The Sequester Could Dramatically Change Budget Politics
A good friend who works for one of the largest military contractors sent me an email yesterday complaining about the sequester -- the spending cut scheduled to occur on January 2 that was triggered when the anything-but-super committee failed to agree last November on a deficit reduction plan -- that expressed grave concern about the impact the reduction will have on his area.
This was his major point (material in parentheses is mine):
...we have a somewhat different issue regarding DoD. First, (there are) thousands of contracts in acquisition attached to many more thousands of contracts with sub-contractors. Saving a dollar may require terminating or cutting $1.10 to $1.20 of program. Second, we are starting to feel the effects now as (Department of Defense contracting officers) don't enter into contracts for already appropriated funds. Third, about a quarter of DoD funds (personnel) will be exempted meaning the full burden will fall disproportionately on the rest of the defense budget. Fourth, the cut will have to be applied to the remaining three quarters of FY13 thereby magnifying the impact. Fifth, since personnel are exempt, and there is no (base realignment and closure) function included, and since the cut drops the (FY13) spending profile significantly, DoD will not be able to shape the force structure, base structure, and end strength over several years as it would certainly prefer to do. Sixth, the current DoD bureaucracy has no experience in doing this and will be swamped by (a) huge contract adjustments, (b) huge reprogramming requirements, (c) the "Mother of All" Nunn-McCurdy reports, and (d) probably many other second and third order issues I haven't even thought of.
My message on the defense side has been that the issue is less the level one drops to in defense spending than the rapidity of the descent and the mindless mixture of the cuts and how they will have to be accommodated. It will take months to sort all this out - if not a year, if not two. Meanwhile, we'll all be forced to furlough a lot of people.
My immediate response was to ask "knowing this, why didn’t the military community put pressure on the anything-but-super committee to come up with a deficit reduction plan that would have prevented the DOD cuts from being triggered?” In other words, the contractor community has to take some of the blame for not recognizing the threat to the spending it is now so worried about.
But there are also much larger issues involved.
For example, as I’ve been saying for several years, as budget reductions become more likely, we’re going to find out just how popular federal spending really is and test that popularity against what currently is the presumed desire that taxes never be raised. My guess is that the current mania about maintaining taxes at their current levels will lose out to increased spending precisely for the reasons my friend alluded to in his email: job losses and profit reductions. That will align workers and investors politically in ways that hasn’t happened before.
Second, if my friend's email is an indication (and given his political and economic preferences, even though it’s anything but a representative sample I take it as a harbinger of things to come) it’s looks like it’s finally starting to dawn on people that spending cuts not only are not costless but actually will be quite painful. If that’s true, a big change in budget and national politics could just be around the corner.
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We have already seen what
We have already seen what happens when budgets get slashed and taxes are not raised with the huge drop in state and local government employment. The same thing is going to happen here. Everyone focuses on government employees and not all the other people who have jobs because of government spending whether it is DOD or biomedical research. I wish I could share Stan's expectation that things will change once folks recognize this.
"Nobody ever went broke
"Nobody ever went broke underestimating the intelligence of the American public." -- H. L. Mencken
Reality bias starting to
Reality bias starting to emerge.
let's all hold our breath
"it’s looks like it’s finally starting to dawn on people that spending cuts not only are not costless but actually will be quite painful. If that’s true, a big change in budget and national politics could just be around the corner."
Our politicians and our media failed utterly during the run-up to the invasion of Iraq. Pretty much everyone admits it now, and pretty much everyone says that the invasion & occupation was a mistake. But there has been precisely zero accountability from anyone for it. Our media still reports the news with a "he said/she said" bent; the Republican Party depends entirely on vaguely plausible talking points without any regard for reality.
We seem to have constructed a zero-accountability society for our elite decisionmakers. I'd be pleased to be mistaken, but I don't see any likelihood that the GOP will see the error of its ways, and retreat from its "government is the root of all evil" talking points. It generates resentment & wins elections, and that's enough for them.
Ma nishta...?
"Saving a dollar may require terminating or cutting $1.10 to $1.20 of program. Second, we are starting to feel the effects now as (Department of Defense contracting officers) don't enter into contracts for already appropriated funds."
This, of course, never happens to Social Programs, which produce a greater velocity of money (and therefore reduce the need for taxes), as opposed to the 30-40% waste of "Defense" Spending.
(Don't get me wrong; I'm happy to see the Dept of War wasting monies--guns, bullets, missiles, and other weaponry it doesn't use don't produce collateral damage and costs to the people who use those weapons or have them used on them. But if you're claiming to make cits in the name of "efficiency," the DoD should be the first place on the chopping block.)
A familiar problem is likely
A familiar problem is likely to rear its head as lobbyists try to reverse sequestration. Contractors for DoD are well organized and many are quite big. Beneficiaries of social spending are not.
Since military spending is done very inefficiently and often for purposes that serve no public good, I'm not wild about urging military contractors to fight sequestration. They already have a whole political party and a lot of members of the other party behind them.
As long as we're quoting
As long as we're quoting Mencken, this seems to apply as well:
"Democracy is the theory that the common people know what they want, and deserve to get it good and hard."
Mencken Quote
Anon C. That is my favorite Mencken quote also.