We’re one week closer to going over the so-called “fiscal cliff”. In last week’s blog, I had discussed the tax portion of the cliff, (with a particular emphasis on the fact that Democrats in Congress railed against passing the now expiring Bush tax cuts 10 years ago, claiming that they were nothing but “tax cuts for the rich,” but now say that 98% of those tax cuts are good, as they are actually tax cuts for the middle class.) Go figure.
This week I’ll focus on the “draconian” spending cuts which will occur after December 31st, barring some agreement to the contrary.
How much in spending cuts will occur? $1.2 trillion over the next 10 years – approximately half in defense cuts and half in domestic programs (other than entitlement programs like Social Security, Medicare, Medicaid, and veterans benefits – these would not be cut.) In general, Democrats don’t like the domestic cuts, and Republicans don’t like the defense cuts. The cuts will occur through sequestration of funds.
What’s sequestration? That means that the cuts will happen automatically; and for the most part, across the board. Most programs, with some exceptions, will be cut by approximately 10% per year for 10 years.
And here’s a dirty little secret. These “cuts” aren’t really cuts at all. If, for example, a program was projected to spend 5% more next year than this year, and it will now only be allowed to spend 4% more next year, we’ve “cut” spending by 1%. Only in Washington!
I had previously mentioned that Social Security, Medicare, Medicaid, and veterans benefits won’t be cut. Here are some other programs that are not cut, even if we go over the cliff: certain child nutrition programs such as school lunches, the children’s health insurance program, Temporary Assistance for Needy Families (Welfare), food stamps, Supplemental Security Income (SSI), and Pell Grants (college tuition.)
Why is sequestration (across the board cuts) considered by many to be bad? Because sequestration is a blunt and indiscriminate instrument. The more thoughtful way to cut is to reduce more deeply (or eliminate) those programs which have the poorest track record. However, Washington typically struggles to cut anything. And when we have a national debt that has grown to more than $16 trillion, and we’re adding approximately a trillion more in debt now each year, one could argue that sequestration is the only way that cuts will ever actually happen.
President Obama has been quite vocal and specific about the fact that he wants to raise taxes (in fact, he insists upon it.) What he’s been less specific about is what he’s willing to cut. When pressed on this he says that his plan is the budget he sent to Congress last year. However, his budget was so unserious that not only did it not receive any Republican votes in either the House or the Senate, but it didn’t get a single Democrat vote in Congress either! (The press virtually never mentions this fact.)
And in Obama’s recent proposal, the one Senator Mitch McConnell reportedly laughed at, and Speaker Boehner said “You can’t be serious!” the President had the nerve to include a $50 billion new stimulus package. We’re supposed to be finding ways to reduce spending, and the President wants to spend even more. He had to know that this didn’t have a snowball’s chance of passing in a Republican-controlled House, so why would he include such a non-starter?
I’m more and more coming to the conclusion that President Obama is determined to raise taxes now, and will only offer imaginary spending cuts in the future (which would never actually happen.) And, unless Republicans agree to this scenario, he’s okay with allowing the country to go over the cliff, figuring that Republicans are going to be blamed, no matter what happens.
At least that’s the way I see it. My preference would be that Republicans stop negotiating with ourselves. We’re supposed to be the party of less government and lower taxes. Let’s start acting like it.