01 March 2013

Sequester Still Stupid

The best way to understand why the sequester is horrible policy is to recognize the options that President Obama's administration is denied in making the cuts in federal spending that take effect today.  A list of twelve of the most sensible budget cutting options that are not available to him are described below the jump. 

Republicans could have proposed making available as alternatives if they were really serious about cutting federal government spending in a sustainable way that minimizes cuts that reduce the quality of the services that the federal government is required by law to provide.  But, they want to undermine federal government operations as a matter of ideology.  So, instead, they have continued their campaign to indiscriminantly oppose all government spending without acknowledging that any of it has any value in order to thwart the ability of the federal government to conduct its day to day essential duties.  They are incapable of acting like responsible adults or a loyal opposition.

Cuts to federal spending as a result of the sequester don't resemble the kinds of cuts that an individual family or private business would make at all.  This across the board budget cutting tool prohibits the President from taking almost all of the approaches to cutting federal government spending without increasing taxes that make any sense.

1.   The President can't cut federal crop subsidies, even though prices for many crops, like wheat, are currently at record highs and the number of farms in the U.S. is rising at the highest rates for more than a century.

2.  The President can't refinance the national debt to adjust the payment terms in order to mitigate spending cuts.

3.  The President can't increase users fees that inflation has eroded to far less than the goverment's cost of providing some service that Congress hadn't originally intended to subsidize.

4.  The President can't cut the rate at which any federal government employee is paid, or their annual cost of living salary adjustments, or vacation days, or pensions or health care insurance contributions. 

5.  The President can't declare unpaid furlough days to cut the pay of salaried federal government employees.

6.  The President can't change civil service rules to make it easier for agencies to fire unproductive employees they'd like to replace with more efficient ones, nor can he authorize agencies that are forced to reduce their total number of employees due to shrinking budgets to lay off unionized rank and file employees based on merit rather than seniority.

7.  The President can impose a hiring freeze for an agency, but he can't transfer a civil servant to a different agency, for example, to an agency that is shorthanded, perhaps as a result of a higher than usual rate of retirements or surge in demand for whatever service is provided by that agency, from some other federal agency that has more employees than it needs for the moment or even indefinitely, perhaps because of a lull in the need for whatever service that agency provides.

8.  The President can't revoke or rebid any contract with private vendors that the government has already agreed to before the sequester took effect.  In the case of programs like building ships, those contracts may have been inked years ago, even before he took office in 2009.

9.  The President can't reduce administrative costs by consolidating redundant programs in areas like our 44 job training programs, 18 nutrition assistance programs, 82 teacher quality progreams, or 56 financial literacy programs (per today's Charlie Krauthammer's column "Hail, Armaggedon" citing a 2011 GAO report), and also can't shut down any obsolete federal programs that he already plans to propose be discontinued in future fiscal year budgets early.

10. The President can't reduce federal corrections spending by releasing federal prisoners who don't pose a serious threat to the public a bit early by any means short of commuting an individual's sentence via the pardon power, nor can he have courts resentence federal prisoners who are serving sentences longer than those that could have been imposed now due to changes in the relevant sentencing laws that acknowledged as a matter of policy that the old sentences were too harsh. The President also can't alter federal sentencing guidelines to control corrections spending.

11. The President must cut agencies even in cases where marginal spending on their operations would increase federal revenues or decrease federal spending without changes in the law, like tax law enforcement, white collar crime and regulatory violation enforcement, oversight of spending requests from vendors with government contracts (like Medicaid providers and defense contractors), and agencies that audit federal government spending.

12. The President can't move money between accounts in the federal budget.  So, for example, the President can't cut more deeply in less essential programs, like grants to send American musicians to foreign countries to give subsidized programs, in order to reduce the amount of cuts that are needed in more essential programs, like catching terrorists or operating air traffic control systems.

These ever present risk that political deadlock will produce mindless temporary cuts create horrible incentives for government managers, particularly in the budget years immediately before there is a risk that across the board cuts will be imposed, something that saavy senior bureaucrats can often see coming as they draft their part of the federal budget. 

If one agency's thrifty director sought and obtained funding for exactly what his agency needed from Congress that government executive's agency will be punished by being left with left will less money than it needs to do its job, while an agency whose director put fat and waste into his agency's budget that can be cut now will be rewarded because the agency will still have all of the funds that it needs. 

Career senior civil servants who build up the first drafts of the budgets that their politically appointed bosses approve are well aware of this reality and develop a culture of intentional feather bedding and waste as a substitute for the savings accounts that households or private businesses would use to guard against hard times as a result of the mere possibility of across the board cuts like the sequester.

This culture of feather bedding that even the mere risk of a sequester style across the board budget cut rewards and encourages, costs American taxpayers far more than the acorss the board budget cuts themselves save taxpayers.

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