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Thread: Sequestration Scare

  1. #1
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    Sequestration Scare

    I'd just like to say to President Obama that you are full of sh*t. Back in the good ol' days it was the Republicans who had the bad ideas and the Democrats who had no ideas. Now it is reversed.

    President Obama is in my home state today saying how if we cut discretionary spending by 8.2% it is basically game over for the economy. Everyone is out of a job, no one is eating for the next year. It's almost to the point where liberals are rethinking their stance on guns.

    Such scare tactics are silly at best and borderline fraudulent. I'll explain why I'm right:

    Back in 2008/2009 time-frame most states, including Virginia, had huge revenue shortfalls. In Virginia departments had to submit plans for 5, 10, and 15% cuts from the PRIOR year budget. The governor then decided if you'd get a 5% cut or 10% cut or 15% cut. This happened 2 or 3 times. Most departments got a 10% cut. Believe it or not, the sky didn't fall. Most agencies were able to absorb a 5% cut just by changing a few priorities, limiting raises, or delaying some purchases. The next 5% was generally absorbed by not filling positions that became vacant. The General Fund for Virginia went down roughly 5% in FY09 and another 12.5% in FY10. To this day it hasn't reached back to it's peak in FY07. The worst thing that happened during this time was tuition went up pretty heavily. Layoffs were very minimal (if at all) some people retired early, some things were not bought for a few years. The average citizen not going to college didn't see a change. Parks were open, police caught criminals, roads didn't cave in, and kids graduated high school. This was in a state that was extremely good at running a tight budget. The US government is not so good at this. Let's take a look at what ACTUALLY is happening.

    You can find the proposed cuts here: http://www.whitehouse.gov/sites/defa.../stareport.pdf

    Note these are cuts to CURRENT YEAR BUDGET AUTHORITY and NOT prior year outlays OR prior year budget authority. This is a huge point. Budget authority is the maximum you can spend that year. Most agencies don't spend that much. Further, it is generally higher than prior years.

    Most cuts are about 8.2%. Let's take a look at the impact of such a cut on a budgetary unit.

    The first one I saw when looking at Appendix A was the Botanic Garden. This seemed like an easy one because you'd think it would be fairly stable year to year. It's FY13 BUDGET AUTHORITY is $12 million. With it's 8.2% cut it will now only be allowed to spend roughly $11 million (according to CBO). It's expenditures for FY11 (actual year shown in FY13 budget) were $11 million. This means all the Botanic Garden would have to do this year is spend what they spent in FY11. Further, the Botanic Garden has actual spending of $7 million in FY06. Assuming a high rate of inflation (3%) their spending for FY13 should only be $8.5 million. So basically this cut is making them go from extreme increases over the past 7ish years to no increase YTY. Sorry, but I don't think that's a big deal.

    Think this is a fluke? It isn't. Operations for the Federal Aviation Administration will be cut by $377 million for a total budget of $11.121 Billion. In FY11 they spent $9.716 Billion.

    If people tell you the planes will not fly because of these cuts it is because THEY are CHOOSING to do that kind of unnecessary cut. This is why it is without a doubt a scare tactic. We may very well see airports shut down but when the budget surplus comes in for that department it's going to be hard to explain to people like me who actually know how to look into this stuff.

    My guess is that these people will get furloughed and it's sick that our politicians will go that far to try and prove a point.
    Last edited by Steeeeve; 02-27-2013 at 11:23 AM. Reason: word error

  2. #2
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    It will be interesting to see if they choose to make cuts that are obvious to the public or not.

    As you point out, from a practical standpoint most of the cuts are not actually cuts at all, but limited budget increases, based on spending authority that most departments don't fully utilize anyway (iirc defense being the exception...but cant say for sure since they cannot account for literally trillions of dollars that they have lost).

    Frankly, in absolute dollars spent, there are no "cuts", so there is no reason the public should feel them at all.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

  3. #3
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    Quote Originally Posted by daewoo View Post
    It will be interesting to see if they choose to make cuts that are obvious to the public or not.

    As you point out, from a practical standpoint most of the cuts are not actually cuts at all, but limited budget increases, based on spending authority that most departments don't fully utilize anyway (iirc defense being the exception...but cant say for sure since they cannot account for literally trillions of dollars that they have lost).

    Frankly, in absolute dollars spent, there are no "cuts", so there is no reason the public should feel them at all.
    And so far so good.

