Sequester Hysterics

Sequester Hysterics
February 22, 2013

Peter Ferrara

Peter Ferrara is senior fellow for entitlement and budget policy at The Heartland Institute, a... (read full bio)

President Obama told America the morning of February 19 that if the sequester goes through on March 1:

"It will eviscerate job-creating investments in education and energy and medical research…. Emergency responders like the ones who are here today — their ability to help communities respond to and recover from disasters will be degraded. Border Patrol agents will see their hours reduced. FBI agents will be furloughed. Federal prosecutors will have to close cases and let criminals go. Air traffic controllers and airport security will see cutbacks, which means more delays at airports across the country.

"Thousands of teachers and educators will be laid off. Tens of thousands of parents will have to scramble to find childcare for their kids. Hundreds of thousands of Americans will lose access to primary care and preventive care like flu vaccinations and cancer screenings…. So these cuts are not smart. They are not fair. They will hurt our economy. They will add hundreds of thousands of Americans to the unemployment rolls. This is not an abstraction — people will lose their jobs. The unemployment rate might tick up again.”

This language is so far from reality that it defiled the White House like it has never been defiled before.

President Obama’s federal government is slated to spend $3.6 trillion this year. That is $3,600,000,000,000. The supposedly draconian sequester will reportedly cut that by $85 billion, which is just 2%. In fact, as Mark Levin pointed out last night, the actual cuts for this year from that level are $44 billion, which is 1% of the budget.

That won’t eviscerate anything. It won’t stop emergency responders from saving victims of disasters, won’t shut down the border patrol, won’t mean longer delays at airports without security or air traffic control, won’t lay off FBI agents, won’t stop criminal prosecutions, won’t terminate thousands of teachers, won’t leave hundreds of thousands of Americans without health care, won’t “add hundreds of thousands of Americans to the unemployment rolls.”

All that is paid for with just 2% of federal spending? Even after the fearsome sequester, federal discretionary spending will still be $60 billion more than in 2008. The government’s own Government Accountability Office (GAO) has identified $125 billion in government waste that can be cut without hurting anybody. Just as I said above about the effects of such tiny cuts.

What all the weeping and wailing and gnashing of teeth means is that Obama and the Democrats think even cutting federal spending by 1% to 2% is the end of the world. But after the sequester goes through, only a few hundred Americans out of 300 million will even notice any effects at all.

And the sequester will help the economy, not hurt it. The sequester means the federal government will not drain another $1.2 trillion over the next 10 years out of the market economy, but leave it in the market to contribute to higher production. How does the federal government borrowing or taxing that money out of production in the private sector and using it to hire more bureaucrats, or to spend on more welfare for people who are not working and not producing, contribute to more jobs, more hiring, more economic growth, and more prosperity? It doesn’t, which is why Keynesian economics never works.

Obama’s retrograde, last century thinking is why the economy still hasn’t recovered from the last recession, almost 4 years after the recession was actually declared over. What we have is the worst recovery from a recession since the Great Depression, and maybe before. The other ten presidents who suffered a recession during their terms since the Great Depression saw the economy roaring back within a year or two after the recession. But that was before Obama transformed our formerly world leading, sole superpower country into just another banana republic.

Too bad the sequester is not six times as large, which is the amount of spending cuts Paul Ryan will propose in his budget next month to zero out the deficit and balance the budget entirely in 10 years. Obama came back from his weekend golfing with his buddy Tiger Woods to complain yesterday that Congress hasn’t done its job. But what about Obama doing his job? He was required by law to produce this year’s budget proposal weeks ago. Where is it? Ya think he could have stayed home last weekend and made sure his work was done?

But Obama showed up yesterday complaining about what others haven’t done, saying we were facing that awful sequester because “Unfortunately, Congress didn’t compromise. They haven’t come together and done their jobs, and so as a consequence, we’ve got these automatic, brutal spending cuts that are poised to happen next Friday.”

The Republicans, however, have done their job. The House passed a bill designating $1.2 trillion in rationalized cuts over 10 years to replace the more arbitrary sequester cuts weeks ago. If President Obama and the Democrats disagreed with the Republican cuts, it was their job to pass what they wanted instead through the Senate. Then the two bills would have gone to a Conference Committee, which would have ironed out a compromise between the two bills.

