Thursday, February 7, 2013

WSJ Op-Ed: The Unscary Sequester -- At The End Of The Day: A Jobs Bill For Washington, DC


March 27, 2013: SecDef, Chuck Hagel, has found a way to drastically cut the number of days defense department civilians need to be furloughed. Meanwhile, the White House tours remain canceled and the President and his family are on vacation in the Bermudas.

March 24, 2013: we don't have enough money for White House tours due to the sequester, but we have $500 million for the Palestinians $500 million would pay for 140 years of White House tours. Actually more because until the 2nd through 140th year-money would be needed, it could be invested in GE stock, paying 3.3% dividend, and potential for share appreciation over those 140 years.

March 22, 2013: the USAF Academy cancels "Fourth of July" celebrations due to sequester. And so it goes. As Commander in Chief, the president could override this. His silence on these matters is deafening. But, somehow, I think the Academy will survive. In fact, a lot of the freshmen will be very, very happy to see the celebrations brought to a halt. Who do you think provides all the physical labor required? It certainly is not the general officers or the faculty.

March 13, 2013: What's wrong with this picture? Due to the sequester, ICE either needs to furlough some agents, or release some detainees. So, they release the detainees.  ICE releases 2,000 detainees, but can't provide the exact number, after telling Congress the actual number would be in the "hundreds." Among those released were some considered to be "violent" offenders. Due to congressional uproar, ICE has now gone back out and "re-captured" four of those "violent" offenders. The Washington Times reports, March 14, 2013.  It's hard for me to believe that the federal government is run so absolutely "close" that 2% spending cut results in so many folks being furloughed. Maybe a pay cut would have been just as effective.

March 4, 2013: how phony is the sequester? Day 1 of the budget cuts -- the sequester is already causing delays at airports -- White House. 

March 3, 2013: Democrats, themselves, say they bet wrong on tax increase earlier in the year; said they were surprised that GOP was so intransigent.

March 3, 2013: before the sequester order was signed, the president suggested a "doomsday" for much of America. Now that the order has been signed, well, maybe not so much. I think I will go out to the airport tomorrow and see if the lines are twice as long as suggested/predicted by the White House.

March 3, 2013: The original post stated the sequester was simply about jobs in Washington, DC. NBC didn't say it leading up to the order, but now that the president has signed the sequester order, NBC News is reporting that DC (as in Washington, DC) will take the brunt of the budget cuts

March 3, 2013: Sequester. What sequester? SecState Kerry hands out $250 million to Islamic/15th century Egypt.

March 3, 2013: the White House admits it -- the White House initiated discussion on instituting a sequester. A day late and a dollar short.

Original Post

I normally don't do this -- a stand-alone post from the WSJ, but I need to have a central clearing post for all the stories between now and the end of March on the "sequester." Also, I need to get serious about the "sequester" and learn more about it.

First of all the "sequester" is not a "nor'easter." According to wiki: A nor'easter is a macro-scale storm along the East Coast of the United States and Atlantic Canada. A nor'easter is expected this weekend.

A sequester is, in this case, a cut in government spending. Which won't happen.

Some data points from the op-ed: 

The president first proposed the sequester in 2011.
Fact check:

In the debate, Obama said he didn’t propose sequestration, Congress did. (We asked the White House for comment, but didn't hear back.)

To determine the question of ownership, we turned to Washington Post reporter Bob Woodward’s new book The Price of Politics.

Woodward’s reporting shows clearly that defense sequestration was an idea that came out of Obama’s White House. But the intention was to force Republicans to negotiate, not to actually put the cuts into effect. [By the way, that's how I remember it also: it was a "threat" that if the White House didn't get is way it would sequester DOD funding.]

Woodward summarizes the thoughts of the Obama team: "There would be no chance the Republicans would want to pull the trigger and allow the sequester to force massive cuts to Defense." Democrats, meanwhile, didn’t want to see their favorite domestic programs cut.
The domestic cuts through the sequester will be less than the blowout for Hurricane Sandy relief. But the accounting is in the fine print.
Fact check:

Government relief for Hurricane Sandy: $50 billion.

The sequester is estimated to cut $85 -- the op-ed. Half would come from defense and half from domestic discretionary spending. That's where the phrase "the sequester will be less than the blowout for Hurrican Sandy relief." But a lot of defense spending will impact domestic spending.

So, a wash.
Medicare providers would take 2% cut.
The government has been trying for years to cut reimbursement to Medicare providers. In the most recent round, the providers won. Taxpayers lost.

Bottom line: total discretionary domestic spending is up about 30% over 2008 - 2013. The sequester would "claw that  back by all of about 5%." Five percent of the 30% or back to 25% -- not sure exactly what is meant by "all of about 5%." But I don't think it's important.

This is all about jobs in Washington: From the op-ed: the sequester will surely require worker furloughs and cutbacks in certain nonpriority services. But most of those layoffs will happen in the Washington, DC, area, the recession-free region that has [recently boomed].


The DOD 2013 budget is $614 billion. This does not include $88 billion for overseas contingency operations which include Afghanistan and Iraq.  Most of the defense sequestration could probably be taken out of overseas contingency operations and delays in some major projects and no one would notice the difference.

My first takeaway now that I now the difference between a sequester and a nor'easter: if the sequester affects the stock market adversely, it will be based on emotion, not fact.