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Sequestration: What Is It, and Why Should You Care?

WASHINGTON, DC – JULY 18: (R-L) Williams-Pyro President Della Williams, EADS North America Chairman and CEO Sean O’Keefe, Pratt and Whitney President David Hess and Lockheed Martin Chairman and CEO Robert Stevens testify before the House Armed Services Committee on Capitol Hill July 18, 2012 in Washington, DC. The aerospace defense contractors likened the coming spending sequestration mandated by the Budget Control Act of 2011 as “cosmetic surgery with a chainsaw,” “blunt force trauma” for the industry and “a Band-Aid on a bullet wound.” (Photo by Chip Somodevilla/Getty Images)

One of the best ways to get something done in life is to create a situation where you are forced to get it done. Since our elected leaders are so reluctant to work together, and with election campaigning beginning soon, they created a “doomsday” scenario.

Sequester History

Way back on August 2, 2011 the president signed the Budget Control Act of 2011. This bill is tied to the problem of raising the debt ceiling to keep the country solvent and able to pay it’s bills. The congressional geniuses decided to impose $1 of spending cuts for each $1 of debt increase. Sounds good doesn’t it?

To force this to happen the bill created some spending caps, and set up a committee to administer whatever debt reduction legislation was needed. In the event that the debt reduction committee could not come to an agreement then automatic across-the-board spending cuts would take effect.

This “your tax dollars at work” committee had a forced deadline of November 23, 2011 (what year is it now?), to come up with legislation that would result in a 10-year debt reduction of $1.5 trillion. Did the committee make the deadline? — Not even close. So if the committee did not reach and agreement the automatic cuts kick in January 2, 2013? Today is February 5, 2013. Yep, they kicked the can down the road yet again. It’s the equivalent of postponing your final exams and putting off your graduation. No big deal. The new date for Congress to act is March 1.

What Sequester Means to You

If congress fails to act and the automatic cuts kick in we would be looking at a 10% reduction in Department of Defense programs along with at least an 8% reduction in other government freebies including education and healthcare. Congress and the president have about 3 weeks to come up with $1.2 trillion in debt reduction ideas. Any bets on the can and the road? All these reductions hurt job growth and are third rail re-election problems for the next wave of politicians.

What Can’t Congress Agree?

The problem isn’t so much agreement as it is putting political ideology ahead of what’s good for the taxpaying citizen. Democrats want to make up the lost entitlements with higher taxes while Republicans have already reneged on their no tax pledge and it’s doubtful they will be receptive to another.

Democrats were elected to keep the free stuff flowing and Republicans were elected to try to get spending under control. So don’t look for a “kumbya” moment in the halls of congress any time soon.

Some Final Thoughts

What this “forced discipline” does is take the heat off congress when they go back home for elections. “Hey, I had to vote for this nasty, expensive thing to prevent the automatic cuts that would have been worse.” “Pardon me while I polish my halo.” Be careful what you wish for.

Tom Egelhoff is an Amazon best selling author of three business books. His 400+ page web site www.smalltownmarketing.com is one of the oldest continuous sites on the Internet. He has been featured on MSNBC’s “Your Business” and quoted in business publications in China, Turkey, India and the UK. He hosts “Open for Business” each week, 11-2 PM Mountain Time on http://kmmsam.com

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