May 5, 2013
When Congress adopted the president’s idea of sequestration to force a budget compromise, the word from Washington was that its implementation would be a disaster.
The cut in discretionary spending amounted to $85 billion dollars. Of course this is a piddling 2.4 percent of the federal budget. Nevertheless, the White House said the cuts would “threaten hundreds of thousands of jobs, and cut vital services for children, seniors, people with mental illness, and our men and women in uniform.”
It further stated “these cuts will make it harder to grow our economy and create jobs by affecting our ability to invest in important priorities like education, research and innovation, public safety, and military readiness.”
Of course this White House would regard any cut in government spending as having disastrous consequences, and to that end, the sequestration was a touch of genius. Because the government has an incentive to increase spending since that increases its power, there is a total disregard for cutting the federal budget.
As a consequence, the sequester was designed to inflict as much pain as possible. Logically if faced with the decision as to where to cut spending, the typical household would select those expenditures that were the least vital. On the other hand, the government’s strategy would be to cut those programs that inflict the most pain to the public.
Instead of trimming staff at the White House or Congress staffers or faceless bureaucrats, instead of rigorously attacking waste, the government will make the cuts both visible and painful. Thus, the sequestration mandated across-the-board cuts, leaving the agencies little discretion in which programs to cut. Thus, the agencies cannot be blamed for inflicting pain.
The first case in point was the Federal Aviation Administration furloughing its air traffic controllers for two days a month, resulting in long flight delays. Naturally there was a hue and cry from airline passengers, and Congress rushed through a fix to restructure the $600 million cut to the FAA. Note that the fix does not increase the funding to the FAA. Rather, it allows the agency discretion in where it can cut. The House vote was 361 to 41, while the Senate was unanimous in its support.
This was an opportunity lost. Instead of changing the sequester law to allow all the agencies discretion in where to cut, it only gave that power to the FAA. What the air traffic controller fix does is to show the public that the sequester is nothing more than a publicity stunt. This is not a serious attempt at budget reduction; rather, Washington is taking us all for fools. As to the budget reduction touted in the press and by our politicians, despite the sequester, federal spending will grow by $15 billion this fiscal year.
Harold A. Black is professor emeritus in the Department of Finance, University of Tennessee, Knoxville having retired after 24 years of service. He has served on the faculties of American University, Howard University, the University of North Carolina - Chapel Hill and the University of Florida. His government service includes the Office of the Comptroller of the Currency and as a Board Member of the National Credit Union Administration. He also has served on the boards of directors Home Savings of America and its parent company, H. F. Ahmanson & Co., Irwindale, California prior to its merger with Washington Mutual Savings Bank, on the board of New Century Financial Corporation, Irvine, California, then the nation’s largest real estate investment trust and as director and later chairman of the Nashville Branch of the Federal Reserve Bank of Atlanta. He writes an occasional article for the Knoxville News-Sentinel at http://www.knoxnews.com/staff/dr-harold-black/. His web page is haroldablackphd.com