Friday, March 1, 2013

In the Water, In the Air: Friday, March 1, 2013.

Friday, March 1, 2013.  A question of courage! maybe.


A QUESTION OF COURAGE! MAYBE: Steve Rattner writes in The New York Times that even though the sequester involves only a 2.3 percent reduction in federal spending, that reduction will fall disproportionately on various spending programs.  Because of this, various spending programs will see a greater than 2.3 percent reduction in their specific budgets.  (Steven Rattner, The New York Times, Breaking Down the Budget Mess, Feb. 28, 2013.)

Mr. Rattner provides the following table of helpful data:


Spending
As % of
Total Budget
Cuts
As % of
Total
Defense 14% 38%
Non-Defense 14% 44%
Entitlements 48% 4%
Other Mandatory 13% 1%
Interest 11% 13%

This data doesn't quite tell the whole story, though -- those "Cuts as a % of Total" look like pretty high percentages, but we know that the entire Defense budget isn't being cut by 38%.  38% of the total being cut -- which is, as Mr. Rattner points out, 2.3 percent of federal spending -- is a much smaller percentage of the entire Defense budget than 38%.  Fortunately, Mr. Rattner's data allows us to estimate the actual percentages of various budgets being cut as follows*:


Spending
As % of
Total Budget
Cuts
As % of
Total
Cuts
As % of
Each Budget
Defense 14% 38% 6.2%
Non-Defense 14% 44% 7.2%
Entitlements 48% 4% 0.2%
Other Mandatory 13% 1% 0.2%
Interest 11% 13% 2.7%

* i.e., the "Cuts As % of Total" multiplied by 0.023 to determine the percentage of the total federal budget represented by the cut for each spending program, then divided by the "Spending As % of Total Budget" to determine the percentage of each spending program's budget represented by the cut for each spending program

So, based on Mr. Rattner's numbers, the sequester will cut the Defense budget by 6.2%.

Even these numbers may appear scarier than they are, though--Mr. Rattner concedes that "these cuts are based on projected higher levels of spending, not today's levels of spending."  So, that 6.2% is relative to a budget scheduled to increase by some percentage over this year's budget.  Let's say, for example, that the budget for defense spending had been set to increase next by 2.2% over this year's budget.  In that case, relative to this year's budget, the actual cut would be more like 4%.  However, without knowing what those currently-scheduled higher levels of future spending are for each spending program (and without accounting for a projected rate of inflation), this data does not allow one to calculate the percentage of each spending program's budget for this year that the sequester will end up cutting in actual, absolute dollars.

At any rate, Mr. Rattner contends that this sort of deficit reduction package, which "so disproportionately inflicts its pain", is "policy making at its worst."  He says that in dealing with our federal deficit, we need "a balanced approach in which everything is on the table, including more revenues and entitlements," and provides some specific ideas regarding tax reform and Medicare reform.  He concludes by saying:
All the blather about whose idea the sequester was or whether more golf would help the process is just a sideshow. The core question is whether our political leaders have the courage to compromise their absolutist positions and agree on a long-term balanced approach that ends budget making by crisis and removes the dark cloud of uncertainty that hovers over our economy.
Well, maybe.

But what if our political leaders didn't need to have any courage in order to end our "budget making by crisis"?

What if we could change the way we establish our spending-side and revenue-side policies so that our budgeting problems would just work themselves out in the natural course of events, under our ordinary and familiar law-making process?  What if we could make a modest change to our budgeting processes, and by doing so ensure that our country behaves in a fiscally responsible way, in perpetuity?

Because it is possible for us to do exactly that. 

Maybe the real question is...

Have you heard about the Solvency Amendment?