Austerity Begins Self Destructive Course

Mark Trahant
2/28/13

 

And so austerity begins across the United States. On March 1, a few hours from now, the federal government will officially sequester funds that have already been appropriated, $85 billion.

The way this will work: Sometime on March 1 – as late as 11:59 pm – the Office of Management and Budget will issue a sequestration order. The order will cite specific reductions in each budget account, money that must be stripped from this year’s budget that ends in September.

This is an old OMB number (and will change on Friday) but it gives an idea of what is at stake. Last September the OMB projected that account number, 018-10-0101, Indian student education, funded at $131 million, will need to drop $11 million. At the Indian Health Service that amount totals some $356 million. Another $325 million goes away for Indian housing (and possibly more because there is unspent funding already in the pipeline). And across Indian country, across the federal budget lines, a similar story. A sequester reduction between now and September that is significant.Mark Trahant

And stupid.

Federal Reserve Chairman Ben Bernanke said this budget cutting enterprise will undermine deficit reduction. He said on Capitol Hill on Tuesday that current budget policies “will slow the pace of GDP growth by about 1-1/2 percentage points this year, relative to what it would have been otherwise. A significant portion of this effect is related to the automatic spending sequestration that is scheduled to begin on March 1, which, according to the CBO's estimates, will contribute about 0.6 percentage point to the fiscal drag on economic growth this year. Given the still-moderate underlying pace of economic growth, this additional near-term burden on the recovery is significant. Moreover, besides having adverse effects on jobs and incomes, a slower recovery would lead to less actual deficit reduction in the short run for any given set of fiscal actions.”

Bernanke’s sensible solution is to replace “the sharp, front-loaded spending cuts” with a more gradual approach to spending reduction.

The problem, saying again, and again, is a long-term one. Not an immediate crisis. As Bernanke pointed out: “Significant progress has been made recently toward reducing the federal budget deficit over the next few years.”

Today there will be floor action in the Senate. Democrats will present their plan and Republicans, after much internal wrangling, will present an alternative. All of this is for show. Neither side has the votes to do anything.

The same for President Barack Obama. There’s a lot of gnashing, folks urging him to bring everyone together and fix this problem. But that cannot happen unless one side is willing to capitulate. And we’re no where near that point. The impact of the sequester will have to be seen and felt by ordinary Americans (most who are not even paying attention to this ugly process) before there will be any movement.

I have written before that this will be a little bit like flipping a fuse box in a house. Small town airports will go dark; then smaller payroll (and retail spending) after federal employee furloughs; or, reduced enrollment in popular programs such as Head Start. One by one the impacts – the essential pain in the mind of some – will show up in congressional districts across the country.

The policy prescription in place is to shrink the economy. And that makes no sense because growth is the only way out.

As Bernanke put it: “... fiscal policymakers should not lose sight of the need for federal tax and spending policies that increase incentives to work and save, encourage investments in workforce skills, advance private capital formation, promote research and development, and provide necessary and productive public infrastructure. Although economic growth alone cannot eliminate federal budget imbalances, in either the short or longer term, a more rapidly expanding economic pie will ease the difficult choices we face.”

Or make those problems worse. Starting Friday.

 

Mark Trahant is a writer, speaker and Twitter poet. He lives in Fort Hall, Idaho, and is a member of The Shoshone-Bannock Tribes. Join the discussion about austerity. A new Facebook page has been set up at: www.facebook.com/IndianCountryAusterity.

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jaytaber's picture
jaytaber
Submitted by jaytaber on
Growth is one way out, not the only way out. With the failure of the federal government to police financial fraud by American corporations, state governments suffering financial losses and declining public services are looking for ways to close the loopholes created by Congress. Instrumental in that effort is closing down tax havens and money-laundering. In their latest report on the subject, Public Interest Research Group examines The Hidden Cost of Offshore Tax Havens, and recommends remedies US states can take toward recovering their losses and restoring fairness to the tax system. Tax revenue on wealth held in tax havens could halve world poverty in a decade, but that will only happen if the tax justice campaign brings accountability to the international tax regime. In the 2nd Edition of Tax Us If You Can, published by the Tax Justice Network, the causes of tax injustice as well as key players in creating and maintaining tax injustice are examined along with a list of agencies addressing global tax issues and methods to move towards tax justice worldwide.

Jay Daniels's picture
Jay Daniels
Submitted by Jay Daniels on
I'm sitting here right now thinking about the sequester possibility. It's really not a big deal. Every body's all hyped up about about it but's it going to be ok. The government has to run. Business will be as usual tomorrow, so don't get all fret up about it. The problem is that is that we still have to manage Indian lands. We have to protect your lands. So, if the government shuts down, they still have a responsibility to protect you land. So, I don't understand the emphasis on making the sequester such a big deal because sequester or not, they (BIA) still has to take care of your land! They are not going to get off on neglecting their fiduciary liability.

Jay Daniels's picture
Jay Daniels
Submitted by Jay Daniels on
I'm sitting here right now thinking about the sequester possibility. It's really not a big deal. Every body's all hyped up about about it but's it going to be ok. The government has to run. Business will be as usual tomorrow, so don't get all fret up about it. The problem is that is that we still have to manage Indian lands. We have to protect your lands. So, if the government shuts down, they still have a responsibility to protect you land. So, I don't understand the emphasis on making the sequester such a big deal because sequester or not, they (BIA) still has to take care of your land! They are not going to get off on neglecting their fiduciary liability.
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