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Understand the Sequester (Spoiler: It's Bananas.)

2013-03-12 · John · watch on YouTube · US politics & society · news analysis

John explains the US budget, its long-term (not short-term) debt problem and how Congress created sequestration, arguing that its indiscriminate cuts are a self-made, embarrassing crisis that fails to address the real long-term problem.

What is said

00:00:00 — Greeting; John sets out to explain what sequestration is and why it is bananas

  • ★★ John sets out to explain what sequestration is, why it is important and why it is so "bananas". — 00:00:01

00:00:09 — Federal budget basics: Medicare, Medicaid, Social Security and other mandatory spending, interest, discretionary spending and defense; aside on older readers emailing about The Fault in Our Stars

  • ★★ John says Medicare, which offers inexpensive health care to older people, is more efficient and cheaper per person than private insurance, but still expensive because old people get sick a lot. — 00:00:12
  • ★★ John says Medicare and Medicaid (health care for the poorest) together are 23% of the federal budget, and Social Security another 22%. — 00:00:25
  • ★ John jokes that old people buy computers with Social Security: many are now reading The Fault in Our Stars and email him in capitals that a granddaughter recommended it because she thinks they are about to die. (playful) — 00:00:38 · The Fault in Our Stars
  • ★★★ John says these three programs are 45% of the budget (mandatory spending); other mandatory spending is 13% and debt interest 6%, 64% in total, leaving 36% discretionary spending allocated by Congress. — 00:00:59 · United States Congress
  • ★★ John says discretionary spending covers things from veterans' affairs, highways and NASA to science research and meat inspectors, but more than half of it goes to defense. — 00:01:26 · NASA

00:01:36 — The US has a long-term, not a short-term, debt problem: cheap borrowing, shrinking deficit, rising Medicare, Medicaid and Social Security costs

  • ★★★ John says the US has a long-term debt problem but not a short-term one: it can borrow extremely cheaply because it is a strong economy that has never defaulted. — 00:01:36 · United States
  • ★★ John says the annual budget deficit is shrinking pretty fast and is probably not a concern at the moment. (hedged) — 00:01:53
  • ★★ John says the cost of Medicare and Medicaid will double over the next 30 years as the population ages and health costs rise, and Social Security costs will rise too. — 00:02:03
  • ★★ John says in the long term the US must cut benefits, raise revenues or both, or the deficit will spiral, debt will get more expensive "and Greece". — 00:02:10

00:02:25 — How the sequester came about: the 2011 debt-ceiling standoff, Congress sets taxes and budget, the Budget Control Act, the super-committee and sequestration as a ticking time bomb

  • ★★ John says in 2011 the US nearly defaulted, not because it could not pay but because Congress refused to raise the debt ceiling it was hitting because of its own budgets. — 00:02:25 · United States Congress
  • ★★★ John stresses that Congress, not the president, sets tax rates and the budget, so a resulting deficit is literally Congress's fault. — 00:02:39 · United States Congress
  • ★★ John says Congress then passed the Budget Control Act, raising the debt ceiling and creating a super-committee to reach a "grand bargain" on long-term fiscal problems. — 00:02:59 · United States Congress
  • ★★★ John says sequestration, originally proposed by President Obama, meant automatic cuts of $1.2 trillion over ten years if no deal: half defense, half other spending, very little to mandatory programs. — 00:03:17 · Barack Obama
  • ★★ John calls the design an incredibly bad idea that was assumed to force compromise, likening it to answering a slow fingernail tumour by removing your gall bladder. (playful) — 00:03:41

00:03:51 — Why sequestration is bananas: indiscriminate across-the-board cuts (bird poop on Chesapeake Bay buoys), lost jobs, and no effect on the long-term fiscal problem

  • ★★★ John says sequestration is bananas not because of the cuts but because they are indiscriminate: every federal project, program and activity is cut by the same percentage, mandatory programs mostly exempt. — 00:03:51
  • ★★ John says everything the government does must be done about 8% less; in a similar 5% sequestration in 1991 federal employees were told to scrape 5% less bird poop off Chesapeake Bay buoys. — 00:04:05
  • ★★ John says the sequester will cost between half a million and two million jobs, cutting them at random rather than because they are outdated or unnecessary. — 00:04:39
  • ★★★ John says sequestration does nothing about the long-term fiscal problem, since mandatory spending keeps growing: Congress answered a long-term problem with a short-term crisis it then failed to solve. — 00:04:47 · United States Congress

00:05:09 — The blame game distracts from the disaster; summary: an unnecessary catastrophe and an embarrassment, worse than minting pennies; sign-off

  • ★★ John says news coverage focuses on blame, with congressional Republicans calling it Obama's idea and Obama asking whether he passes legislation, which distracts from the sequester being a disaster. — 00:05:09 · Republican Party, Barack Obama
  • ★★★ John concludes the sequester is inefficient and bureaucratic, does nothing for the economy, and creates an unnecessary catastrophe without addressing the larger future one: an embarrassment. — 00:05:27
  • ★ John jokes the sequester is even more embarrassing than the continued minting of pennies. (playful) — 00:05:41

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