The purpose of this post is not to blame the right or the left for sequestration. There is enough blame to go around on both sides. For a reminder of how we got to sequester, go back and read an earlier post on the topic: How the Sequester Got Started. The real purpose of this post is to cut through the various and sometimes conflicting views on whether or not the cuts are minor or serious.
Imagine you run a family budget and you have to cut about 2% per year from spending. Now a little over half of the budget is tied up in house, car and insurance payments that you are not willing or able to cut. So that 2% cut has to come from the other half of your budget, which makes it a 4% cut from that half. Let’s say that 25% of the budget is for entertainment and recreation and the other 25% is for living expenses like food, gas and day to day items. Keep in mind that these don’t represent an actual family budget, they are just to show a point.
Let’s say you decide to spread that 4% cut evenly over the entertainment and living expenses portions of your budget instead of cutting one part 8% and the other 0%. Now if we just focus on the 4% cut to living expenses, imagine that you can’t cut your gas costs or your food costs for whatever reason. So your day to day items budget has to absorb all of that 4% cut to the living expenses portion, which could amount to closer to a 12% cut in that area. Keep in mind that you are already halfway through the year so a 12% cut is really like a 25% cut of the budget you have remaining for the year.
Take the numbers above and substitute non-discretionary spending on Social Security, Medicare, and Medicaid for your untouchable house, car and insurance payments. Substitute Defense and non-Defense discretionary spending for you living expenses and entertainment budget (the terms don’t mean anything so don’t read into whether Defense is entertainment or living expenses). Now you can see why it is possible to say simultaneously that these cuts only represent 1-2% of spending and cannot possibly be devastating and that they represent up to 35% of some programs and will be painful. Statistics and numbers can be manipulated to say what you want them to say. Although the cuts are only 1-2% of the overall budget, they were targeted at smaller portions of the budget and do not allow for flexibility in how they are implemented. In the family scenario above, you might get by with a 25% cut in your day to day items budget. Could you do the same with your food or gas budget?
So what does this all mean? One, it means that both sides are partially right and partially wrong when describing the effects of the cuts. Take Defense cuts once again. They represent half of the sequester cuts, despite the fact that they are less than 20% of spending. When you take into account that they cannot cut personnel costs or costs for ongoing operations you see that the DoD has to make the cuts in limited areas like training and new equipment. Not exactly good news if something unexpected happens, like say Syria or North Korea.
This also means that if the American people are not willing to seriously look at non-discretionary entitlement spending that any future cuts will come from an increasingly smaller piece of the pie. Entitlement spending is already over half of the US budget and along with interest on the debt, will only increase in proportion every year if no changes are made. I have already written on entitlement programs and compared the life expectancy when the programs were created to the life expectancy now at the link here Budget. It doesn’t take a mathematician to realize that the longer people live and the more medical care costs, the more that these programs will cost the nation. Are we willing to say that maybe 60, 62, 65 or 67 are not the same as those age milestones were in the 1930s or 1960s? Are we willing to make any spending cuts at all that are not tied to a game of chicken called the sequester? If so, are we only going to make those cuts from less then one half of the budget and shrinking?
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