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Sequestration – Let it Come – Here’s Why

Sequestration VaultBased on the dire warnings from our leaders in the U.S. government, you would think the end of the world is at hand. Maybe it is, for them! I started this as an informative post but quickly realized that it was as much a rant as anything else. My rant is NOT because there will most likely be a sequestration. It’s more about what the leadership is telling the citizens of the U.S. The warnings we are hearing from the highest levels of government all amount to scare mongering. Their intent being to sway the public in believing that sequestration is going to be an “Armageddon” event. More on that in a bit.

I’m starting to believe that sequestration will probably benefit us as a country more than harm us. The average American will see little to any effect from this forthcoming “Sequestration”. Our existing political elite will be seen for the procrastinating bureaucrats that they are. That, I think, poses a bigger danger to those that hold power in our government now than anything else that could possibly happen. Once “The People” realize and see first hand that the federal government does little to improve their life on a daily basis, their arguments for bigger government will rapidly begin to unravel, and about time too!

Why Sequestration?

The sequestration will happen because our politicians are unable to come up with a BUDGET on a timely basis. Seriously, the jackals have picked the carcass clean and are unable to figure out where to get more food. Since they can’t come up with a budget, 1.2 trillion in mandatory budget cuts (spread out over ten years) will kick in. This budget impasse started as early as November of 2010 when republicans gained control of congress, ostensibly on a promise of smaller government and less spending. The History between that point and now would fill a novel, so I’ll skip to the last major fiscal “apocalyptic” event, the Fiscal Cliff of 2012.

That debacle was bought to closure at the last minute when the American Taxpayer Relief Act of 2012 was signed into law. One of the results of that legislation was that a delay in sequestration was put into place until March of 2013. Or, as you may have heard, “The can was kicked down the road”. Well, March is upon us and there is no sign of any negotiations or any other activity to indicate that we are anywhere near a resolution. So I fully expect the sequestration to go into effect.

What do they Want?

To be as brief as possible, the Republicans want spending cuts and the Democrats want higher taxes, preferably on higher income Americans. I’m sure there has to be a fair compromise, but both sides seem unwilling to budge in this essential difference between the two political Ideologies. If I were forced to pick a side,I would lean towards spending cuts. In 2012 the U.S spent $3,600,000,000,000 (trillion) and had an income of $2,469,000,000,000. To put that in perspective, that’s the equivalent of a $65,000 a year couple spending $94,000 a year. How long will that couple be able to sustain that rate of spending before having to file for bankruptcy?

What will be the Effect of Sequestration?

When sequestration goes into effect, the U.S. Treasury will “sequester” funds intended to go to certain agencies and quite simply, not release then to be spent. The number that has been floating around is 85 to 100 billion Dollars. The White House has made some public statements on what to expect as a result of sequestration. Here are some of the things we’ve been told to expect. Of course I feel compelled to add some commentary on these effects 🙂

  • FBI agents Furloughed 3 week estimate
    • WD – I’m sure that the crime rate will go through the roof, Thankfully the civilian population has not yet been disarmed, so they’ll be able to look after themselves
  • NICS Background checks cuts will see a cut in staffing
    • WD -This means that U.S. citizens will see another impediment thrust in front of them when attempting to purchase a firearm. Dealers may not be able to complete a NICS check or may have to wait a long time to get someone on the line for a prospective customer.
  • TSA and ATC cuts
    • WD – The airlines collect a 9/11 fee of $2.50 per “enplanement” up to a maximum of $5.00 per one way trip. The TSA estimates that it would need to charge $8.00 per passenger to fully cover their costs. So, every passenger that boards a plane is indirectly paying $ 8.00 for the inconvenience (and questionable effectiveness) of being harassed through security. Think about that the next time yo fly somewhere within the U.S.
  • Reduced staffing at IRS
    • WD – Yaaaay! Let me repeat, “Yaaaay”. Well, wait a minute, does this mean there will be a delay in my refund?
  • Cuts in military assistance to Israel, Jordan and Egypt
    • WD – Seriously, Why are we giving Jordan and Egypt military assistance anyway?
  • Furlough of 800,000 Civilian Pentagon Employees
    • WD – I feel bad for them individually, they may end up just getting a free vacation, the last time we had a Government furlough the affected employees eventually got paid for that time retro-actively.
  •  Meet Inspector Furloughs and resultant food shortages
    • WD – I have a freezer full of meat and a hen house full of chickens, I’m not in the least bit worried about this.
  •  Reductions in Embassy Protection and Border Patrol
    • WD – If this means that the level of protection provided to our Embassies will fall below the exemplary levels of protection provided to our diplomats in Benghazi then this might be something to be concerned about. Considering that the level of protection in Benghazi was as close to zero as can be imagined, I don’t think this has any real meaning.
    • WD – Reduction in border patrols, those guys need a break anyway. They probably have one of the most unrecognized yet difficult law enforcement jobs in the U.S. Government. Besides, a break in patrolling the borders will make their jobs so much more fulfilling later when they are asked to track down all the illegals that came in during the “Sequestration”.
  • Cutting the Persian Gulf Naval Presence from two Aircraft Carriers to One
    • WD – This one puzzles me, aircraft carriers and their personnel don’t get put away in a closet until needed again. I suspect that the costs to maintain operational readiness in people and equipment are fairly close whether the ship is deployed in the Gulf, “steaming” towards a destination or in a home port. Granted, I’m sure there additional expenses in deploying a ship rather than having in a home port, but how much more is it?
  • Fewer Police and Firefighters on the Street
    • WD – This is my personal favorite. The last time I checked, a big chunk of  the cost of law enforcement and emergency responders was being paid for out of my real estate and sales taxes. None of which have anything to do with the federal government. I know there are federal grants to increase law enforcement on the streets. Hah, That’s really funny……Here’s what I understand one county in North Carolina did with that grant (hearsay only!). They reduced their county’s funded headcount in the Sheriffs department by one. They then added the headcount back to the Sheriff’s department using federal funds. Net results, more money for the county to spend on other things and a net increase in Law enforcement of zero.

