Tuesday, February 26, 2013

Sequestration Alarmists & Snake-Oil Salesmen

Over the past several weeks we have discussed the pending "automatic" federal spending cuts commonly called "sequestration". 

First, several have referred to these as "budget cuts". They are not. The federal government has not operated under a budget since FY09, which was passed in the fall of 2008 while President Bush was still in office. You cannot cut a budget that doesn't exist.

Snake-Oil salesmen on both sides of the aisle are attempting to appeal to the fears, emotions, and self-preservation instincts of the citizens. This is nothing short of dishonesty. 

The CATO institute published an article likening these alarmist calls to Chicken Little. The article does a decent job of debunking the alarmist claims made by pundits and government officials.

Let's examine a few facts about the sequestration. First, the cuts to defense will not affect military pay or benefits. Obamacare is already impacting health care programs for military family members and retirees, though. The roughly 8% cut in defense spending will mostly impact the Defense Department (to include DA, DAF, and DN) civilians. Many of those civilian positions were created in an effort to allay some of the garrison duties normally assigned to service members. It was done in an effort to free up military personnel to deploy so that the frequency of rotations would reduce. It was part of the request to increase force numbers, to keep that increase tolerable for opponents to an increased active, standing military. In addition, the creation of those civilian positions was done so that a draft would be unnecessary. The positions, however, were intended to be temporary. Now, proponents of big government on both sides of the aisle want to treat them as though they were permanent. 

Some have stated that the cuts will affect local fire, police, libraries, municipal water services, and other local area utilities. The federal government has no authority or responsibility over municipal or state level issues. 

There are rumors that the cuts will affect Social Security, Medicare, Veterans' Benefits, and military retiree pensions. The facts are that the sequestration bill strictly exempts all of the above. 

Current federal spending is far above its 2007 levels, the last FY budget passed by a congress whose both houses contained a conservative majority. 

The sequestration cuts are real cuts. However, the exact amount is subject to how you do the math. Strictly, it contains an immediate $85 billion in cuts. After some governmental economic voodoo, it may actually be closed to $73 billion in real cuts. That is nothing when federal spending will still be over $3.8 trillion. All the cuts will do is bring the annual deficit for FY13 to just under $1 trillion ($974 billion). 

Obama and other demagogues claimed that congress has done nothing in regards to the sequestration. In reality, they really shouldn't. Allowing the cuts to go through is a positive move. The Senate has concentrated on Postal Worker pensions and health care plans as well as violating the Second Amendment. However, the House introduced bills HR 803, HR 804, HR 807, HR 810, HR 814, and HR 816

H.R. 803. A bill to reform and strengthen the workforce investment system of the Nation to put Americans back to work and make the United States more competitive in the 21st century; to the Committee on Education and the Workforce, and in addition to the Committees on the Judiciary, Agriculture, Veterans' Affairs, Energy and Commerce, and Transportation and Infrastructure, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned. 

H.R. 804. A bill to cancel the 251A sequester for the revised security category and to provide for a reduced spending plan with respect to the Department of Defense, and for other purposes; to the Committee on the Budget. 

H.R. 807. A bill to require that the Government prioritize all obligations on the debt held by the public in the event that the debt limit is reached; to the Committee on Ways and Means.

H.R. 810. A bill to grant the Secretary of Defense the authority to transfer funding under a continuing resolution, and for other purposes; to the Committee on Appropriations, and in addition to the Committee on Armed Services, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned. 

H.R. 814. A bill to reauthorize and amend the program of block grants to States for temporary assistance for needy families and related programs; to the Committee on Ways and Means, and in addition to the Committee on Oversight and Government Reform, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.

H.R. 816. A bill to amend the Balanced Budget and Emergency Deficit Control Act of 1985 to allow intraagency transfers of funds to provide more flexibility for the agency to comply with a presidential sequestration order for fiscal year 2013 or 2014; to the Committee on the Budget.  

Then, in regards to preparing for a push to increase the federally mandated minimum wage to $9 per hour, they have proposed HR 815, which, essentially, is a tax cut to employers to defray the additional costs of labor. They won't offset the costs of  the PPACA, though.

