What Caught My Eye Today - Debt Sequestration

Debt Sequestration - In case you had not noticed, the United States is supposed to careen off a fiscal cliff on March 1. Let's recap how we got here, shall we? 

The fiscal cliff was the sharp decline in the federal budget deficit that could have occurred beginning in early January 2013 due to increased taxes and reduced spending as required by previously enacted laws. The previously enacted laws leading to the fiscal cliff had been projected to result in a 19.63% increase in revenue and 0.25% reduction in spending from fiscal years 2012 to 2013. Those laws included the expiration of the 2010 Tax Relief Act and planned spending cuts under the Budget Control Act of 2011. The spending reduction elements of the fiscal cliff are primarily contained within the Budget Control Act of 2011, which directed that both defense and non-defense discretionary spending be reduced by "sequestration" if Congress was unable to agree on other spending cuts of similar size. The scope of the law excludes major mandatory programs such as Social Security and Medicare. Up to now Congress has unable to reach agreement on spending cuts and the sequestration was delayed until March 2013 as part of the American Taxpayer Relief Act of 2012.

I'll grant you a moment or two to get over the shock of Congress being unable to agree on pretty much anything. Right then? Let just see what all the commotion is about here.

At last check, the U.S. debt stood at slightly more than $16.6 trillion. The impending doomsday of sequestration amounts to $85 billion in 2013. So much sequestration does that buy you? Not much.  $85 billion represents just over one half of one percent of our national debt. So if we manage to take off $85 billion a year then that debt will be history by the year 2213 (give or take a year or two).  Of course, the government is running a $1.1 trillion deficit so the debt will actually continue to grow more than the $85 billion we are paying back each year. Which means we'll eliminate the debt...never.

A recent news item suggested that one of the outcomes of the debt sequestration could be a delay in tax refunds. Last year, the Internal Revenue Service paid out $300 billion in tax refunds (about $3,000 per household).  Never mind the fact that this money amount to an interest free loan to the government courtesy of the taxpayers. I say keep it for the debt.  In fact, keep those tax refunds for the next 53 years of so. That'll get rid of the debt. Oh, but wait just a second. The government is running a $1.1 trillion deficit so the debt will actually continue to grow more than the $300 billion we are paying back each year. Which means we'll eliminate the debt (yep, you guessed it)...never.

The Congressional Budget Office estimated spending on Social Security and healthcare for 2012 at $2.5 trillion ($1.6 billion for Social Security, Medicare and Medicaid and $900 billion for healthcare).  And that figure is expected to rise to more than $3.2 trillion over the next 10 years as the rest of the healthcare reform law kicks in. I suppose we could scrap entitlements altogether and we'd have that debt down in no time. Of course there would be no social safety net, but isn't that what churches are for anyway?

You know, we could always just sell off some states to pay down the debt. In 2010, the GDP of all fifty states was $14.7 trillion. That's a wee bit short of $16.6 trillion, but would it really matter?  Who are the debtors going to collect from if there aren't no more United States?

I get that you don't indiscriminately cut $85 billion without the possibility of hitting some bone.  A lot of people are going to get hosed by this deal through no fault of their own.  My point here is that the government seems to be making a real big deal out of something that, in the grander scheme of things, does not make much of an impact on the issue we are supposed to be tackling in the first place, the national debt.

Anyway, I'm off to my homemade bunker to wait things out. Geeze, I thought after the end of days and recent close encounters with asteroids, I wouldn't be going back so soon.