right direction so long as the private sector grows faster than the burden of government spending.

And that’s what’s been happening. Indeed, we’ve even experienced a couple of years with no growth in the size of the public sector! Here’s some of what Steve Moore wrote for today’s Wall Street Journal.

According to the Congressional Budget Office, annual outlays peaked at $3.598 trillion in fiscal 2011. After President Obama’s first two years in office, many in Washington expected that number to hit $4 trillion by 2014. Instead, spending fell to $3.537 trillion in fiscal 2012, and is on pace to fall below $3.45 trillion by the end of this fiscal year (Sept. 30). The $150 billion budget decline of 4% is the first time federal expenditures have fallen for two consecutive years since the end of the Korean War. This reversal from the spending binge in 2009 and 2010 began with the debt-ceiling agreement between Mr. Obama and House Speaker John Boehner in 2011.

This chart shows what’s happened to federal spending over the twenty years. We’ve gone from decent policy under Clinton to profligacy last decade and now a period of fiscal responsibility.

Obama Spending Binge Ended

As you can imagine, President Obama is not happy about this development, particularly since sequestration was a huge political and policy defeat for the White House.

So it’s understandable he’s trying to seduce GOPers into a budget deal that would replace sequestration with tax hikes. Steve explains this would be very misguided.

As long as Republicans don’t foolishly undo this amazing progress by agreeing to Mr. Obama’s demands for a “balanced approach” to the 2014 budget in exchange for calling off the sequester, additional expenditure cuts will continue automatically.

But even if Republicans don’t fall into Obama’s tax-hike trap, we shouldn’t overstate this victory.  After all, recent spending cuts are not overly impressive when you compare them to the spending orgy that took place during the Bush Administration and the early years of the Obama Administration.

Admittedly, this fiscal progress follows the gigantic budget blowout that began with the last year of George W. Bush’s presidency and the first two years of Mr. Obama’s. In fiscal 2009 alone, federal spending surged by $600 billion. That same year, outlays as a share of GDP reached a post-World War II high of 25.2%. But by the end of this fiscal year, outlays as a share of GDP could fall to as low as 21.5%. At least for now, the great Washington spending blitz of the Obama first term is over.

Moreover, some of the “spending cuts” are simply a back-door form of revenue, an issue I explained when comparing the fiscal record of all Presidents from LBJ to Obama.

Some $80 billion of the outlay savings have come from one-time partial repayments back to the government for the hundreds of billions spent on the bailouts of banks and of Fannie Mae and Freddie Mac.

But let’s not pick too many nits. We’re making a bit of progress, which is bad news for all the interest groups feeding at the federal trough.

The sequester is squeezing the very programs liberals care most about—including the National Endowment for the Arts, green-energy subsidies, the Environmental Protection Agency and National Public Radio. Outside Washington, the sequester is forcing a fiscal retrenchment for such liberal special-interest groups as Planned Parenthood and the National Council of La Raza, which have grown dependent on government largess.

That being said, Steve notes that the short-term progress will quickly fade away if nothing is done to deal with entitlements.

…the fiscal story isn’t all rosy. The major entitlements remain on autopilot and are roaring toward insolvency. Thanks in large part to Mr. Obama’s aversion to practical fixes, the Congressional Budget Office calculates that through July of this year Social Security, Medicare and Medicaid spending are up $73 billion from just last year. This doesn’t include ObamaCare, which is scheduled to add $1 trillion of new costs over the next decade.

Remember, though, that there’s a huge difference between genuine entitlement reform and gimmicks such as price controls and means-testing that merely translate into a year or two of illusory savings.

Let’s close on an upbeat point. As Steve explains in his conclusion, the left must be glum that Obama’s reelection wasn’t the trigger for a new expansion of the welfare state.

Liberals had hoped that re-electing Mr. Obama, the most pro-spending president since LBJ, would unleash another four years of Great Society government expansion. Instead, spending caps and the sequester are squashing these progressive dreams. Welcome to the new fiscal reality in Washington.

I’ll go even farther than Steve. It’s not just that Obama’s victory didn’t translate into bigger government. I think the 2012 election was a closing chapter in an unfortunate era of big-government Republicanism.

And as illustrated by this poll showing a hypothetical contest between Reagan and Obama, the American people would welcome the chance to support a candidate who favored small government and free markets.

