THE SEQUESTER AND ECONOMICS 101

ECON101-money-by-borman818In this first day of the Republican designed and implemented sequester, here are a few basic facts you all should consider. Many of these run counter to right-wing talking points (i.e. lies) and needs to get out to the public.

Despite the economic crisis of 2008 that resulted from over 30 years of government deregulation of the banks, the United States remains the wealthiest nation on the planet. Problem is a record high percentage of that wealth is being hoarded by those in the 1% and not being distributed in the general economy. This money is being held in off shore banks and interests, free from being taxed to fund our needed governmental operations.

As President, George W. Bush increased our National Debt by starting two wars (off the books), creating Medicare Part D without funding it and refusing to allow the government to negotiate pharmaceutical prices, and for the first time in our history, enacting huge tax cuts in a time of war without offsetting these cuts with reduced government spending.

When President Obama took office from George W. Bush, the percentage of deficit spending to Gross Domestic Product was approximately 10%. This was a near record high and certainly unsustainable for the long term. However, it wasn’t the highest in our nation’s history; it was far higher during and just after World War II.

In his first four years as President, Obama has reduced deficit spending to Gross Domestic Product in half to 5%. Government spending to GDP is shrinking despite what you hear from Republicans and the Propaganda Ministry known as Fox News. In short, the deficit is shrinking. It is now lower than it was in Bush’s final year in office.

wh_deficit_chart_gdp

Recessions and Depressions are the result of a lack of economic activity due to decreased demand and/or available funds for economic activity. Less demand in the economy and money to pay for goods and services, results in less requirement to create jobs. The fewer jobs, the lower the economic activity and as a result, the problem snowballs upon itself.

Some government spending actually stimulates the overall economy. For instance, for every dollar spent on Food Stamps translates to $1.73 in economic activity in the overall economy.

In our history, each and every time we entered into a recession, the government increased spending to create jobs and stimulate economic activity. This has been done from the founding of our country through George W. Bush. It ended under President Obama. For the first time, government spending has decreased as a share of GDP during a major recession. In fact, we currently have the smallest growth of government and government services since President Eisenhower. This is why our recovery has been slower than in other recessions.

In the crash of 2008, banks refused to loan money opting instead to keep it, including the money given them in TARP created by the Bush administration, not Obama’s. As a result, the private sector couldn’t borrow money to expand or pay their expenses or create jobs. This is what Obama inherited in 2009.

The Republicans took back the House in 2010 and with their colleagues in the Senate (using record high numbers of filibuster) blocked all bills designed to stimulate the economy and create jobs. It has been documented and never denied that on the day of Obama’s inauguration, the GOP decided they would do everything necessary to block each and every action of the President, in order to harm the nation, resulting in him becoming a one term president.

In order to get the Republicans to lift the debt ceiling in 2011, the President and Speaker Boehner agreed that they would work to reduce government spending otherwise there would be an $106,000,000,000.00 across the board cuts in military and entitlement spending. The thinking was the cuts would be so severe and poorly planned; both sides would work to come up with a more rational manner to reduce the deficit.

Since the agreement, Obama has reduced government spending by over 2.5 trillion dollars. In the lame duck session of Congress prior to January 2013, in order to increase revenue by allowing the Bush tax cuts to expire. Obama agreed to extend permanently the Bush tax cuts for those earning less than $400,000.00 a year while not expanding the FICA tax holiday for all working Americans. Congress agreed to look at more revenue enhancements while Obama would look at additional cuts. Sequestration was extended to March 1st, 2013 and the amount of sequestration was reduced to 85 billion dollars.

In the two months that followed, Speaker Boehner complained that the President offered no cuts, no plan, nothing regarding resolving the Sequester despite the fact that his plan has been on the White House Account: http://www.whitehouse.gov/sites/default/files/docs/deficit_reduction_table_bucketed_r8.pdf

Meanwhile, Speaker Boehner recently said that the House had already sent two bills to the Senate to address the sequestration and will not do a third. He demanded the Senate “get off their ass.” Problem is, as anyone who understands basic civics knows; any legislative act sent to the Senate in the old Congress that hasn’t been passed and signed died in the new 113th Congress.

