More Games

On Wednesday, THC reported on Warren Meyer's dealings with the National Forest Service regarding the potential shutdown of his business.  He's now received the official shutdown order and here is his comment:

From our shutdown order:

Congress has not provided appropriations for fiscal year 2014.  Pursuant to applicable legal requirements in the Antideficiency Act and Attorney General opinions addressing agency operations in the absence of appropriations, the Forest Service is unable to administer federally-owned recreation facilities.  Consequently these facilities will be shut down and posted accordingly with signs provided, with gates locked where they exist, restrooms locked, and water systems shut down.   Visitors in occupied sites would be given 48 hours to vacate, with the area shut down as the last visitor leaves, not to exceed 48 hours.

In other words, we pay all the bills, run the parks in an independent manner, have no USFS people stationed in the parks, but we have to shut down because the Forest Service can no longer "administer" the facilities.  Huh?  What day-to-day administration is necessary? Remember that the USFS itself did not think their presence was necessary, originally confirming on Tuesday that we would stay open as we had in all past shutdowns.

We often go weeks and months in these facilities without ever seeing a USFS manager.  The USFS considers it so important to have staff available to "administer" these facilities that none of their recreation personnel work on weekends or on holidays, by far and away the busiest and most difficult times in these facilities.

The Games People Play

UPDATED

We are in yet another round of our ongoing and seemingly never ending kabuki theatre regarding budgets (for prior chapters see The Fiscal UnCliff, Wile E Coyote On Our Financial Future, Dogs and Cats Living Together and More On Dogs and Cats).

National Parks, Forests and Monuments seem to be the chosen ground for showing the terrible impact of the current stalemate.  Warren Meyer, who operates Coyote Blog and owns a small business providing services in public parks, reports on the Obama Administration's latest maneuver; from his letter to his Arizona representatives in Congress:

My company, based in North Phoenix, operates over 100 US Forest Service campgrounds and day use areas under concession contract. Yesterday, as in all past government shutdowns, the Department of Agriculture and US Forest Service confirmed we would stay open during the government shutdown. This makes total sense, since our operations are self-sufficient (we are fully funded by user fees at the gate), we get no federal funds, we employ no government workers on these sites, and we actually pay rent into the Treasury.

However, today, we have been told by senior member of the US Forest Service and Department of Agriculture that people “above the department”, which I presume means the White House, plan to order the Forest Service to needlessly and illegally close all private operations. I can only assume their intention is to artificially increase the cost of the shutdown as some sort of political ploy.

The point of the shutdown is to close non-essential operations that require Federal money and manpower to stay open. So why is the White House closing private operations that require no government money to keep open and actually pay a percentage of their gate revenues back to the Treasury?

This comes on top of the bizarre Administration decision to restrict access to the monuments on the Washington Mall, prompting a group of aged WWII veterans to re-enact the D-Day landings.

UPDATED

More on the phony closure of open access monuments.  I believe the government is in the process of seeking a people more worthy of it.

More On Dogs And Cats

In Dogs And Cats Living Together, THC reported that the actual budget cut from 2012 to 2013 under sequestration was only $9 billion.  The source for this estimate was the August 2012 Congressional Budget Office (CB)) analysis.  I've now read the recently released February 2013 CBO report and it reports that spending will actually increase by $15 billion this year even with sequestration. Let's say that again - federal spending will increase this year, not decrease, under sequestration.

Dogs And Cats Living Together

Just as Bill Murray prophesied catastrophes of Biblical proportions in Ghostbusters, including "dogs and cats living together" so we now are faced with similar predictions about sequestration if it occurs, as scheduled, on March 1.  My advice - calm down.

(White House Spokesperson Jay Carney)

As THC pointed out in The Fiscal UnCliff - A Guide For The Perplexed, sequestration only triggers a $9 billion reduction in the federal budget year over year.  That is a 0.25% reduction out of a $3.6 trillion budget - in other words, instead of $100, the government can only spend $99.75.  All of the other figures you see tossed out are using baseline budgeting which always assume increased spending and counts as a cut anything less than that inflated number.  This has nothing to do with the real world - you know what I'm talking about if you've ever had to manage a household or business budget.

Let's take an example from ABC News about how this really works.  The Department of Transportation (DOT) has a 2013 budget of $74.2 billion.  If sequestration occurs its budget will be reduced to $73.2 billion.  However, in 2012 DOT spent $72.6 billion so even if sequestration occurs its spending still increases by 0.8% but despite that the Administration is claiming DOT's budget is being cut!

