Sequestration Does Not Mean the Sky is Falling - take 2

I had an early version of this post that did not properly consider all of the data available.  Suffice it to say that the sequester is complicated.  My conclusions are the same.  The National debt stands at $16 trillion.  The interest on this is approaching $800 billion.  The current annual debt is about $1.2 trillion.  If we do not cut spending, we soon will be borrowing just to pay the interest.   The sequester is a very small step toward a long journey.  Is this a problem this year?  No, we can get through this.  Is it a problem in 10 years, almost certainly.  Change needs to be made on the spending side as well as on the revenue side.  Sooner is better than later.  Neither the President nor the Congress gets this.

All of the press reports seem to conclude that the public has figured out that the sequester will not destroy the United States and that the administration was crying wolf.  That was the point I was trying to make in the earlier post.

This post will just get the information about the sequester out there for everyone to peruse.  It is far more complicated than I thought.  For one, the Budget Control Act of 2011, the law proposed by the President’s Economic Council Director, Gary Sperling, and approved by both houses of Congress, is not a standalone document.  Rather it modifies the Balanced Budget Control Act of 1985 (i.e. Gramm-Rudman).  It revises §251 (a)(2) of that bill by inserting language requiring that the discretionary spending of every account within either the Security or Non-Security category be reduced by a percentage sufficient to achieve the sequester goals. This new section includes the language, “ELIMINATING A BREACH.—Each non-exempt account within a category shall be reduced by a dollar amount calculated by multiplying the enacted level of sequestrable budgetary resources in that account at that time by the uniform percentage necessary to eliminate a breach within that category.”  This means that the OMB is correctly assessing the bill and correctly reducing the discretionary spending within each category of each budget function.  It is the law that determines the sequester amount and the manner in which it is imposed, not the OMB.

The Budget Control Act of 2011 further inserts a new section 251A, Enforcement of Budget Goal, that defines the sequester amount.  There is clear language in Section 251A to define for the OMB (Office of Management and Budget) the annual amount of the sequester.  As if this was not sufficiently complicated, the Taxpayer Relief Act of 2012 reduced the 2013 sequester amount by $24 billion.

Whew, now we understand, right?  No, we don’t.  Section 251A also includes so-called discretionary spending limits for the security and non-security categories but the stated discretionary spending requirements seem not to relate to the budget at all except that we do not meet them.  Using the proposed DOD budget the DOD meets the discretionary goals if you take out the anticipated cost of the Afghan war but there are Budget Function 050 categories within the Department of Homeland Security and others that are Budget Function 050.  When they are added, the DOD exceeds the discretionary limit by a few billion dollars.  It is totally unclear to me what the so-called discretionary budget limits mean.  The number was referenced in the initial OMB sequestration report but not used in the latest sequestration report.  Instead, a new number called the “Sequestrable Base” is inserted and that is used to calculate the percentage reduction.  The new number is ~$549.3 billion.  If I use the 2013 proposed defense budget and back out the Afghan war costs, etc., I come up with $552.6 billion but hey, what’s $3 billion among friends?