So at present, the House has no Sequestration Bill. Further, Boehner refuses to bring up any bills designed to resolve the sequester for an up or down vote. This is interesting because Boehner is on record being opposed to the sequester. However he is also on record saying after his fiscal cliff deal with the President in 2011 that resulted in the sequester stated he “got 98% of what (he) wanted so (he’s) happy.” Guess he was for the sequester before he was against it. Though he originally floated ideas about closing tax loopholes for the rich, Boehner has now said that anything designed to increase revenues to lower the deficit is off the table and he refuses to negotiate.

Starting today, this is what the Sequester will do regarding federal government spending. Keep in mind these are required cuts not open to any negotiation per the sequestration statute that most of the Republicans voted for, few Democrats and Obama signed to get a deal through:

In the next 10 months beginning today, nondefense spending is to be cut by 9% while defense spending is cut 13% for a total of 85 billion dollars.

Over ten years, this will translate to 1.2 trillion dollars.

These cuts are across the board evenly with few exceptions. Veteran’s Affairs, CHIPS, Food stamps, Pell grants and Medicaid are exempt.

Medicare benefits are protected; however, payments to providers are cut 2%.

Cuts will be absorbed by National Parks, Federal Courts, Homeland Security, TSA, the FBI, Food Inspection, Housing Aid and other Federal Government programs.

In the military, 500 billion dollars will be cut resulting in job losses of civilian support services.

In fact, 750,000 jobs, both private and public sector will be lost.

Many government employees will be furloughed for one day a week resulting in a 20% cut in pay.

Private sector jobs funded by the federal system for infrastructure improvements, roads, bridges etc are now in jeopardy.

In this recovery, the reason our unemployment rate is still at 8%, despite private job sector creation is due to public sector job losses. Teachers, Police, Fire Fighters, etc have all been laid off from federal, state and local government due to lack of funding from the federal government. Sequestration will result in more government job losses resulting in higher national unemployment.

Even with Obama letting the Bush tax cuts expire for those earning over $400,000.00 a year, we are still at the lowest federal tax rate in over 60 years. We are not collecting enough revenues to not only keep needed government services running; we certainly aren’t earning enough to pay off the debt already accrued.

The right-wing always complain that spending is placing a financial burden on our children. It’s an inane argument, but if you’re going to take it at its word, shouldn’t this generation pay off our own accrued debt now, instead of giving it to future generations. To do so, shouldn’t we be increasing revenues from those who have the money thanks to unpaid for tax cuts from Bush that they simply aren’t using?

Europe has proven that austerity measures results in deeper recessions, often double dip recessions. Government spending keeps economies running. Our economy is still teetering. To randomly slash funding from needed services resulting in more money being taken out of the economy, only to stay housed in bank accounts overseas only serves to harm the nation, increase the ongoing debt, and making lives worst for ourselves and future generations.

It’s time to grow up and realize you often need to borrow and spend more to grow and be in a position to pay that loan off due to your success. You need to make measured wasteful cuts and raise revenues from those who aren’t doing anything with the money they have. It’s always been that way and nothing has changed.

The longer the sequestration remains, the higher the probability we will not only fall into a double dip recession, the standard of living from those in the middle-class, working poor and impoverished will become even worse making the nation weaker while those in the 1% remain unaffected. The only solution to this mess is the one thing the Republicans refuse to do, negotiate and compromise for the good of the nation. They are too hung up with childish, “don’t compromise” ideology professed by those who really have no intellectual ability to understand they’re only hurting themselves.

The American Economy is being held hostage. The GOP is hoping that the longer they do this, the Stockholm syndrome will kick in and you’ll side with your captors.

Don’t let this happen and let your feelings be known. Finally, as we approach the 2014 midterms, never forget what they do and will continue to do and vote all these idiots out of office in every level of government for your own good.

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