This chart sets out the longer-term consequences which are minimal:


The "bad consequences" you are reading about are from the bureaucratic playbook on how avoid budget cuts - threaten to cut the things in your budget that people like the best while refusing to cut those things that are truly expendable.

As Jonah Goldberg has written:

"Democrats are saying that if Uncle Sam doesn't get a bigger raise, government won't be able to function . . . That's junkie logic. It's the mindset that says you can't cut back on beer but if you don't get more money you'll have to cut back on the kids' diapers."

Also remember that when the President speaks about a "balanced solution", which always seems to rely heavily on yet more tax increases, that his math is also not related to the real world.  Although he would like people to forget it, the Republicans already agreed to a $60 billion annual tax increase at the end of 2012.  If you take that $60 billion and add the $9 billion in sequestration cuts you have a total of $69 billion in annual deficit reduction of which 87% comes from increased revenues.  It's the spending side where there is a lack of balance.

Sequestration was President Obama's idea during the 2011 budget negotiations and he was the one who insisted on it because, as Bob Woodward reported on page 339 of The Price Of Politics, half the cuts would come from Defense and thus, "There would be no chance the Republicans would want to pull the trigger and allow the sequester."



Although Defense is only 18% of the Federal budget it will take 50% of the reductions in sequestration.
Sequestration can work if the Administration wants it to work instead of using it to panic the public with horror stories.  Here's hoping the Republicans have the guts to let it happen.

Stopped Making Sense

Maybe it stopped making sense before this but . . .

If you remember way back in time (a couple of weeks ago), Congress agreed with President Obama's proposal to increase taxes on "millionaires and billionaires", which translated into English means if you make more than about 200K and have a net worth of less than $1 million.  You may have read that the tax increase kicks in at 400K (singles) or 450K (married) but because of new limits on the ability to take deductions the tax increases actually begin to kick in at a much lower level.

This tax increase will bring in about $60 billion a year.

Guess what?  This week, Congress just spent the first year's take!

The Sandy Relief Bill will cost $60 billion.  But it's "off-budget", so we don't need to worry about it adding to the deficit (nudge, nudge, wink, wink)!  Except it's real dollars and we'll need to borrow to afford it.

Actually, it's not all for Sandy.  Only about $26 billion is for relief from the storm.  The other $34 billion includes funds for Head Start, a new roof for the Smithsonian, support for Alaskan fisheries, and funding for future natural disasters.  If you want an insight into additional political shenanigans regarding whether Sandy is classified as a "hurricane" or a "tropical storm" and the financial implications of this classification read this post by Roger Pielke Jr.

The bill passed the House with unanimous Democratic support and 49 Republican votes.  But the real story is that the Republican leadership which runs the House could have prevented a vote on the pork-laden bill until the junk was stripped out of it.  Instead, they facilitated the amendment inserting the pork.

So here's where we stand on fiscal responsibility:

The Democrats have given up any pretense of caring.  They just talk about the rich and fairness and ignore the math.

The Republicans want to keep up the appearance of caring but when push comes to shove (and Governor Christie (R) can push quite hard) they don't really want to fight and when their local R's want the money it will flow.

Demosclerosis strikes again!

Wile E Coyote On Our Financial Future

Now that we've solved the immediate problem of the impending fiscal cliff by having Congress do some random stuff at the last minute, I decided to ask an expert in cliff scenarios about his assessment of our longer term fiscal prospects.  In response, Mr Coyote provided his views via the video below which I'll share with you.

Mr Coyote's assessment is based upon his painstakingly detailed analysis taking into account yesterday's deal based upon the CBO summary of the current state of play:


On the bright side, I'm sure you will share my relief that along with making most of the Bush tax cuts permanent the fiscal cliff deal also includes sorely needed tax breaks for motorsports entertainment complexes, economic development credits for American Samoa and, most importantly for the growth of our economy, special expensing rules for Hollywood productions (meaning that certain expenditures can be immediately expensed rather than considered investments subject to depreciation).  So when you see that your favorite Hollywood star is being paid $10 million to star in Die Hard: Spiderman 7, The Return of X-Men 9 you can feel good that you helped pay for that!  I'm sure you can at least get an autographed photo in return for your contribution.