Gov’t downsizes amid GOP demands for more cuts

Spending on core governmental functions has been shrinking steadily since the recession

Topics: From the Wires, Leon Panetta, Republicans, government spending, Recession, ,

WASHINGTON (AP) — Republicans and other fiscal conservatives keep insisting on more federal austerity and a smaller government. Without much fanfare or acknowledgement, they’ve already gotten much of both.

Spending by federal, state and local governments on payrolls, equipment, buildings, teachers, emergency workers, defense programs and other core governmental functions has been shrinking steadily since the deep 2007-2009 recession and as the anemic recovery continues.

This recent shrinkage has largely been obscured by an increase in spending on benefit payments to individuals under “entitlement” programs, including Social Security, Medicare, Medicaid and veterans benefits. Retiring baby boomers are driving much of this increase.

Another round of huge cuts — known in Washington parlance as the “sequester” — will hit beginning March 1, potentially meaning layoffs for hundreds of thousands of federal workers unless Congress and President Barack Obama can strike a deficit-reduction deal to avert them.

With the deadline only a week off, Obama and Republicans who control the House are far apart over how to resolve the deadlock. While last-minute budget deals are frequent in Washington, neither side is optimistic of reaching one this time.

Even as the private sector has been slowly adding jobs, governments have been shedding them, holding down overall employment gains and keeping the jobless rate close to 8 percent, compared with normal non-recessionary levels of 5 to 6 percent that have prevailed since the 1950s.

“It’s a massive drag on the economy. We lost three-quarter million public-sector jobs in the recovery,” said economist Heidi Shierholz of the labor-friendly Economic Policy Institute. “We’re still losing government jobs, although the pace has slowed. But we haven’t turned around yet.”

A larger-than-usual decline in federal spending, notably on defense programs, helped push the economy into negative territory in the final three months of 2012. Economic growth, meanwhile, has been inching along at a weak 1-2 percent — not enough to significantly further drive down the national unemployment rate, which now stands at 7.9 percent.

Although federal spending is projected to decline from 22.8 percent of the gross domestic product recorded last year to 21.5 percent by 2017, it still will exceed the 40-year-average of 21.0 percent, according to the nonpartisan Congressional Budget Office. Spending peaked at 25.2 percent of GDP in 2009.



The budget office also said the economy is roughly 5.5 percent smaller than it would have been had there been no recession.

The Defense Department already has made deep spending cuts, and outgoing Defense Secretary Leon Panetta said 800,000 civilian Pentagon employees were notified this week they likely are to be placed on periods of unpaid leave due to lawmakers’ failure to act.

The recent downsizing in government is most pronounced at the state and local levels. Most states have constitutional or statutory requirements for balanced budgets.

That means nearly all states are prohibited from running budget deficits, while the federal government is not.

Not only can the federal government run deficits, but it can print money — through actions by the Federal Reserve — something states are prohibited from doing.

Those calling for a smaller government mostly don’t take notice of the wave of recent cutbacks. Their clarion call remains Ronald Reagan’s mantra: Government doesn’t solve problems, it is the problem.

“This spending issue is the biggest issue that threatens our future,” House Speaker John Boehner, R-Ohio, says. “When are we going to get serious about our long-term spending problem?”

And Florida Sen. Marco Rubio of Florida, delivering the GOP response to Obama’s State of the Union address, said “a major cause of our recent downturn was a housing crisis created by reckless government policies.”

Soaring recent government deficits are partially a side effect of the worst recession since the 1930s, which took a huge bite out of tax revenues at the same time spending increased on recession-fighting programs like unemployment compensation and stimulus measures under both Presidents George W. Bush and Obama.

“The problem going forward is one of demographics and rising health care. It is the baby boom generation retiring,” said Alice Rivlin, a White House budget director under President Bill Clinton. “It’s the fact that everybody is living longer.”

Republicans argue that entitlement programs should be on the cutting board as well as other government programs. Democrats generally have been more protective of them, although the president and many congressional Democrats acknowledge some paring of these popular programs is in order.

The federal budget deficit for the fiscal year ending Sept. 30 is estimated to be $845 billion — the first time it’s dropped below $1 trillion in five years. But it’s on track to rise again as more and more baby boomers retire and qualify for federal benefits and as interest payments on the national debt keep going up.

The national debt first inched past $1 trillion early in the Reagan administration and has grown in leaps and bounds ever since through both Democratic and Republican presidencies. It now stands at $16.6 trillion and is on a path toward soon becoming unsustainable, both parties agree.

Unchecked, entitlement payments will add roughly $700 billion to the debt over the next four years.

For now, though, “the economy is continuing to heal from the worst economic downturn since the Great Depression,” top White House economic adviser Alan Krueger says.

Under the sequester law, roughly $85 billion in federal spending would be slashed in the remaining seven months of this fiscal year and a total of $1.2 trillion in cuts over 10 years.

While entitlement programs and uniformed military personnel would be exempt, the rest of the government would be hit with indiscriminate across-the-board cuts.

Obama wants government deficits trimmed through a mix of selective spending cuts and new tax revenues, mostly by ending deductions and tax credits frequently claimed by the wealthiest Americans.

Republicans oppose any new taxes, even if for closing loopholes rather than increasing rates.

