02.11.2013 14

Understanding Obama’s sequester bombshell

By Robert Romano — Under the Budget Control Act of 2011, which will implement approximately $53.8 billion of sequestration cuts to outlays in 2013, the White House Office of Management and Budget (OMB) was required to submit to Congress its plan for implementing the cuts.

That should have been presented, along with its annual budget “[o]n or after the first Monday in January but not later than the first Monday in February of each year.”

As of Feb. 11, OMB has still not submitted its budget for the year along with its sequester plan — despite having almost two years to plan, including a two month delay to sequester that was supposed to kick in on Jan. 2.

Instead, the White House dropped a bombshell “fact sheet” on Friday, Feb. 8 to scare everyone — Congress, media outlets, and the American people — into submission. It doesn’t want any cuts to occur.

Or anyone to see just how small those cuts really are, we might add — but more on that later.

The Obama Administration warns ominously that the cuts “threaten thousands of jobs and the economic security of the middle class.” Outgoing Defense Secretary Leon Panetta warned that the defense cuts would result in a “hollowed” out force.

Based on those panicked claims, if the cuts go into effect on March 1, we suppose that by, say, April 1, unemployment will jump to 20 percent, and the Chinese will be occupying Hawaii, Japan, and South Korea. Right?

Fortunately, under the Sequestration Transparency Act of 2012, OMB did prepare a line-by-line preliminary estimate of how sequester will affect every single agency. Read it for yourself and decide.

As taxpayers you are entitled to know the truth, and to have a ready means of verifying some of the White House’s assertions.

For example, for the Small Business Administration (SBA), the White House alleges that “the automatic cuts triggered by a sequester would reduce loan guarantees to small businesses by up to $540 million.”

What the White House leaves out of its “fact sheet” is that the SBA’s “Business Loans Program Account” will only be cut by $29 million under sequester in 2013, leaving $330 million in untouched budget authority, according to OMB’s preliminary estimate.

But wait, how could a $29 million budget cut result in $540 million fewer loans? Leverage. The SBA actually does about $12 billion of guaranteed loans every single year according to Entrepreneur.com — even with its annual budget authority in the hundreds of millions.

This is confirmed by the White House’s 2013 SBA budget request for “$497 million in new budget authority for the Business Loans Program account,” which actually “supports $14 billion in 7(a) term loans and $2 billion for 7(a) revolving lines of credit.”

Based on that rough proportion, with $330 million of budget authority for 2013, the SBA should be more than able to still support $10.6 billion of loans this year. Which is hardly the budget catastrophe the White House alleges. They will barely miss the $540 million less loans.

Yet to believe Obama, somehow this modest cut to SBA will “constrain financing needed by small businesses to maintain and expand their operations and create jobs.” Please.

To offer another example — there are actually very few to point to in the “fact sheet” since there are so few dollar amounts even provided — the White House complains that Native American tribes “would lose almost $130 million in funding from the Department of the Interior.”

Interestingly, that amount was actually less than what the OMB report stated for FY 2013 of a $212 million of budget authority cuts to the Bureau of Indian Affairs and the Bureau of Indian Education.

What the White House leaves out is that those two bureaus will still receive $2.2 billion of new budget authority in 2013. Again, no catastrophe. They’ll get by just fine.

It’s like that across the entire OMB sequester report. Affected government programs face reductions of anywhere from 7.6 percent to 9.4 percent. Some may even see a 10 percent cut. What it all means is these programs will still roughly receive 90 cents or so on the dollar — in every single affected category.

No programs — none — are eliminated under sequestration. The cuts are not prioritized. They are across the board to non-exempted programs.  It must be noted that the cuts per department and agency would be even smaller had fewer programs been exempted.

Exempted programs included Social Security, most of Medicare, Medicaid, unemployment, food stamps, and other entitlement and welfare programs.

Recall that the $85 billion reduction of budget authority comes out of a $3.5 trillion budget — just a 2.4 percent overall cut. If these cuts had truly been across the board to every program, affected programs would be seeing 97.6 cents on the dollar they saw last year instead of 90 or so.

