Of Course the Sequester is Going to Happen

Despite the caterwauling on the horrible impact of sequestration that those wascally Wepublicans foisted on the poor President, it is going to happen.  A friend of mine saw Paul Ryan on Meet the Press towards the end of January and immediately concluded that the Republicans were not going to be blackmailed over defense cuts.  Ryan's performance is masterful and worth taking the time to watch, he schools David Gregory. Ralph Benko predicted that the Republicans want to actually have the fight over spending when the Continuing Resolution expires on March 27.  The Republicans will have the leverage that comes from the need to continue funding the government.  When the House puts forth a budget that keeps the government running, the Democrats will be hard pressed to allow the government to shut down.  This gives the Republicans the opportunity to more permanently reduce government spending by passing a budget for the rest of the fiscal year.

Meanwhile, I know from first hand knowledge that one of the reasons the sequestration is going to hit the Department of Defense particularly hard is that Obama directed the Department of Defense to spend at last year's level of funding through the first half of this fiscal year.  As a result, when a budget cut of 10% has to be executed over half the year, it looks like a more drastic 20% cut.  I suspect, but lack the proof, that the President did this for political reasons.  First, he did so not to lose votes in places like Virginia.  Second, he got the additional benefit of making the cuts to defense appear more draconian because they must be executed over a shorter time frame.

Meanwhile, most of the country is going to yawn at the actual effects of sequestration.  There will be pockets of pain in cities with a high concentration of defense civilians, and maybe some longer lines at the airport.  I think this works to the advantage of those who want to cut spending because the over-reaction to sequestration will be seen as "crying wolf."

Sequester - Its the Democrats Who Won't Compromise

I had the unfortunate experience of listening to two hours of MSNBC today, while waiting for my wife in a hospital waiting room.  (It was a routine procedure, no worries.)  Besides the ridiculously loaded language* they used whenever describing Republicans, I found their arguments on the coming sequestration to be the worst of their propaganda.  The essence of the argument is that the Republicans invented sequestration and foisted it upon an unsuspecting President and now won't compromise because they want to wreck the country.  This is because at MSNBC the government IS the country and they equate an $85 billion cut to a Federal budget of $3.8 trillion (2.2%) to wrecking the country.  At least one guest made the point that the size of the sequestration is 1/175th of the Gross Domestic Product, saying it is hard to believe it will have much effect on the economy.  Indeed, with sequestration already a certainty, the stock market has not moved much.

With the tax increases that were passed at the beginning of the year, the Democrats got what they asked for, more taxes on the rich.  But of course, now they want even more.  I am waiting for them to propose meaningful reductions in spending.  That's why there is a sequestration.  They don't believe that there is a spending problem.  Until they do, their is no room for serious discussion.

UPDATE

I found this quote from a WSJ article on the sequester:

In the current dustup, Mr. Obama is showing little appetite for negotiating with leaders on Capitol Hill. Thursday, Mr. Obama spoke by phone with Mr. Boehner and Senate Republican leader Mitch McConnell, his first time speaking to either GOP leader in weeks. People familiar with the call said it did little to bring the two sides closer to agreement.

*In one example, Rush Limbaugh was described as "a mouthpiece of the Republican Party" when he is not a spokesman and if he was, the loaded term "mouthpiece" shouldn't be used by a self respecting news organization.

Obama's Urges Will Not Lead to Act Of Congress

The actual headline from the NY Times was "Obama Urges Congress to Act to Stave Off Cuts."  No matter, the President again fails to lead, choosing merely to demagogue his opponents without proposing anything meaningful.

“They should at least pass a smaller package of spending cuts and tax reforms that would delay the economically damaging effects of the sequester for a few more months,”

So let's parse this.  The President refuses to offer any specific spending cuts.  He just got an increase in the tax rate on the rich, as well as an increase in their capital gains rate.  Now he wants more tax increases, but obfuscates his meaning with the words, "tax reform."  Further, he missed the deadline to propose a budget to Congress, by which he could have clarified his position. 

The final paragraph of the article hits the heart of the matter.  

While the budget office forecast that annual deficits will decline significantly as the economy recovers, the budget office once again emphasized that the deficit will rise later in the decade, beginning in 2016, and continue do to so as the population ages and health care prices rise.

The President refuses to countenance any reform to social security or medicare and his party demagogues those who suggest that the issue must be addressed.  He is harming the country.  The problem won't go away on its own.  Further, the sequestration battle deflects attention from a solution.  As a Democrat, Obama could save the nation by proposing sensible reform, because only bipartisan reform of these two largest entitlement programs will stave off fiscal catastrophe.  That he thinks only to use the issues for political gain does not speak well of him.

