Budget cuts? Join the club
Americans aren't shocked at the idea of sequestration because we're used to budget cuts. We've been making them in business and at home for years. It's time the feds joined in.
By Rick Newman for US News & World Report
Airport lines will snake out the door. Teachers and firefighters will get laid off. Military training will be canceled, leaving the homeland vulnerable.
These are just a few of the calamities that will supposedly occur if "sequestration" goes into effect on March 1, cutting about $85 billion in government spending through the rest of 2013. Yet the majority of Americans have already dealt with more sizeable cutbacks in their own lives, while finding ways to prevent disaster.
The federal government, in fact, may be the only big institution that hasn't slimmed down lately, giving taxpayers yet another reason to distrust the feds.
The whole sequester scheme dates to 2011, when Republicans and Democrats agreed to across-the-board spending cuts affecting most government agencies if Congress couldn't come up with a more coherent way to reduce annual deficits. Congress couldn't, so the sequester is poised to go into effect.
Like most of the wearisome budget battles inside the Beltway, the sequester wouldn't be that big a deal if Washington had simply laid out a predictable timeline for austerity measures to be phased in gradually. But instead, political brinkmanship has generated yet another all-or-nothing standoff, with nobody quite sure what will happen once the fateful deadline arrives.
On a full-year basis, the sequester is supposed to reduce spending by about $110 billion per year for nine years. That amounts to about 3.8% of federal spending in 2013. In a $15.8 trillion economy, the sequester represents about 0.7% of GDP.
Many families and businesses have had to make far more drastic cutbacks.
Income down 8.1%
From 2007 to 2011 (the latest data available), median household income fell by 8.1%. Most families have adjusted to lost income by spending less, downsizing where they can, and doing without things that aren't absolutely necessary.
As most workers know, doing more with less is a major corporate trend as well. Here are just a few of the prominent companies that have had to deal with sizeable drops in revenue, according to data provided by S&P Capital IQ:
Ford (F): 21% drop in revenue since 2007.
General Electric (GE): 15% drop.
Home Depot (HD): 11% drop.
Allstate (ALL): 9% drop.
Whirlpool (WHR): 7% drop.
All of those companies are profitable today. They had to slash costs and in some cases lay off employees to adjust to tougher circumstances. But that's the point: Companies must adjust when revenue falls -- no matter how painful -- or risk going out of business. Companies that don't adjust end up like Hostess, Borders, and many other firms that landed in bankruptcy court.
Many budget experts point out the federal government isn't like a business and shouldn't be held to free-market standards. The government is supposed to do things that can't be done by the private sector, such as defend the nation and maintain a social safety net. The profit motive that governs ordinary companies doesn't apply when services must be offered equally to everybody, or when cost cutting would be counterproductive.
But the idea that the government can't trim expenses without causing havoc is absurd to the millions of Americans who have already cut back in every other aspect of their lives. When President Barack Obama and his Cabinet officials warn of chaos from the sequester, they're basically saying the government can't adapt to leaner times the same way taxpayers who fund it have already done in their own lives.
Since 1980, government spending has surged by three times the rate of inflation. There are now at least 20 different Cabinet-level agencies (depending on how you count), and there has been no meaningful consolidation of the federal bureaucracy since the end of World War II.
In the business world, by contrast, just about any company trying to do things the way it did in 1980 or even in 2000 is dead and gone. That makes the federal government about the only institution left in America that's still clinging to the ways of the past.
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 & World Report:
- The upside of the sequester
- 20 industries with record numbers of jobs
- A stock market correction may have begun
"But the idea that the government can't trim expenses without causing havoc is absurd to the millions of Americans who have already cut back in every other aspect of their lives."
Don't mess with the Middle Class (or Working Poor as we are now called). I have given up all I can. It is now time for the Federal Government and the large corporations to take some of the heat off us.
Yes, the large corporations! It's great they are making profits but at our expense? I cannot work any harder for less money...something has to give.
I do not think we need 50 times the number of nuclear weapons when one time is enough to wipe us all off the planet. The Government needs to budget and downsize, smartly.
Waraksas.....I "did not" vote for Obama on his first term EITHER...
I did not feel he was qualified....For the top position, either.
As far as outspending Bush his first 4 years...That really remains to be seen and tabulated..?
Our Country was in DIRE STRAIGHTS, many of those spending policies and tax cuts; HAD BEEN,
under or from the "previous BUSH ADMINISTRATION.."
Under Normal conditions, little can be changed the "first couple years" in office..
You are old enough, to realize that.?
We have been in a Recession, the "worst in history" during the end of Bush and since Obama has been in office...And Obama and the latter Congress, mostly the House are still acting like children, while America is doing a slow burn...
I voted for Obama the 2nd. term....Not that I wanted to, but BECAUSE of the foolish choices presented to the Voting Electorate..
My feeling was that Romney was a very poor choice, would have "double dipped" us into a worst Recession, bordering on a nearer Depression; He had absolutely "no compassion" and only contempt for the "poorer classes" along with little respect for the "working Middle class."
He did not appeal to Americans; Being a Rich Elitist, dodging taxes with off-shore accounts..
And cronyism to people of his statue, along with burying us in more Wars or extended wars in the Middle East...And bending completely to the Tea Party Repubs...He was a very poor choice at the "wrong time in history."
Still asking the same question ABS....The Challenge one...??
A decent day in the Markets to regain a small portion back from yesterday....??
My life is perfect and great!
If any of yours isn't, go start a Revolution. I couldn't care less!
God bless America!
Republicans have long forgotten the faith of their fathers.
Read: ' How Lee Atwater destroyed the Republican Party.'
U.S. Governments have been slimming down since the '80's - at least in terms of labor pay and benefits for
'The Common Man.' Republicans have pauperized the American Workforce.
Almost all monthly entitlement income is spent in local economies within 30 days of receipt. Republican Austerity will result in even more small, local business failures as residents see entitlements diminish.
BTW.....Warass...Remember when your buddy said. "He had Political Capital, and he was going to spend it...??"....I do..
Now the black guy, Obama has it....Guess what ???
Another thing wankass...Remember the Surpluses left to Bush...By Clinton..
What happened to them...POOF.
How old are you ??
warakass....You sound like an idiot..
Known fact Bush took more vacations...First 4 years in office then Obama...
Fact he flew all over hell during 911..chikin shidt..
Fact he flew around Katrina area for several hours, then came back to only tell BARNEY....
How many trips to the Middle East to kiss his buddies, the Saudis azzes...Couldn't open door ??
Hmmmm, think he even flew them and bin Laden families out of here (US). 911 timeframe ??
I wouldn't have mentioned Bush, but you made a MORONIC remark about Obama..
And you are an idiot.....
WARAKSAS: You pass off a bunch of lies like it`s facts.You`re not objective.We
all know you`re just a LOG CABIN REPUBLICAN, who`s never fair to Obama.Give
Obama credit for his 16 major accomplishments.I`d faint if I ever heard the far
right give Obama the respect he deserves.
Copyright © 2014 Microsoft. All rights reserved.
The stock rises 9% after the company reveals strong second-quarter results.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.