Overall, instead of providing a sober assessment of the budget, as is required under law, the White House decided instead to proffer a misleading “fact sheet” right before the weekend to incite hysteria. And the more hysterical their claims become, the more obvious it should be they are full of it.

Perhaps their biggest fear is that if this mere 2.4 percent cut to the budget actually is allowed to go into effect — nobody will notice.

Robert Romano is the Senior Editor of Americans for Limited Government.

  • Jill

    So I suppose we can again say- just more lies from the White House!

  • Dr. Patrick Rodgers

    Don’t blame me, I voted for the American.

  • pduffy

    The current state of America is much like a jumbo jet flying over the pacific ocean when unexpectedly, it has run out of fuel. There is no airport, or land for thousands of miles. It’s going to crash, there is no doubt, and nothing in heaven or earth can stop it. But right now the plane is still in the air, and the passengers are comfortable, watching videos and drinking wine, and have no clue.

  • Doris C

    Defense cuts were not mentioned why not?

  • I wish that some other representatives in our congress had the same GUTS that senator Graham has. If so, something could be done to force Obama to do his job the way he swore that he would do it!! Reid should, also, be forced to do his job, but he, also refuses. We have two dictators working as a team and America is being destroyed right under everyone’s nose and I don’t see anyone doing anything to stop them!! If it were not for some of our representatives using OUR constitution as their living force, nothing could be done. I don’t understand why no charges have been brought forward in an effort to make Obama and Reid do their jobs!! It would seem that both are above the law, which make both dictators!!

  • WhiteFalcon

    Anything that this commieonazicrat administration tells us is a lie pure and simple. If they say it, it is a lie. If they say they are going to cut spending, the fact is they are going to increase spending. If they say they are going to have to cut jobs, the fact is they will increase Government jobs. They are total and complete liars.

  • Millions and millions of Americans want Obama out of office and the country but our Judges will not obey the Constitution.

  • what the hell is the problem with cutting money from going to countries we waste money on and they hate us anyway i’m really sick of us always suffering we don’t owe any country a damn dime

  • Lloyd

    Have you ever noticed that when a politician says cut, that we usually end up paying more than before? They may cut in one place, but they tack more on someplace else. That’s how they share the wealth. 1 for you 2 for me, 1 for you 3 for me. I think everyone gets the picture. We don’t just want him out of office though, and we certainly don’t want him out of the country, not with all that he knows. You know what they say, “Keep your friends close, but keep your enemies closer”. Well, their is only one other way to solve that problem.

  • BarleyWheets

    RE: Exempted programs included Social Security, most of Medicare, Medicaid, unemployment, food stamps, and other entitlement and welfare programs.

    Social Security and Unemployment is NOT ..IS NOT .. ENTITLEMENT PROGRAMS…. !! WE paid from each and every pay check into those funds… !!! Stop putting those two programs into the same category as welfare programs… Geez!!!

  • Frank629

    PDUFFY…great analogy.

  • The reason Social Security is called an entitlement program, like Medicare, is precisely because people paid into them. As for unemployment, based on the extended benefits regime of up to 73 weeks (it was as high as 99 weeks), individuals are collecting far more in benefits than were paid in. That moves it from being simply an insurance program to being an outright welfare program, running deeply in the red.

    Overall, “mandatory” spending programs like Social Security, Medicare, Medicaid, food stamps, etc. are all putting way more out in benefits than are collected via revenue, which is the primary reason why now the national debt is increasing by about $1 trillion a year.

    Does it matter much what I call them? We’re going broke.

  • You can see for yourself where in the Department of Defense cuts will occur, starting on page 52 of this OMB report linked in the above piece: http://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/stareport.pdf

    We have also written extensively on this topic: http://netrightdaily.com/2013/02/the-true-story-of-sequester-1/

    This particular piece was written in response to the White House “fact sheet” that was released on Friday, Feb. 8.

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