Why Republicans Are Content to Sequester

It's the only way they can get Obama and the Democrats to cut spending.  I just assumed that the Republicans had given away the farm on the first sequestration deal, because my concentration has been elsewhere.  (The good looking Chief pictured in this post died last Friday, he was not my Dad, but certainly a father-figure in my life.)  An article by Ralph Benko in Forbes alerted me to the reality of the tax deal.

I reviewed a summary of tax law changes at Yahoo Finance.  The bad news is that the top rate increases from 35% to 39.6%, but that is not even that bad of news.  It affects married filers with income over $450,000, and frankly they will find ways to avoid that tax.  That group's capital gains rate will increase to 23.8% (20% + 3.8% for mediscarce).  Meanwhile, 99% of the Bush tax cuts are made permanent.  The payroll tax was restored to its historic rate of 6.2%, from the useless and temporary cut to 4.2%.  This will slow the hemorrhaging in the Social Security account and ensure that lower income Americans are also paying taxes.   Best of all, the indexing for alternative minimum tax was made permanent and little was changed in the gift and estate tax rules. Benko wrote that Boehner scored a huge victory, because the tax deal deprives Obama and the Democrats of the revenue to fund their agenda.

Enter sequestration.  Since the Democrats have expended their ammo by cutting the tax deal and "taxing the rich," there is little revenue for them to offer for deficit reduction.  The administration deliberately prevented the Defense Department from planning for sequestration at the start of this fiscal year, thinking the Republicans would blink.  They have not.  The cuts imposed are going to be very painful in the short term, but that's only because Obama's lack of leadership are forcing a 10% across the board cut to be executed in the second half of the fiscal year, making it look like a 20% cut, for the time being.  But some of the problems with military spending have little to do with readiness.  Retiree health care costs now consume 10% of the military budget, $59 billion, up from $20 billion only a decade ago.  Military pay raises have outpaced inflation over the same period.  In the decade ending in 2009, military pay had grown 52%, while civilian wage inflation over the same period was 38%.  The other big headache is that the military operation are heavy users of petroleum based fuels.  Operations and maintenance is the biggest defense budget category and the high price of fuel contributes.  In my opinion, reducing training tempo, deferring maintenance and releasing soldiers and sailors is where they will find the big money to pay for the cuts.

So the Republicans believe that they can live with defense cuts, while other programs favored by the Democrats also get axed.  Defense spending was overdue for a pullback, the country does so after every wartime period.

Of course, none of this deals with the real fiscal threats, social security, mediscarce and medicaid.  Looking at the graph below, if you count interest on the national debt as a transfer payment, then transfer payments, mostly from the young to the old, consume 60% of the federal budget:

If we don't get those under control, squabbling over the other 40% won't really make much of a difference.

Odds and Ends

The administration's proposals on guns fills many Americans with fear and loathing.  Especially odious is the idea that the President will restrict our rights unilaterally through executive orders.  I look forward to seeing him getting smacked down in the courts.  Further, his efforts will damage the rest of his political agenda. Good. I view his entire agenda with equal distaste.  He doesn't have the best interests of the country at heart; rather he sees his Presidency as a quest for social justice.  His pre-2008 comments that he was in favor of higher capital gains tax rates was enough proof for me; he said that he didn't care if the higher rates raised less revenue, he wanted them higher in the name of fairness.  This sent the clear signal that his agenda is based on animosity towards particular groups.

 The Under Secretary of Defense issued a memo today, authorizing the military departments to take actions to deal with the threat of sequestration, including freezing new hires; canceling certain types of new contracts and furloughing civilian employees for up to 22 days.  (Can't find a link.)  Typically, the mainstream media has mostly ignored the issue and there has been some inaccuracies in the reporting of the issue.  The Washington Post reporting that the Pentagon will take immediate action.  In fact, according to the memo, the military services are directed to consider those actions.  Whether they do so has not been determined.  Whenever, I see press reports about matters of which I have knowledge, I am always amazed at the inaccuracies I find.  Makes me wonder about the rest of the news I read.

Meanwhile, the issue of the national debt continues to be ignored.  See clock at right.  And since we can't deal with that issue, everything else pales by comparison.

Locally, Bob Filner has said that he wants to stop city legal action against local pot dispensaries.  He has said that the City Attorney should end such prosecutions.  San Diego City Beat reporter Dave Maass tweeted  

Filner says Goldsmith doesn't realize he's the lawyer and the city is the client.
— Dave Maass (@DaveMaass) January 9, 2013

While I agree with the idea that medical marijuana should be dispensed according to state law, I don't think the mayor has the right to remove prosecutorial discretion from the city attorney.  Is this what we want out of city government, the politicization of prosecutions?  Filner's proposal to change the city's laws regarding medical marijuana dispensaries seems a more sensible approach than bullying the City Attorney.

I owe a post on an issue involving the AT&T cell tower in Point Loma and an update on the Bay View Plaza in Bay Park. So far, no news on the latter and not much news on the former.