Letter 2 America for March 1, 2013

Dear America,

We are being allowed to believe that the "sequestration" that is impending is a new idea.  But the fact is that it was invented nearly thirty years ago in the form of the Gramm-Rudman Hollings Act (GRH), formally known as the Balanced Budget and Emergency Deficit Control Act of 1985.  The 2011 act that inflicted this sequestration on us was just an amendment.  GRH was to serve the same purpose as the current sequester: to impose radical spending cuts if our government couldn't manage rational ones.  In 1968, LBJ had managed to get Social Security, and thus the debt to, and the corpus of, the Social Security Trust Fund put "on budget," thus including it in the general fund's accounting of our national fiscal state by ignoring the debt owed to the fund as part of the national debt, and GRH addressed that machination as well.  Social Security had been off budget since the creation of the trust fund in 1939, and actually earlier in an informal way as under the 1935 act that created Social Security, payroll taxes were to be collected and held in reserve by the treasury.  It was scheduled to be taken off budget again in 1993 by the Social Security Amendments of 1983, but in addition to creation of sequestration, GRH restored Social Security to "off budget" status even earlier from the on budget status contrived by the Johnson administration to make the budget look more balanced.  It was actually just the opposite of what John Boehner and the others who claim that the trust fund is just an illusion would have us believe.  When Gramm-Rudman Hollings was amended for the second time, among the things it did was to put Social Security and the trust fund off budget by 1990 as opposed to the scheduled date in 1993, and thus it eliminated the  myth that the Social Security Trust and expenditures for the program were part of the general fund a little earlier than prior law had required as well as creating the sequester mechanism.  That is all significant because of the connection of Social Security to the discussion of the national debt and the federal deficit since the law that created sequestration as a tool for budget control also expedited the eradication of the myth that Social Security had anything to do with it...a myth that the Democrats had cooked up and used to their advantage as far as national accounting was concerned for nearly twenty years.  That off-budget designation was the actual myth rather than the other way around; Social Security started our being off budget and was on budget for only twenty years...and then only as a contrivance of no real substance.

So now, when people talk about Social Security and the deficit in connection with obviating the sequestration that is looming over our economy--rightly or wrongly--like a thunder cloud, they are misrepresenting the truth in several ways.  First, the sequestration was created as a bad idea that no one would allow to happen about three decades ago, not last year by the Republicans for the purpose of compelling a "super-committee" of congressmen to act responsibly.  Second, it didn't work when GRH was passed, and it didn't work even after it was amended.  Congress just went around it then as they are arguing over doing today.  Third, even GRH acknowledged that Social Security wasn't part of the problem of deficit spending when it was passed, and that hasn't changed.  Fourth, sequestration wasn't President Obama's idea even if one of his staff brought it up as a way to compel a sincere effort to reduce the deficit.  The mechanism was there all along, and this isn't the first time that it has been invoked to no avail.  And finally, sequestration became an issue again because the Republicans refused to consider any increases in revenue...that is, they would not consider tax increases on the rich as part of a budget balancing formula.  It was the only way to get the Republicans to allow the debt ceiling to go up, and thus avert default on the U.S. Treasury's obligations, an issue that will arise again within a few months.  All in all, the conservative wing of the Republican Party has reached back into history for a bad idea that never worked before, and used it to the same effect again.  They should be running out of fans to stick there fingers in by now, but there is no sign of it.

The ultimate irony to all this is that if the super-committee had just agreed to the tax increase that the Republicans allowed a couple of months ago, they would have been more than half way to the $1.2 trillion in deficit reductions over the next ten years that was their mandate.  With $400 billion or less left to achieve with cuts, the sequester would have been that much easier to avoid, either then or now.  But once again, by digging in their heels the Republicans have made a bad situation worse, and everyone appears to know it if poll data is any indication.  The only questions remaining are, will they relent this time, and if not, what will be the consequences.  Either way, they are going to get the blame...and they seem to deserve it.

Your friend,

Mike