    I remember some time ago you mentioned you were against "across the board cuts". I too feel this is a bad idea, however, these are not "across the board cuts". As you mentioned, they are "across the board limited increases". Going forward, a skilled team of auditors needs to go department by department and basically layoff a bunch of people. I've got a friend who works for a naval shipyard who always jokes that they could have the people employed and get twice the work done if needed. This will never happen though because even with the excess labor they are still a third the cost of a private company. Apparently private contractors are significantly better at overcharging the federal government than the actual federal employees are. This actually helped explain a question I've always had; why do we not build cruise ships in America? They are mostly built in Europe with extremely high labor costs/laws. Apparently the answer was simple: The feds pay more.

    Further, what has been exposed is how horrific the budget managers are across the federal government. How did we go four months into the fiscal year and only realize we might not have 10% MORE to spend a few weeks before it actually happened? And how can you not absorb a 7% cut? They have to have the easiest accounting job in America. Imagine if you knew every year your revenue would be 10% exactly...the budget would just become a computer program.

  4. #4
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    Quote Originally Posted by Steeeeve View Post
    And so far so good.

    I remember some time ago you mentioned you were against "across the board cuts". I too feel this is a bad idea, however, these are not "across the board cuts". As you mentioned, they are "across the board limited increases". Going forward, a skilled team of auditors needs to go department by department and basically layoff a bunch of people. I've got a friend who works for a naval shipyard who always jokes that they could have the people employed and get twice the work done if needed. This will never happen though because even with the excess labor they are still a third the cost of a private company. Apparently private contractors are significantly better at overcharging the federal government than the actual federal employees are. This actually helped explain a question I've always had; why do we not build cruise ships in America? They are mostly built in Europe with extremely high labor costs/laws. Apparently the answer was simple: The feds pay more.
    Ohhhh yea. Any time that you see a quote to the federal government from a private company for work to be performed, figure completion price will be 2-3x the contract price. The REAL money is in the change orders. You only put in enough of a bid to make it look good. There are actually consultants out there who make big money helping companies put together bids for the federal government. A "manual ignition device" on a crucible furnace becomes a book of matches in your bid numbers...not the spark ignition that they clearly want....then you charge them $35,000 to change it to the spark ignition....despite the fact that it only actually costs you $2,000. At that point they dont really have a whole lot of choice unless they want to pay the divorce fee in the contract (substantial) and go back to bid. What is your cost to do that spark ignition? Screw them...it is whatever you say it is. R&D...Testing....you can easily justify $35,000 for a spark plug with a wire, a button, and a power supply....especially since at that point it is a "rush" in order to not put the rest of the project behind schedule. Not even kidding, the GSA will approve $1000/hr for "rush" engineering services without batting an eye.

    That is the problem with the whole privatization push. I am sure you remember during the Bush 1 and Clinton eras when privatizing everything was going to save us all that money. Bad news...it didn't work. Take a bunch of private companies with a significant profit motive, toss in a "client" with basically unlimited funds that is used to throwing money around like it is parade candy because HEY...its not like it belongs to the mid level bureaucrat who is dispensing it.

    Look at the army munitions plants. Up until Bush 1 the army maintained a system of munitions production facilities. There was a huge one here in Kansas...the sunflower munitions plant...the place was several square miles. About 2/3 of it was idle..."ready standby". Under Bush 1 and Clinton they were all shut down. They ended up spending literally billions of dollars tearing down the sunflower munitions plant because of nitrate contamination....not a big deal when the army was running the place because they were exempt from EPA regs, but when they shut it down it had to be cleaned up. They contracted with private companies to produce all the munitions and to maintain ready standby capability. In the following 10 years our munitions costs increased over 1000%. When the Bush II wars came up, we could not come up with ammunition enough for our troops. The federal government was literally buying it on the civilian market because the companies that we had been paying for years to maintain ready standby capability were not doing so by having equipment and facilities in place, but by keeping a fund in place so they had the means to "quickly" purchase the equipment and facilities they need...never mind that it takes a minimum of a year to have the kind of specialized equipment built required to do something like produce bullet casings in large quantities. Oh...and pf course they were reaping the proceeds from those funds.

    People need to figure out that there are some things that it is just better to have the government do.