The biggest irony is that this pending sequestration is just the beginning. What can potentially happen at the end of March is a complete Government shutdown (Not really, but they like to call it that). This is not something new, President Clinton experienced two Government shutdowns during his term as President. The first was from November 14th through November 19th in 1995. Although short lived, it was quickly followed by another shutdown that started December 16th, 1995 and lasted to January 6th 1996. The result of that was that both sides claimed victory, Clinton proclaimed the end of the era of Big Government and the next four consecutive budgets were actually balanced, not a bad outcome at all!

Related Reading:

What Is Sequestration And How Do I Get Rid Of It? CriticalFinancial.com

Everything You Didn’t Want to Know About the Sequester – dqydj.net

President Obama’s Sequester Remarks

USA Today State by State Analysis

White House Dossier

Trivia – Did you know that amongst a few more names (Troop, Tribe and Flange) a group of baboons is also called a “Congress“?

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John Schmoll is a Dad, husband and veteran of the financial services industry. He's passionate about helping people learn from his mistakes so that they can live lives free from the shackles of debt and empowered to make their money work for them. You can check out his other sites: Frugal Rules, for ways to improve your financial literacy; and Sprout Wealth for tips on different ways to make more money. John has been featured on Forbes, Lifehacker, Yahoo Finance and US News & World Report and more. If you're wanting to grow your blog, check out my blog coaching services to see how I can help you take your site to the next level.

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33 comments

  1. “The warnings we are hearing from the highest levels of government all amount to scare mongering.” The government actually does this?! 😉 I could not agree more Jose! I think some sort of compromise is possible, but that would require both sides to put aside their partisan blatherings and actually work together to get something done. This is not to mention the media’s role in this, that’s a rant I’ll save for another day. 🙂

    • John, you are so right in that not being the media’s role. The media is so biased today that you would think they are a political Action Committee and not an organization dedicated to “fair and Impartial” reporting of the news!

  2. This has gotten out of hand and you hit it right on the head Jose. The government is going crazy trying to turn citizens against each party that they are now just pushing out crap. I am tired of it and just want to make sure that I protect myself.

    • They are so intent on poisoning the citizens minds and pushing their parties agendas that everything else seems to have gone right out the window. The biggest shame is that we don’t have term limits in the Senate and in the House. If those yoyos were limited to two terms at the MOST, I think we would be far better off. Career Politicians are the Governments equivalent of a bad infection. They keep spreading their disease, infecting the newer politicians that go in with the best of intents!

  3. I can’t see them coming up with a deal. The democrats got exactly what they wanted in ‘kicking the can down the road’ until after the election. Now both sides can be as awkward as they like and they have 4 more years to blame each other for the consequences.

    • I don’t think they want a deal. It’s a risk on their part since blame can fall in either direction. I think the Dems face the biggest risk though when the Sheeple realize that big government is doing anything for the average American. We shall see!

  4. Yeah. $100 billion in cuts is, what, 3% of the budget? It’s unbelievable that people are worried about giving civil servants an unpaid vacation. That’s got to be the most humane budget cuts possible. Nobody loses their job, people keep their benefits, they just don’t work / get paid for a couple weeks. I’m not an American and don’t pretend to be overly knowledgeable about your issues, but it certainly sounds nothing like the fiscal cliff. I think they’re worried that people will realize “wow, the world didn’t end. What are these people getting paid for btw?”

    • The ironic thing is that if history repeats itself, the people that get furloghed will get paid retroactively. I’m in agreement that a furlough is far better than losing one’s job. The last company I worked for did a one week furlough rather than lay people off. Was it painful? YES, but it was a far better alternative than losing my job. Although they did lay me off six months later.