But we got no action at all from the Democrats. Just as the Senate has not produced a budget in several years, it didn’t act on the Republican House bill on the sequester at all. That reflected the failure of leadership by President Obama, who did nothing to specify his own proposals, and push them through the Democrat majority Senate.

But Obama did produce a lot of talk, and badly confused and dishonest rhetoric. Obama said yesterday:

"[S]o far at least the ideas that the Republicans have proposed ask nothing of the wealthiest Americans or biggest corporations, so the burden is all on first responders or seniors or middle-class families. [Or the $125 billion in identified government waste.] They double down, in fact, on the harsh, harmful cuts that I’ve outlined. They slash Medicare and investments that create good, middle-class jobs. And so far at least what they’ve expressed is a preference where they’d rather have these cuts go into effect than close a single tax loophole for the wealthiest Americans. Not one."

But this is the President again playing you, because he thinks you are too stupid and uninformed to pay attention to what has been going on. Just last month, Washington increased taxes on the wealthiest Americans by $2 trillion (or at least it tried to — we will see if the wealthiest Americans are too stupid to pay attention to what is going on, and they or their money stick around to be fleeced). There were no spending cuts in that January 1 fiscal cliff deal. It was all tax increases. Almost all on the wealthiest Americans.

And those tax increases will affect middle class and working people more than the rich. As the rich hustle their money into tax shelters and out of the country to avoid the increasingly oppressive tax burden they face, the country loses precisely the investment capital that is the foundation for new jobs and growing wages. So the result is more unemployment and lower wages for the middle class and working people, which is exactly what America has been experiencing under Obama.

Moreover, only President Obama and the Democrats have slashed Medicare, when they passed Obamacare in 2010, which cut trillions actually in future Medicare spending, by adopting payment formulas that would pay the doctors and hospitals that are expected to provide the health care to seniors even less than Medicaid pays to doctors and hospitals for health care for the poor. The Republicans have not cut Medicare by a single dime. Remember the last time they had Congressional majorities in both houses, they enacted the Medicare prescription drug plan, Medicare Part D. That may not have been a good idea, but the point here is that every time Obama talks about Republicans cutting Medicare, he is talking out of all three sides of his mouth.

I thoroughly explained in last week’s column that the rich already pay far more than their fair share, unless you are a communist. Official IRS data show that the top 1% of income earners pay 39% of all federal income taxes, while earning only 13% of the income. The middle 20% of income earners, the true middle class, pays only 2.7% of all federal income taxes, while earning 15% of the income. So the top 1% pays 15 times as much federal income tax as the entire middle 20%, or middle class, even though the middle 20% earns more in income. The bottom 40% of income earners rather than paying any taxes to support the government actually receives payments from the IRS equal to about 10% of all federal income tax revenues.

And this was before the $2 trillion in tax rate increases on the rich, in the fiscal cliff deal.

President Obama also persisted yesterday in spreading the dishonest falsehood that billionaires pay lower tax rates than theirs secretaries. That is based on a cartoon version of our tax code. CBO reports to the contrary that in 2009 the top 1% paid an average federal tax rate of 29%, while the middle 20% paid an average federal tax rate of only 11.1%, and the bottom 20% paid an average federal tax rate of 1%. We need a law that would hold President Obama personally liable when he uses the trappings of office to spread outright fairy tales.

Finally, President Obama said yesterday:

Now, for two years, I’ve offered a balanced approach to deficit reduction that would prevent these harmful cuts…. I am willing to cut more spending that we don’t need, get rid of programs that aren’t working. I’ve laid out specific reforms to our entitlement programs that can achieve the same amount of health care savings by the beginning of the next decade as the reforms that were proposed by the bipartisan Simpson-Bowles commission [Not true].

But only if we raise taxes yet again. Obama added:

I believe such a balanced approach that combines tax r[increases] with some additional spending [cuts], done in a smart, thoughtful way is the best way to…avoid these [sequester cuts once and for all that could hurt our economy, slow our recovery, put people out of work. And most Americans agree with me.

This is the danger of the Washington media cocoon, taken over by socialist revolutionaries, which leaves our leaders believing their own confused and dishonest propaganda. What Obama is saying here is that most Americans agree that cutting spending hurts the economy, but raising taxes doesn’t. And if you do agree, and willingly allow Obama to play you like that, it is you who are stupid.

[First published at the American Spectator.]

Peter Ferrara

Peter Ferrara is senior fellow for entitlement and budget policy at The Heartland Institute, a... (read full bio)