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You don’t enjoy many victories when you fight for liberty, so I’m not averse to spiking the football on those rare occasions when we win.

That’s why I shared this very funny cartoon last week to celebrate Obama’s belly flop on gun control.

Now we have another cartoon, this one by Henry Payne, mocking the Administration’s shameful effort to force a tax increase by deliberately making air travel less convenient.

Sequester Tax FAA

No wonder the President is behaving in such a petulant fashion. The sequester is an embarrassing defeat for Obama and other proponents of bigger government.

He thought he could bully Republicans into a class-warfare tax hike. Now he’s resorting to pathetic gimmicks.

And he lost on that issue now that Congress has made explicit that the FAA has authority to reallocate funds.

Let’s not just spike the football. Let’s do a dance in the end zone.

 

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In an interview with Neil Cavuto earlier this month, I mocked proponents of big government for their hysterical predictions of bad things happening under sequestration. And cartoonists had a field day making the same point (see here and here).

The White House obviously wasn’t happy about the sequester, in part because they like bigger government and also because sequestration was a big defeat for the President.

Well, now the Obama Administration sees a chance for revenge and redemption. The President’s appointees, by choosing to furlough air traffic controllers, are seeking to turn air travel into something akin to a visit to the Post Office or DMV. It’s clear that the White House hopes to recreate momentum for a tax hike as an alternative to sequestration.

But they’re not exactly being subtle.

The Wall Street Journal exposes the White House’s political motivated chicanery, starting with the very important point that the FAA’s budget – even after sequestration – is as large as it was in 2010. Yet the White House is manipulating the sequester to cause the maximum amount of inconvenience for taxpayers.

The sequester cuts about $637 million from the FAA, which is less than 4% of its $15.9 billion 2012 budget, and it limits the agency to what it spent in 2010. The White House decided to translate this 4% cut that it has the legal discretion to avoid into a 10% cut for air traffic controllers. Though controllers will be furloughed for one of every 10 working days, four of every 10 flights won’t arrive on time.

The Obama Administration is pretending that it’s merely following the law, but the WSJ editorial debunks that notion.

This is a political pose to make the sequester more disruptive. Legally speaking, the sequester applies at a more general level known as “accounts.” The air traffic account includes 15,000 controllers out of 31,000 employees. The White House could keep the controllers on duty simply by allocating more furlough days to these other non-essential workers. Instead, the FAA is even imposing the controller furlough on every airport equally, not prioritizing among the largest and busiest airports. …ever since Al Gore launched a training initiative to increase the productivity of air traffic controllers in 1998, productivity has continued to fall. A larger workforce is now in charge of a smaller workload as the number of flights has dropped by 23%.

I didn’t realize that controllers were doing less work over time, but I’m not surprised to learn that superfluous bureaucrats at the FAA are being protected.

But the WSJ doesn’t go far enough. My Cato colleague Chris Edwards has a column in the Daily Caller that outlines the inefficiency of the FAA.

The federal budget sequester is interfering with the air traffic control (ATC) system and snarling up air traffic. As usual, politicians are pointing fingers of blame at everybody but themselves. But politicians are the ones who have strapped the ATC system to the chaotic federal budget. And they’re the ones who have insisted on running ATC as a bureaucracy, rather than freeing it to become the high-tech private business that it should be. …Last year Bloomberg reported: “More than one-third of the 30 contracts critical to building a new U.S. air-traffic system are over budget and half are delayed, a government audit concluded.

Chris then takes the logical next step and says the system should be privatized. Which is exactly what happened in his home country of Canada.

To run smoothly and efficiently, our ATC system should be given independence from the government. We should privatize the system, as Canada has done very successfully. …Canada provides an excellent model for U.S. reforms. Canada’s ATC system is run by the nonprofit corporation Nav Canada, which is separate from the government. Like any private business, it raises revenues from its customers to cover its operational costs and capital investments. The company’s financial statements for 2012 show revenues and expenses of $1.2 billion, with $125 million allocated to capital expenditures. Unlike the U.S. system, Nav Canada is self-supporting and not subsidized.

I’ve already written on this topic, citing some good analysis from Canada’s Financial Post, and the evidence is overwhelming that the private system in Canada works much better than the inefficient bureaucracy we have in the United States.