H.R. 815. A bill to amend the Internal Revenue Code of 1986 to make certain dividends and distributions paid to individuals from certain small businesses exempt from tax to the extent of the increased wages of the small business; to the Committee on Ways and Means. 

In the grand scheme of things, those cuts are next to nothing. They amount to two trips to Starbucks a month for a family earning $50k after taxes, but with $60k a year in bills, payments, utilities, and luxury spending. They don't even come close to fending off a pending bankruptcy.

Obama and his cronies reached out to states, attempting to employ a scare tactic over what cuts each state will face due to the sequestration. Here is the rub. Any state government worth its salt is wise enough to balance its budget before receiving a single cent of federal funding. If they are responsible, they shouldn't count on it.

Here is an excerpt of the threat letter sent to Texas:

If sequestration were to take effect, some examples of the impacts on Texas this year alone are:
-Teachers and Schools:
Texas will lose approximately $67.8 million in funding for primary and secondary
education, putting around 930 teacher and aide jobs at risk. In addition about 172,000
fewer students would be served and approximately280 fewer schools would receive
     o  Education for Children with Disabilities: In addition, Texas will lose approximately
$51million in funds for about 620 teachers, aides, and staff who help children with
- Work-Study Jobs:
Around 4,720 fewer low income students in Texas would receive aid to help
them finance the costs of college and around 1,450 fewer students will get work-study
jobs that help them pay for college.
- Head Start:
Head Start and Early Head Start services would be eliminated for approximately 4,800 children in Texas, reducing access to critical early education.

- Law Enforcement and Public Safety Funds for Crime Prevention and
Texas will lose about $1,103,000 in Justice Assistance Grants that support law
enforcement, prosecution and courts, crime prevention and education, corrections
and community corrections, drug treatment and enforcement, and crime victim
and witness initiatives. 

The statement clearly expresses that Veterans' Administration funding is exempt from sequestration. However it still attempts to send alarms of cut services to veterans should the sequester cuts be allowed. The notice gives no justification or data to support the claim.

You can see the state by state claims issued by the White House at Jamie Dupree's site.

Let's look at those cuts. First of all, education is a state, local, and parental responsibility. It does not fall within federal authority. The Tenth Amendment forbids it. Any funds received from federal spending used for education should be additional, after local and state governments already established the necessary budgets. In addition, studies have shown that many schools that receive higher funding actually are not performing as well as those receiving less.

On the subject of "Headstart", this federal program is already highly suspect. Many parents are choosing to home school or use private facilities for their pre-K children. Even in areas where this is perceived to not be the case, local taxes are already taking care of those public school programs. For instance, San Antonio passed a resolution that Obama's Communist Cuban Comrade, Julian Castro, proposed as a form of test-bed for Obama's proposed national program. The resolution passed a 1/8% sales tax increase in the city to pay for full-time pre-k programs for up to 3,700 new students. If you subtract that from the White
House's claim of a reduction of 4,500 students state-wide, that leaves a deficit of 800 students. Other municipalities can easily find a way to increase local revenues to cover their share of the 800 across the state.

The "work-study" claims are just more class-warfare rhetoric, since the claim specifies "low-income students". It claims that the students have no control over their income level. They are capable of working a little harder and seeking better paying jobs than the work-study programs provide. I know many people who have done it and others who are doing it now. In addition, federal involvement in higher education is the direct cause of the exponential inflation of collegiate costs. Return student loans to private banks. Reduce federal taxes and allow states to control their own financial aid and work-study programs at state (public) colleges and universities. 

Those funds to law enforcement are to support federal laws and federal initiatives that are forced upon local law enforcement and correctional officers. The state of Texas and its local municipalities and counties are more than capable of balancing their revenues with the necessities. The federal funds are not needed, nor are they constitutional. In fact, they infringe upon the 10th Amendment.

Most states have balanced their budgets. The sequestration cuts will have little to no real impact on them, especially if they continue to do so. The sequestration just serves as one more example of why the federal government needs to play in their own sandbox and stay out of those belonging to states and individuals.