The GOP-Supported Sequestration Is the Key to Budget / Debt Control until 2016

We've looked at the Obamacare aspect of the US budget and debt ceiling crisis. Today, let's review the actual national debt and annual federal budget situations. ~~~~~ First, the national debt. America began the year 2013 with a net public debt that has more than doubled since the year BEFORE Barack Obama took office. This explosion in the public borrowing is completely unprecedented in the history of the United States, outside of the two major global wars fought in the 20th century. But the incredible movement from $11 trillion to $17 trillion in the national debt doesn't really tell the full story. Various other government agencies and private companies taken over by the government under Obama have obligations of nearly another $5 trillion. The US Treasury has already booked complete losses on $140 billion worth of these obligations that are off the federal balance sheet. When you add these other federal obligations that exist today, you come up with a total debt figure that's much more than $20 trillion. Far more than half of these debts were assumed under President Obama. We don't know what the full burden of these new and existing debts will be in total over time because the Federal Reserve's power to manipulate interest rates, in order to lower the interest to be paid on these obligations, is unlimited. We also don't know how much of Fannie Mae's and Freddie Mac's bad debts will eventually be covered by the US Treasury. But we know they have an unlimited line of credit, making it a safe bet that we haven't seen the last of these charges. Finally, we have no idea what the eventual costs of the Federal Reserve's ongoing expansion of the monetary base will be over the long term - because the Bernanke quantitative easing program is currently adding $85 billion per month to US treasury debt and is estimated to have added a total of $3 trillion so far. But here again, one thing's certain - these debts will carry a burden. Today, America has more government debt than any country in the history of the world. America has more debt than all the countries in the European Union combined. This was one of the large arguments of the just-ended House vs Senate+White House fight over the budget (the partial shutdown) and raising the national debt ceiling, which now stands at 74% of GDP and will rise to the universally-recognized unsustainable100% of GDP in 2038 unless brought under control. The Republican / tea party demand to lower the national debt is not merely politics. It is imperative that America bring its debt down. ~~~~~ Now that we know what's in the national debt part of the coming negotiations, let's look at the budget situation. In addition to approving legislation to fund the government until January 15 and to prevent a possible debt default on February 7, the recently agreed House-Senate-White House deal has set up broader budget negotiations between the GOP-controlled House and Democratic-led Senate. One goal of those talks is to ease the automatic spending cuts - called sequestration - that were achieved by the GOP in the 2011 debt ceiling negotiation with President Obama, but despised by the Democrat Party. These automatic cuts began in March and could deepen in January, when about $20 billion in further cuts are set for the Pentagon. The sequestration - despite Obama's refusal to admit it, preferring to say that the econony has expanded under his watch - along with the eliminated Bush tax cuts, are largely responsible for the lower $900 billion 2013 budget deficit, down from an estimated $1.2 trillion. The Congressional Budget Office (CBO) reports that federal revenues (mostly taxes) equal 19.5% of GDP today, compared to an average of 17.5% over the past four decades. The 2013 budget included 2013 revenues of $2.9 trillion (17.8% of GDP) and spending of $3.8 trillion (23.3% of GDP). The 2013 deficit was $900 billion (5.5% GDP), down from the 2012 deficit of $1.3 trillion (8.5% GDP). Over the 2013-2022 period, the sequestration essentially freezes defense and non-defense discretionary spending in dollar terms, so that these categories shrink relative to a growing economy, from 8.7% of GDP to 5.9% of GDP. This will mean at least a slower growth, if not a reduction, in the total national debt.Mandatory spending (Medicare, Medicaid, Social Security, and other safety net programs), not touched by the sequestration, remain approximately 14% of GDP. Net interest on the national debt doubles from 1.5% to 3.3% of GDP. Revenues (taxes) rise steadily during the period, to 20.1% of GDP. ~~~~~ In last week's deal, the GOP managed to save the 2013-2019 sequestration, although fiscal cuts should have cut another $19 billion, taking the 2014 budget deficit down to $967. For now, the 2013 budget sequestration remains and the budget deficit is at $986 billion. But this is a lot better than the $1.058 trillion budget the Senate Democrats wanted. It is also estimated that the sequestration will reduce the national debt and save $170 billion in the period to 2019. As Senate GOP Minority Leader Mitch McConnell said, the shutdown and fight over the debt ceiling were worth it because of saving the sequestration. However, the CBO estimates that total federal outlays will continue to increase even with the sequester by an average of $238.6 billion per year during the next decade because of off-budget increases. The sequestration cuts are split evenly (by dollar amounts, not by percentages) between the defense and non-defense budgets. Some major programs like Social Security, Medicaid, federal pensions and veteran's benefits are exempt. By a special provision in the sequestration law, Medicare spending will be reduced by a fixed 2% per year. Federal pay rates are also unaffected but the sequestration did result in involuntary unpaid time off, also known as furloughs. ~~~~~ Dear readers, the GOP defends the sequestration against the Democrat Senate and the White House - both of which want to scrap it and increase spending. Republican Paul Ryan's House Budget Committee budget plan for 2014-2022 that keeps the sequestration and eliminates the Obamacare budget will freeze or reduce the budget deficit and hold the national debt to $20.3 trillion. The Democrat plan continues to generate $600 billion budget deficits and raises the national debt to $24.4 trillion. America should stop attacking the GOP for its cobservative spending position and support it. This is really not a partisan political party issue. It is a matter of survival for America.