Understanding The Sequester: An Idiot’s Guide

Breaking News, Politics


It’s no secret that there has been a lot of discussion about the economy lately. Talks about tax cuts, government spending, tax increases, and funding, are running rampant. And to make matters worse, these talks are accompanied by key phrases and confusing buzz words that the media and politicians toss around, but that nobody else seems to be able to comprehend.

If you’re anything like me, you hear a lot of this gibberish, but don’t necessarily understand all of it. I do my best to keep up with current events and the doings of the government, but sometimes it is just too much. Fortunately, I’ve done my best to stay informed since the fiscal cliff situation, and I think I can break this whole sequester thing down in laymen’s terms.

Here are some of the basics about the dreaded sequester, and whether it spells disaster or fortune for you, the everyday American.

On the Government’s side

In essence, the sequester is all about budget cuts. Now this sounds scary to some, because they don’t exactly know what that money is being cut from. Overall, the sequester will lead to an $85 billion cut in the budget. Without a doubt, this will limit the funds that are allocated to government sectors like public schools, the military, and discretionary spending. Yes it will lead to job loss, but perhaps a more efficient and tidy government is exactly what we need.

Now while $85 billion sounds like a lot, it is not just getting cut in one fell swoop. This plan is intended to take place over the next eight years. That means that between March of this year until 2021, we simply have to spend less. Although the number is larger than most people will see in a lifetime (for instance, it is several billion times larger than my bank account) it isn’t as much to big brother. America will still be in debt, and that debt will still be impressive. Some counts show that over the next ten years, our country will spend 45 trillion dollars. With these cuts, that number would shrink to just 43 trillion.

So while these cuts are large and foreboding, they shouldn’t frighten you. Yes it will hurt at first. In the long run, the money saved in the sequester will hopefully be spent elsewhere, and more wisely.

To change the way we are looking at things, I’m going to change terminology again. The sequester acts, in the government’s eyes, not as a cut but as a decrease in increase. Wrap your head around that for a second. Every year, unless voted otherwise, the government increases spending. Again, this is automatic, unless voted otherwise, which is rare.

Now with the sequester soon to be implemented, it means a slight decrease in future government spending. For example, if every year, the budget went up by 10%, the sequester would cut that down to 9.3%, roughly. If you’re wondering why the budget jumps every year, that part is simple. Due to inflation, it is a necessary step. However, it is primarily a response to new issues and increasing need among all government sectors. If the budget weren’t increased, there would be cuts every year across the board.

What it means for you

These reductions in spending will mostly affect those who work in the defense department. This includes military positions, and defense contractors in particular will be crushed. Others will find their lives disrupted, and even more will notice – gasp – less paid vacation.

However, there will be cuts in educational spending as well. Fortunately much of public school’s funding comes from the state level, so numbers regarding teacher layoffs have been exaggerated.

In truth, most people will remain unaffected, or fail to notice most of the changes. Some will be hurt, and others will not. This is the way things work. It is unfortunate, but not the end of the world. To bring home the point, something has to be done to regulate spending and the deficit before it gets any out of control any further.

What people should notice is that this is part of what everyone was afraid of around new years’ time. Remember the fiscal cliff? The debt ceiling? This is part of the same issue. However, clever officials tend to come up with new, misleading names for the same problems. That way, opinions change on the same topic within a month or two.

A deal was made to avoid the fiscal cliff.

That deal was to put off action or legislation until March 1st.

So really, the sequester is what people were discussing just two months ago, but now there is a refreshed spin on it.

As it stands now, the sequester will cut:

  • $42billion in defense cuts (7.9%)
  • $28.7 billion in domestic discretionary (5.3%)
  • $9.9 billion in medicare (2%)
  • $4 billion in other mandatory sectors (5.8% to nondefense, and 7.8% to mandatory defense programs)

Military pay will remain unaffected. However, their benefits will be reduced. This includes tuition assistance, and the TRICARE program. Technically, federal employees won’t see pay cuts. However, if their department suffers, there may be layoffs or reductions in pay. Federal assistance in unemployment programs will be cut back, but the state level primarily handles that anyway. And to end on a sad note, defenseless national parks and animal preserves will see a loss in funding as well.

Is there still time to change this?

Yes and no. Congress still has the chance to act on all of these cuts and future spending alterations. The good news is that everyone wants to replace the sequester with a different plan.

President Obama’s stance is that taxes should increase for the wealthy, primarily by closing loopholes. This is coupled with other spending cuts.

As for the democrats, they similarly want to install a tax for incomes above $1 million. They also want to reduce tax subsidies for oil companies, and support military spending cuts. These are common and popular ideas among democrats. Surprisingly, they support a reduction in farm subsidies and an increase in flood insurance premiums.

But the republicans have been scrambling over this one.

After passing the Spending Reduction Act of 2012, they are shocked that the sequester still came about. Effectively, it should have reduced the amount the sequester could cut. They concede that the bill could not be passed again. But it encapsulates what they want out of this shift: no tax increases, no defense cuts, and considerable reductions on domestic spending.

So until all parties can agree to a reasonable shift in the nature of the sequester, you have a basic idea of what’s going on. There are outside parties attempting to prevent the sequester, but they aren’t getting a lot of attention or consideration. In short, the world won’t end, but things will certainly change. If anything, the sequester promises that there will be many more shifts in spending to come in the future.

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