The looming spending cuts were first scheduled to take effect on Jan. 1. But they were postponed to March 1 as part of year-end “fiscal cliff” negotiations that also raised tax rates on affluent Americans. Republicans insist that’s enough tax increasing for now.

___

Follow Tom Raum on Twitter: http://www.twitter.com/tomraum

More Related Stories

Featured Slide Shows

  • Share on Twitter
  • Share on Facebook
  • 1 of 7
  • Close
  • Fullscreen
  • Thumbnails
    AP/Jae C. Hong

    Your summer in extreme weather

    California drought

    Since May, California has faced a historic drought, resulting in the loss of 63 trillion gallons of water. 95.4 percent of the state is now experiencing "severe" drought conditions, which is only a marginal improvement from 97.5 percent last week.

    A recent study published in the journal Science found that the Earth has actually risen about 0.16 inches in the past 18 months because of the extreme loss of groundwater. The drought is particularly devastating for California's enormous agriculture industry and will cost the state $2.2 billion this year, cutting over 17,000 jobs in the process.

       

    Meteorologists blame the drought on a large zone (almost 4 miles high and 2,000 miles long) of high pressure in the atmosphere off the West Coast which blocks Pacific winter storms from reaching land. High pressure zones come and go, but this one has been stationary since December 2012.

    Darin Epperly

    Your summer in extreme weather

    Great Plains tornadoes

    From June 16-18 this year, the Midwest was slammed by a series of four tornadoes, all ranking as category EF4--meaning the winds reached up to 200 miles per hour. An unlucky town called Pilger in Nebraska was hit especially hard, suffering through twin tornadoes, an extreme event that may only occur every few decades. The two that swept through the town killed two people, injured 16 and demolished as many as 50 homes.   

    "It was terribly wide," local resident Marianne Pesotta said to CNN affiliate KETV-TV. "I drove east [to escape]. I could see how bad it was. I had to get out of there."   

    But atmospheric scientist Jeff Weber cautions against connecting these events with climate change. "This is not a climate signal," he said in an interview with NBC News. "This is a meteorological signal."

    AP/Detroit News, David Coates

    Your summer in extreme weather

    Michigan flooding

    On Aug. 11, Detroit's wettest day in 89 years -- with rainfall at 4.57 inches -- resulted in the flooding of at least five major freeways, leading to three deaths, more than 1,000 cars being abandoned on the road and thousands of ruined basements. Gov. Rick Snyder declared it a disaster. It took officials two full days to clear the roads. Weeks later, FEMA is finally set to begin assessing damage.   

    Heavy rainfall events are becoming more and more common, and some scientists have attributed the trend to climate change, since the atmosphere can hold more moisture at higher temperatures. Mashable's Andrew Freedman wrote on the increasing incidence of this type of weather: "This means that storms, from localized thunderstorms to massive hurricanes, have more energy to work with, and are able to wring out greater amounts of rain or snow in heavy bursts. In general, more precipitation is now coming in shorter, heavier bursts compared to a few decades ago, and this is putting strain on urban infrastructure such as sewer systems that are unable to handle such sudden influxes of water."

    AP/The Fresno Bee, Eric Paul Zamora

    Your summer in extreme weather

    Yosemite wildfires

    An extreme wildfire burning near Yosemite National Park forced authorities to evacuate 13,000 nearby residents, while the Madera County sheriff declared a local emergency. The summer has been marked by several wildfires due to California's extreme drought, which causes vegetation to become perfect kindling.   

    Surprisingly, however, firefighters have done an admirable job containing the blazes. According to the L.A. Times, firefighters with the state's Department of Forestry and Fire Protection have fought over 4,000 fires so far in 2014 -- an increase of over 500 fires from the same time in 2013.

    Reuters/Eugene Tanner

    Your summer in extreme weather

    Hawaii hurricanes

    Hurricane Iselle was set to be the first hurricane to make landfall in Hawaii in 22 years. It was downgraded to a tropical storm and didn't end up being nearly as disastrous as it could have been, but it still managed to essentially shut down the entire state for a day, as businesses and residents hunkered down in preparation, with many boarding up their windows to guard against strong gusts. The storm resulted in downed trees, 21,000 people out of power and a number of damaged homes.

    Debbie Arita, a local from the Big Island described her experience: "We could hear the wind howling through the doors. The light poles in the parking lot were bobbing up and down with all the wind and rain."

    Reuters/NASA

    Your summer in extreme weather

    Florida red tide

    A major red tide bloom can reach more than 100 miles along the coast and around 30 miles offshore. Although you can't really see it in the above photo, the effects are devastating for wildlife. This summer, Florida was hit by an enormous, lingering red tide, also known as a harmful algae bloom (HAB), which occurs when algae grow out of control. HABs are toxic to fish, crabs, octopuses and other sea creatures, and this one resulted in the death of thousands of fish. When the HAB gets close enough to shore, it can also have an effect on air quality, making it harder for people to breathe.   

    The HAB is currently closest to land near Pinellas County in the Gulf of Mexico, where it is 5-10 miles offshore.

  • Recent Slide Shows

Comments

0 Comments

Comment Preview

Your name will appear as username ( settings | log out )

You may use these HTML tags and attributes: <a href=""> <b> <em> <strong> <i> <blockquote>