    Further, what has been exposed is how horrific the budget managers are across the federal government. How did we go four months into the fiscal year and only realize we might not have 10% MORE to spend a few weeks before it actually happened? And how can you not absorb a 7% cut? They have to have the easiest accounting job in America. Imagine if you knew every year your revenue would be 10% exactly...the budget would just become a computer program.
    I have no idea. It shocked the bejesus out of me when the treasury secretary first came out this year and said that it turned out we were going to hit the fiscal cliff 4 months sooner than they originally anticipated. I pulled numbers on that and it basically meant they were off by like $170 billion dollars over 4 months. How in the name of god does that happen? I am a practical guy...I understand that everything does not always go according to plan. Unexpected expenses pop up. Sometimes revenue projections dont work out quite right. But $170 billion over 4 months? I could guestimate better than that. It makes me wonder exactly what in the hell they are doing with their time over at the treasury department because it apparently has nothing at all to do with money.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

  5. #5
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    Quote Originally Posted by daewoo View Post
    People need to figure out that there are some things that it is just better to have the government do.
    Yeah, like running a government. I'm a big supporter of separation of business and state. A federal government runs wars, they should run whatever is necessary to run a war. I'm fine with using a private company for some help, such as partnering with Boeing to design aircraft, but we really should bring most everything in house. Public-private partnership area all the rage and probably the worst deal for taxpayers. They are just stupid. Roads are a great example of this. Virginia is loving the "public-private" partnership for roads these days. They sign a 50+ year lease and you end up with a road tolled at $10 per 30-40 miles increasing 5% each year and road conditions that are borderline unsafe even by Detroit's standards. Meanwhile no one wants to use the road and therefore no development happens around it and you end up with major traffic problems elsewhere. After enough complaining you have to hire a bunch of people to be apart of a "committee" that monitors private roads and conduct regular inspection to ensure public safety. It's literally a no win for everyone but the company that did it. And the BS about "competition" is totally wrong. There is no competition when only one customer exists. Roads built by a private company is fine but owned...no way.

    Should Government own roads? Yes. Educate people? Yes. Run grocery stores? No.

    Ugh...I want to go on a rant but I have too much work to do. Besides, it will only end up in me yelling about the two lunatics running for governor here while the only sane guy drops out.

    I have no idea. It shocked the bejesus out of me when the treasury secretary first came out this year and said that it turned out we were going to hit the fiscal cliff 4 months sooner than they originally anticipated. I pulled numbers on that and it basically meant they were off by like $170 billion dollars over 4 months. How in the name of god does that happen? I am a practical guy...I understand that everything does not always go according to plan. Unexpected expenses pop up. Sometimes revenue projections dont work out quite right. But $170 billion over 4 months? I could guestimate better than that. It makes me wonder exactly what in the hell they are doing with their time over at the treasury department because it apparently has nothing at all to do with money.
    All I know is that you should be able to cut 5% FROM LAST YEAR without skipping a beat.

  6. #6
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    Quote Originally Posted by Steeeeve View Post
    Yeah, like running a government. I'm a big supporter of separation of business and state. A federal government runs wars, they should run whatever is necessary to run a war. I'm fine with using a private company for some help, such as partnering with Boeing to design aircraft, but we really should bring most everything in house. Public-private partnership area all the rage and probably the worst deal for taxpayers. They are just stupid. Roads are a great example of this. Virginia is loving the "public-private" partnership for roads these days. They sign a 50+ year lease and you end up with a road tolled at $10 per 30-40 miles increasing 5% each year and road conditions that are borderline unsafe even by Detroit's standards. Meanwhile no one wants to use the road and therefore no development happens around it and you end up with major traffic problems elsewhere. After enough complaining you have to hire a bunch of people to be apart of a "committee" that monitors private roads and conduct regular inspection to ensure public safety. It's literally a no win for everyone but the company that did it. And the BS about "competition" is totally wrong. There is no competition when only one customer exists. Roads built by a private company is fine but owned...no way.

    Should Government own roads? Yes. Educate people? Yes. Run grocery stores? No.

    Ugh...I want to go on a rant but I have too much work to do. Besides, it will only end up in me yelling about the two lunatics running for governor here while the only sane guy drops out.
    We need to do a real world cost/benefit assessment before deciding whether things belong in the private sector or if the government should be doing them. When they decide to go with private sector solutions, real regulation needs to be in place so they cant pull the kind of BS that ammunition makers did, or that the telephone companies have pulled, or the electric companies. We also all need to keep in mind that even if we let private sector companies handle certain functions, like infrastructure, that fall under the purview of the government, and they fail, there is nothing at all wrong with taking it back (bye bye AT&T). Right now there seems to be a presumption that the private sector can do pretty much everything better than the government so we should let them do it. That has certainly not proven to be the case.

    All I know is that you should be able to cut 5% FROM LAST YEAR without skipping a beat.
    Yes, you should.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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