  5. This is just political posturing. First off, it’d be a 10% across the board cut. If my household could do a 20% cut I’m sure there’s plenty of government fat that can be cut.
    However, the federal government doesn’t have to follow budgets. They come up with them as a guideline and borrow the difference or kick the can down the road.

    • It is political posturing. If they gave a half a crap they wouldn’t be arguing about overspending by Trillions of dollars. Trillins, it’s just mind boggling!

  6. The TSA cut would be my favorite. I almost threw up when I heard they would have to get $8 per person to afford their harassing and violating security checkpoints. I opted out of the full body scanner (have been able to go through metal detector up till this point but absolutely refuse to submit to the scanner) and I’m still scarred from the pat down. Disgusting.

    • The amount of money spent by the TSA is obscene. I like to use the analogy that airport security is the equivalent of tearing the back wall off of the back of your house and selling the material so you can put in a steel vault door on the front. The sad and most overlooked fact is that the tragedy that happened on 9/11 was performed with items that were perfectly legal to carry through security. There wasn’t a failure in airport security.

  7. Excellent post Jose, I agree with your assessment of the scaremongering Chicago style tactics, it is the same ones used to sell gun control. Oh yea, it was the same one used to sell healthcare, and the stimulus package. When will we learn, it is all about a big government power grab, and nothing more. Shutting down the government would be a wonderful turn of events!

    • It seems that every BIG news event related to our government, whether it be Healthcare, the Budget, Security is aimed at doing one thing, to get bigger government. That’s why I hope we have a sequester and a government shutdown. Hopefully Americans will wake up and realize just how much big government does for them on a day to day basis.

  8. The sad thing is that people believe and accept all these things as gospel. Organizations also run with them. During the last election, my neighbors, who are over 65, got emails from an organization for seniors telling them that they would have to pay more taxes if they sold their home in order to fund Obamacare. This is only true if your income is over $250K, which theirs is not, but they were panicking because their home equity is part of their retirement plan. It doesn’t ever matter that the facts are, just how much they can be skewed to fit whatever agenda someone is looking to serve.

    • Some of the propaganda that is spewed during issues such as this is amazing. Ads telling seniors their SS will be cut are airing recently. The fact is that what might change is how the cost of living adjustment is calculated. As far as I’m aware there aren’t any defacto cuts being proposed.

  9. Agree with most of your points (but you knew that, heh). On the IRS one – just withhold more, and file late. You’ll save your IRS agent some time by owing them and paying it back later in the year.

    “NICS Background checks cuts will see a cut in staffing” – Isn’t the law ‘if the NICS doesn’t come back in three days the transfer will proceed’?

    • I’ll have to check on the NICs waiting period but I think you’re right. My point is the customer should walk out of the store with his purchase. I don’t have to suffer the pain of a NICS check since I’m a CCW in NC but hate it for those that do!

  10. Arbitrary cuts rarely are a good thing. If you have never been involved in shutting down/mothballing a government program you have no idea the impact financially and the labor involved. It is overwhelming. Make no mistake, the sequestration will cost taxpayers millions due to the unintended costs of downsizing programs which will later be brought back by Politicians who are no longer willing to compromise!

    • Paul, the really sad part of this is that the White House has the discretion to pick what programs and agencies get hit. They don’t advertise that, but if they were prudent and truly interested in creating the least impact, they could.

  11. I hadn’t really been following what’s going on budget-wise in the States for a few weeks – sounds like a giant mess!

  12. You’re right on the money here, Jose. It’s absolutely ridiculous, all of it. We can only defend and plan for ourselves, as it seems that our elected officials, by and large, are so far removed from the real world that they may never return. Can’t those of us who see this go and make our own country somewhere? 🙂

  13. Thanks for the post! I seem to have people asking me in the last week every day about exactly what the sequester was and what it would do. Now I have a nice link to share with them. Thanks for taking the time to write it all out! Keep up the good work. I’ll be reading through some of all the past post you have put up too.

    • Thanks I appreciate your feedback (especially since it’s positive :)) You’ll find my posts to be somewhat eclectic. There’s so many interesting topics to write about that I’m bouncing around quite a bit, and having a great time doing it. I suppose an abundance of topics is a good problem to have. In six months I may be scratching for ideas!

  14. Excellent article, well-written. In my mind the bottom line is that the House, the Senate, and the President are all acting like spoiled bratty children. All of these people across both parties should be ashamed of the way they are behaving. I bet this would get solved quickly if their salaries and benefits were on the line.

    • I’m in 100% agreement with you. I know of a sure way to fix the problem, impose term limits on Congress and the Senate. That way by the time they got “contaminated” they would have to go anyway!

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