Understanding Sequester In Understandable Bullet Points

Now you can be the first on your block to fully understand Sequester. Read carefully. It is complicated. Congress likes it that way.

This Is The Introduction...

• Sequester is a legal term whereby valuable property is taken into custody for safekeeping in order to prevent the property from being disposed of before a dispute over its ownership can be resolved.
• Congress now uses it to describe a fiscal policy procedure originally provided for in the Gramm-Rudman-Hollings Deficit Reduction Act of 1985.
• This act tried to reform Congressional voting procedures to make the size of the Federal government's budget deficit a matter of conscious choice.
• Before Gramm-Rudman-Hollings Deficit Reduction Act the budget was simply the arithmetical outcome of a decentralized appropriations process in which no one ever looked at the cumulative results until it was too late to change them.

This Is The Smartfella Telling You How Smart A Fella He Is...

You may remember I recently blogged about my Spend & Tax Proposal for Congress. I thought I was being silly. I did not know that that’s exactly what Congress made a practice of doing. If you want to refresh your memory about my silly but true blog, click here... http://forii.blogspot.com/2013/01/all-this-time-congress-has-had-it.html

Expansion Of The Introduction Above Before I Interrupted Myself To Tell You How Smart I Was...

• If the appropriation bills passed separately by Congress provide for total government spending in excess of the limits Congress earlier laid down for itself, and if Congress cannot agree on ways to cut back the total, then an "automatic" form of spending cutback takes place.
• This automatic spending cut is what is called “Sequestration”.
• Under Sequestration, an amount of money equal to the difference between the cap set in the Budget Resolution and the amount actually appropriated is Sequestered and not handed over to the agencies to which it was originally appropriated by Congress.
• In theory, every agency has the same percentage of its appropriation withheld in order to take back the excessive spending on an "across the board" basis.

As Usual Our Duly Elected Snidely Whiplashes (Congress) Steps In and Messes Things Up...

• Congress for years has been choosing to exempt certain programs from the Sequestration Process.
• The number of exempted programs has tended to increase over time.
• This means that Sequestration would have to take back gigantic shares of the budgets of the remaining programs in order to achieve the total cutbacks required.
• In other words the unexempted programs would have been virtually crippled.

The Bottom Line...

• Congress did favors for some and not others and they have made a workable plan (Gramm-Rudman-Hollings Deficit Reduction Act of 1985) unworkable.
• The prospect of Sequestration became so catastrophic that Congress has been unwilling to let it happen.
• Instead, Congress has repeatedly chosen to raise the Budget Resolution spending caps to match the actual totals already appropriated.
• The bottom of the bottom line is Congress wiped out the incentives that the reformed budget procedures were expected to provide for them to get better control of the budget deficit.

Let’s Look At All of This in A Little Different Way

Did your 5^th Grader just walk into your computer

room and say, “What are you doing?” Rather than trying to explain all of the above (which I am certain you fully comprehended), tell the little tyke to read these hypothetical 5th grade bullets below...

• The entire Federal Government is composed of 10 departments.
• Each Department has a budget of $100,000.
• Your little tyke immediately figures out that the total budget is $1,000,000.
• There is a major downturn in the economy which results in a major downturn in tax revenue.
• Everyone agrees that there must be a 10% reduction in expenditure by the Federal Government.
• All members of Congress get out their calculators and they compute that each department must cut $10,000.
• Everyone agrees that each department will have to cut $10,000.
• They all go to Happy Hour happy.
• The next day Senator Foghorn proposes to exempt department #1 from participating in the expense reduction and that proposal is agreed upon by Congress.
• Within minutes Senator Slick proposes to exempt department #7 from participating in the expense reduction and that proposal is agreed upon by Congress.
• Within minutes Senator Willie proposes to exempt department #4 from participating in the expense reduction and that proposal is agreed upon by Congress.
• This process is repeated 6 more times until the only department not exempted is department #8.
• Everyone agrees that department #8 will have to bear the full cut of the Federal Government’s required reduction of $100,000.
• Then the newest member of Congress (he has not been there long enough to stop thinking) steps up and says his calculator tells him department #8 will have to forfeit its entire budget of $100,000.
• Everyone agrees that it is unconscionable that any department should not have any money to spend.
• Everyone agrees that they must borrow $100,000 from China.
• They all go to Happy Hour happy.

The only parts of this entire blog posting that are complete fabrications are the lines that say “everyone agrees”. That never happens.

Now do you understand how Congress works?

Would I kid u?

Smartfella

IceRocket Tags: Sequester,Sequestration