Let’s close with a Michael Ramirez cartoon. The “politics” and “waste” markings are very appropriate.

FAA Sequester

Lost in this controversy, by the way, is any recognition that sequestration barely makes a dent in the federal budget. There are some small first-year cuts in a few programs, but the wasteful behemoth known as the federal government is barely nicked.

To be more specific, the net effect of the sequester is that the burden of government spending grows by $2.4 trillion over the next 10 years rather than $2.5 trillion.

So don’t pay any attention to the hyperbole and hysteria from the special interest groups in Washington. The sequester is a tiny – and desirable – step in the direction of fiscal responsibility.

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Are we about to see a new kinder-and-gentler Obama? Has the tax-and-spend President of the past four years been replaced by a fiscal moderate?

That’s certainly the spin we’re getting from the White House about the President’s new budget. Let’s look at this theme, predictably regurgitated in a Washington Post report.

President Obama will release a budget next week that proposes significant cuts to Medicare and Social Security and fewer tax hikes than in the past, a conciliatory approach…the document will incorporate the compromise offer Obama made to House Speaker John A. Boehner (R-Ohio) last December in the discussions over the “fiscal cliff” – which included $1.8 trillion in deficit reduction through spending cuts and tax increases. …unlike the Republican budget that passed the House last month, Obama’s budget does not balance within 10 years.

Since America’s fiscal challenge is the overall burden of government spending, I’m not overly worried about the fact that Obama’s budget doesn’t get to balance.

But I am curious whether Obama truly is proposing a “conciliatory” budget. Are the tax hikes smaller? Are the supposed spending cuts larger?

Actually, there are no genuine spending cuts since the President’s budget is based on dishonest baseline budgeting. At best, we’re simply talking about slowing the growth of government.

But since Mitchell’s Golden Rule is based on the very modest goal of having government grow slower than the private sector, it’s possible that Obama may be proposing something worthwhile.

But possible isn’t the same as probable. Indeed, it appears that the budget is predicated on a giant bait-and-switch since the beneficial spending restraint imposed by sequestration would be repealed!

Obama’s budget proposal, however, would eliminate sequestration.

This appears almost as an afterthought in the Washington Post article, but it should be the lead story. The White House wants to get rid of a policy that genuinely limits the growth of spending.

We won’t have the official numbers until the budget is released next Wednesday, but I’ll be very curious to see whether the supposed spending cuts elsewhere in his budget are greater than or less than the spending increases that will occur if sequestration is canceled. Particularly since the President also is proposing lots of new spending on everything from early child education to brain mapping.

Moreover, it seems as though Obama tax numbers are based on dodgy math as well. The White House is claiming that this is a “conciliatory” budget because he’s no longer proposing $1.6 trillion of tax hikes.

The budget is more conservative than Obama’s earlier proposals, which called for $1.6 trillion in new taxes and fewer cuts to health and domestic spending programs. Obama is seeking to raise $580 billion in tax revenue by limiting deductions for the wealthy and closing loopholes for certain industries like oil and gas. Those changes are in addition to the increased tobacco taxes and more limited retirement accounts for the wealthy that are meant to pay for new spending.

Let’s try to disentangle the preceding passage. The President wants $580 billion of new taxes from “deductions” and “loopholes.” But he also wants an unknown pile of revenue from new tobacco taxes and from restricting IRAs. And keep in mind that he already got $600 billion as part of the fiscal cliff.

Until we get official numbers, we can’t say anything with certainty, but I’ll be checking on Wednesday to see how much revenue the President intends to grab as a result of the tobacco and IRA provisions. Suffice to say that I won’t be surprised if the net impact of all his tax hikes is close to $1.6 trillion. Especially since he’s also proposing to manipulate CPI data, a change that would generate another $100 billion in revenues.

In other words, the revenue side of his budget likely will be a bait-and-switch scam, just like the spending side is a joke once you understand that he wants to get rid of sequestration.

I hope I’m wrong, but I fear that my concerns will be validated next Wednesday and we’ll see another budget that has no real entitlement reform and more class-warfare tax hikes.

P.S. The budget approved by the House of Representatives avoided any tax increases and restrained spending to that it will grow by an average of 3.4 percent annually. Not exactly draconian, but that approach does balance the budget in 10 years.

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