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Thursday, February 14, 2013

EVERYTHING YOU NEED TO KNOW ABOUT SEQUESTRATION

On 7November2012 I titled my posting "What Fiscal Cliff?"  Well, there was none.  Our two-party political system compels the opposition to oppose.  There is thus eternal posturing.  The media, to gain attention, then exaggerates the truth.  

So here we go again, this time on something called sequestration.  Here is everything you need to know:

  1.  This all began in 2010 when President Barack Obama and the Congress created a bipartisan National Commission on Fiscal Responsibility and Reform (more popularly known as Simpson-Bowles, the co-chairmen--Bowles is to the left), which failed to reach any consensus to issue a final report to the White House and the U.S. Congress.  Here is what was projected by the Commission:


  2.  With the U.S. at 73%, my blog on 8February2013 showed the following comparison of debt as a percent of GDP (gross domestic product):


  Japan          208%
  Italy            121%
  Singapore    118%
  UK               89%
  France          87%
  Canada         84%
  Germany      82%


  3.  Faced with nothing official from the Commission, a Congressional Panel (Super Congress 12 members to the left--you can't recognize them, but just as well) was formed in 2011 to reduce our national debt by $1.2 trillion over the next decade.  Amazingly enough, they actually reached agreement in the Budget Control Act of 2011 to annually make automatic across the board equal cuts in our defense budget and entitlements if Congress failed to take appropriate action themselves.  So 2January2013 came along and our Congress kicked the can to March 1 by raising taxes for the "rich" to gain some revenues while providing them two months to arrive at a more sensible means to reduce the national debt.  On March 1 the Federal budget will be reduced by $85 billion, except for items like Medicare and Social Security.

4.  Thus the term sequester, which in this case means across-the-board cuts (or sequestration) to the Federal budget, save for those mentioned entitlements, which means that only between 30-35% of the actual Federal budget will take the hit, for Medicare, Social Security, and similar programs make up the difference.  Cartoon from truthdig

  5.  A couple of days ago in this blog site I said:

 The White House and U.S. Congress are doing absolutely nothing to help, but the U.S. budget deficit is dropping:


  2009    $1.4 trillion
  2010    $1.3 trillion
  2011    $1.3 trillion
  2012    $1.1 trillion

and as predicted:

  2013    $0.85 trillion
  .
  .
  .
  2017    $0.54 trillion

So it's best for them to continue to do nothing!


  6.  At any time, the Congress can rescind the Budget Control Act of 2011.  However, there does not seem to be any interest in doing so at this time.  The latest Republican strategy is to place the blame on President Obama, for they now want him to come up with a compromise.  Speaker John Boehner yesterday repeated that there was little hope for the Democratic-controlled Senate and Republican House to avoid sequestration.  Boehner also voiced doubts about preschool education, immigration reform, increasing the minimum wage and gun control.  Climate change is not even in his vocabulary.

My position?

     a.  Rescind the Budget Act of 2011 and don't cut anything.  Effectively, kick the can down the road, for our national deficit is already dropping.  This diminution occurs after every major war.


     b.  Keep borrowing as necessary if long term interest rates remain around 2% or less, where the 10 year treasury bond is at today.  My HuffPo explains why:

  The Simplest Solution for Our National Debt...

Spend the money on rebuilding our infrastructure, global warming remediation, early childhood education, etc.

     c.  If sequestration occurs, even though this is unnecessary, don't worry about any defense cuts, for our national security will not be threatened and the Nation will survive this one-time sequestration.  Why one time?  Congress will then rescind the Budget Act of 2011 and continue to do nothing much else.

     d.  What we should do is raise the retirement age to 70, legislate for zero growth of our economy into the future and insure for a soft landing when the world economy seriously stumbles, as it will, and probably soon.

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