3 things the sequester can teach us

Americans say they want spending cuts in general, but aren't so good with specifics. These automatic cuts will show what government really does, and what could go.

By MSN Money Partner Feb 27, 2013 4:27PM

Image: Hand hiding banknotes under vest, studio shot © Mike Kemp/Rubberball/Getty ImagesBy Rick Newman for US News & World Report

 

A majority of Americans think the government is too big -- in the abstract. When you ask what should be cut, however, they have a hard time saying what should go.

 

The upcoming "sequester" ought to help taxpayers decide which parts of the government they like and which they could do without.

 

Starting March 1, most government agencies will have to cut their budgets by about 8%, as part of a 2011 deal to start paying down the national debt. President Barack Obama has warned that the spending cuts could cause hundreds of thousands of job losses, harm the national defense, snarl airline operations, slow emergency response time and hurt the economy in many other ways.

 

Yet politicians in Washington don't really seem that concerned. They've refused to come up with a better deal that would forestall the sequester and cut spending more sensibly.

 

So we're about to experience the most abrupt cutback in federal spending in years. Here are three things it ought to reveal:

 

Whether Washington doomsayers are telling the truth.

Will the government machinery really seize up, as Obama and others have warned? On one hand, policymakers are right to complain about cuts that take effect overnight, with no effort to prioritize which spending is most important. No well-run business would cut expenses by hacking every line in the budget equally, on an arbitrary deadline.

 

But the magnitude of the cuts isn't all that severe, especially in an era of widespread austerity. Many companies and families have had to cut spending to the same degree the sequester will require, if not more. In many cases, the adjustments forced by budget pressures have put businesses and families on sounder financial footing. If the government can't fulfill its basic obligations with a modest cutback in funding, it might be time to restructure the whole federal bureaucracy. And if the government does adjust, we'll know that Obama and his fellow doomsayers were exaggerating the dangers of spending cuts.

 

How vital the government really is.

Americans take many aspects of the federal government for granted, unaware, in many cases, that it's the government that keeps airplanes flying, monitors food safety, prevents terrorist attacks, underwrites most mortgage, and manages countless other things to keep society functioning. The problem is that for the past 12 years, Americans have been getting a lot more government than they've been paying for, with borrowed money financing the difference.

 

That has to end sooner or later, and modest cutbacks in government services are a good way to start testing how much government taxpayers are willing to pay for. The basic choice is to pay more for the government we have, through higher taxes, or pay the same for less government. Here's one example: The Department of Homeland Security has begun to release illegal immigrants held in various jails across the country, to help save money that will be cut from its budget by the sequester. Is that something we're willing to live with? Or should we come up with more money to prevent it from happening?

 

What else we might be able to cut.

For all the drama, the sequester will do very little to fix Washington's finances, because it doesn't really touch the biggest categories of government spending: entitlement programs such as Medicare, Medicaid and Social Security. Right-sizing the federal budget will require either big cuts in those programs, or thorough reforms that make the government far more efficient (but might be impossible).

 

So the sequester is really just a warm-up for the cuts it will take to truly shrink government spending enough to bring it in line with revenue. Are we ready for more spending cuts? Or will we suddenly decide we like big government a lot more than we thought? If the sequester provides some answers, maybe it will serve some purpose.

 

Rick Newman's latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.

 

More from Rick Newman at US News:

 

In charts: Sequestration drama may overstate the stakes

Business, families have already endured a sequester

News flash: Workplace slackers still exist

 

VIDEO ON MSN MONEY

5Comments
Feb 27, 2013 11:48PM
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So... What I wonder about is why - WHY - authors, article "writers", and our politicians all keep parroting the following nonsense?

"...biggest categories of government spending: entitlement programs such as Medicare, Medicaid and Social Security. Right-sizing the federal budget will require either big cuts in those programs, or thorough reforms that make the government far more efficient (but might be impossible)."

That, and WHY all us citizens continue to let them do this without rebuke or even comment?

Don't they actually KNOW anything about Social Security? Don't YOU?  It is NOT an "entitlement program" from the federal government.  NO. It IS a self-funded and independent old-age and worker's retirement insurance program.  Bought 100% by a special, dedicated tax - the FICA payroll tax - levied on every wage-earning American worker at any income level up to ca 113000/year. A tax designed specifically to fund the SS program and not anything else.

Whether Social Security works or not is NOT a matter of the federal budget - the SS is NOT a COST levied on any part of the general funding which pays for our gov't and that federal budget.  The SS program is, quite simply and by LAW, independent of that general tax fund.  FICA is not a contributor to our general tax fund, and SS benefits are NOT a COST against that tax fund. SS is simply NOT a part of the federal budget.

So... it is wholly disingenuous - even perhaps clever and evil scheming - to continue trying to argue for or manipulate any settlement between our apparently ignorant politicians of any budget plan or policy with discussion of "also" settling the SS issue.  The SS issue should in NO WAY matter in any broader budget discussion, threat, debate, or argument.

What IS so surprising about this is that apparently about NOBODY out there seems to know that the SS program was created and remains a separate and independent program OUTSIDE of our national budget.  I am hoping that some will wise up and become more aware of this, before our politicians manage to wrap the SS program and its issues into our budget despite the law, and thereby manage to defacto destroy it and your - our - collective future.

Just saying!  Think about it?

Feb 28, 2013 8:42AM
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Tired of these guys just working to be elected. It seems to be ALL they care about. If someone manages to be elected who has a desire to actually SERVE. they quickly learn it is impossible to SERVE while swimming in that cesspool. They learn they are made outsiders unless they comply with the status quo as it is on the hill and in the dale of supposed "public service"... and soon they too become as corrupt as the rest of the bunch.

Feb 28, 2013 10:39AM
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If ME and My employer are contibuting to social secuity then how is that an entitlement , it's my money,not the governments to spend as they choose. 
Feb 27, 2013 10:52PM
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What is it that we as a people must do to prevent what could cause a melt down in a lot of what support those who are unable to contribute to their way of survival here on earth? In the mean time our politicians must stop the bickering between each party and try to work as one to help solve the problems we face today. As a 47%ter what I see is the bigotry amongst our political leaders that is still evident in the world we live today that will not allow the dream of all to live as one. When, if ever will we be able to see the truth in the word that is spoken from those leaders of today.
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