OEDEL: Expand the Sequester

March 10, 2013 

On the “Tonight” show in the ’60s, former Illinois Sen. Everett Dirksen is said to have quipped, “A billion here, a billion there, pretty soon, you’re talking real money.” The federal sequester would cut more than a trillion dollars from federal spending if it’s allowed to stay in effect for 10 years. Key politicians on both sides are defending their joint decision to allow the sequester to be implemented. They say that $1.2 trillion isn’t such a big deal.

That’s a meaningful shift in sensibility since the ’60s that isn’t just explainable by inflation. A trillion is a thousand times larger than a billion. And hey, a billion is still a billion, even if Forbes estimated there were 1,226 billionaires worldwide in tax year 2012.

Forbes’ list suggests one way of reckoning the sequester’s size. If we taxed every billionaire in the world $1 billion, that’d barely cover the 10-year value of the sequester.

So the sequester’s impact in cutting so-called “discretionary” spending, even though that category is considerably less than a quarter of total annual federal cash spending, isn’t chump change.

But at the same time, the politicians are correctly signaling that there are bigger fish out there. Just what is the pecking order of federal spending largesse by major subcategory?

That’s harder to measure than you might imagine. One reason is that governmental accounting is politicized to disguise true comparisons. For instance, only about two-thirds of military spending is catalogued under defense. Other military spending appears in “discretionary” accounts. Some costs are segregated as veterans’ benefits. Some military funding goes off budget. It’s enough to make you wonder if military accounting is itself a battle of strategic evasiveness.

A second complication involves the cash accounting method used by the federal government. That’s the rudimentary system used by many small businesses.

Publicly traded companies and federal agencies must use the more sophisticated accrual accounting method, which focuses on when monetary commitments are made rather than when money is received or paid. When used in tandem with cash flow statements, accrual accounting provides more well-rounded measures of financial condition. If accrual accounting is required of big companies and federal agencies, it should be expected of the federal government overall.

Even on a cash basis, though, the numbers are shocking enough. Congressional Budget Office numbers reveal that the federal government is now blasting through more than $3.5 trillion cash yearly -- almost double what it was gobbling up about a decade ago.

What’s all that spending for?

There are four main categories:

1. military spending (including veterans’ benefits);

2. healthcare spending (Medicare, Medicaid, etc.);

3. Social Security spending (for retirees and the disabled);

4. and everything else (“discretionary” spending, which is the target of the sequester, plus other mandates).

Each of those categories is roughly comparable in size to each other category, though military spending, when you count veterans’ benefits and some discretionary items, tops out at about $1 trillion. The other three categories come in at slightly under $1 trillion each, though entitlements are moving up quickly.

Something worth considering is to extend the sequester’s approach -- across-the-board spending cuts -- to all other spending categories.

That has the distinct political beauty of evenhandedness. And it could work without disaster striking. When Georgia faced revenue shortfalls a few years ago under former Gov. Sonny Perdue, the governor survived politically after he simply imposed across-the-board cuts.

It’s going to be a nearly impossible political question to decide whether to cut the military, health care or Social Security relatively more or less.

If you accept the idea that the federal government should run smaller deficits, and if we can survive the sequester, then why not extend that basic rationale to the bigger categories of spending as well?

A trillion here, a trillion there, pretty soon, we might quit borrowing from China and the grandkids.

David Oedel teaches, studies and writes at Mercer University Law School.

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