Only one working day remains for Washington to avoid sequestration. Thus far, the country has heard horror stories about this cut and that cut. In the Dayton area, the sequester will have a tangible effect on thousands, as furloughs will certainly become reality at Wright-Patterson Air Force Base.
At stake in the near-term—that is, this year—is $85 billion. At various times, the Obama administration has incorrectly claimed that 1) this was a Republican idea that would 2) cost teachers and first responders their jobs. The other side of the coin is the federal budget deficit, which is substantial.
In fact, the 2012 budget deficit was estimated to be roughly $1.3 trillion, the second highest in the nation’s history. Washington is divided on the culprit for the deficits, with Democrats citing a tax problem and Republicans citing spending. The problem is that Democrats seem unwilling to cut spending while Republicans seem unwilling to support massive tax increases.
The historical record shows, however, that spending has doubled since the year 2000 while revenues have increased by about 25%. This would suggest that spending, not revenue, is the issue.
Still, Washington is in a state of semi-hysteria over $85 billion of cuts, which is roughly 2% of $3.8 trillion in spending. What is often left unsaid is that the feds still project to spend more in 2013 than they did in 2012.
In fact, this is the rule. Dating back to 1998, the year of the first Clinton/GOP House budget surplus, federal outlays have increased each year almost without exception. Deficit spending returned in 2002 after 9/11 and a recession, reaching $412 billion in 2004; but even then, the deficit gradually dropped to $160 billion in 2007.
2008, of course, saw the financial crisis and the Troubled Asset Relief Program (TARP), a $700 billion expenditure. Without TARP, it’s possible that the deficit would have declined still. Total expenditures that year totaled $2.9 trillion.
In 2009, another $700 billion program—the American Recovery and Reinvestment Act, better known as the stimulus—helped push the deficit from $458 billion to a staggering $1.4 trillion. That year, the feds spent $3.5 trillion in 2009 compared to $2.9 trillion the year before. The amount of the increase was, approximately, the amount of the stimulus.
What happened is that the baseline moved up. Essentially, the feds spent at least the same amount as the prior year simply because they spent that much before. But it didn’t have to be so.
Put another way, TARP and the stimulus would seem to be one-time deals; however, federal spending did not decline even though the feds were not authorizing similar expenditures each year. In other words, President Obama could have lived up to his 2008 campaign promise of reducing the deficit merely by pushing Congress (assuming they cooperated) to drop the budget by the amount of either TARP or the stimulus. (Ironically, the feds have not spent all of both funds as yet.)
While there will be financial pain as a result of the sequester, it was easily avoidable.