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Rush Limbaugh Was Right About the Sequester

Still more evidence emerges that the sequester -- which was supposed to affect everyone -- is going unnoticed.

Just before the sequester kicked in, I wrote that it was difficult to tell if the hype was just "sky-is-falling politicking" or whether the budget cuts would truly affect Americans, especially business owners.

People knew the immediate impact would be limited. They also knew conservatives like Rush Limbaugh were betting that the effects would be so minimal that most people wouldn't even notice.

Four months in, it turns out Limbaugh and others like him were right. As Americans have seen, unless you're in one of three groups -- among the nation's poorest citizens, a federal worker, or a government contractor -- then sequester hasn't really done much to impact your life.

Government spending rises

You'll recall that the sequester was supposed to mean an immediate $85 billion federal budget cut. The Obama administration charged this would mean job losses and reduced services for the most vulnerable Americans.

Yet, in one category at least, government spending is up.

I wrote in February that one logical category of people who might see an impact were those who were waiting for the federal government to make regulatory decisions. The Patent and Trademark Office was supposed to lose about $156 million and the Food and Drug Administration was supposed to lose about $318 million, "so if you're waiting for a decision on a patent or a medical product, you might wind up waiting longer."

Now, however, a new report on the federal budget for fiscal years 2013 and 2014 shows that the spending cuts had almost no effect on the FDA, the PTO, and other federal regulatory agencies.

"Regulatory agencies' budgets are growing faster than inflation in 2013, despite concerns about the sequester," wrote the budget report's authors, Melinda Warren of Washington University in St. Louis and Susan Dudley of George Washington University. "Their budgets are projected to continue growing in 2014, due to a combination of new legislative authorities and presidential priorities."

The report notes that the "estimated cost of running regulatory agencies in fiscal year 2013 is $56.4 billion." And yet, "President Barack Obama's proposed budget for regulatory agencies increases to $59.4 billion in 2014."

What really happened?

Let's review. The sequester has its origins in a doomsday provision that the Obama administration worked out with Congress in 2011, when House Republicans refused to raise the debt ceiling without big cuts to the federal deficit. The sequester plan, which called for $1.2 trillion in across-the-board cuts to all federal spending over 10 years, was supposed to be a budgetary meat cleaver. It was supposed to mean cuts so drastic that both sides would be motivated to work out a more strategic deal.

The deal never happened, but there were two results of the sequester--both of which, in retrospect, should have been obvious.

First, federal agencies acted to implement the cuts in ways that least impacted their programs and people but were also obvious to outside observers. Examples: The administration ham-handedly cancelled public tours of the White House. Meantime, the Justice Department, which warned it would have to prosecute fewer criminals and furlough FBI agents and prison guards, found ways to move money around and avoid those cuts.

Second, despite assurances ahead of time that the government wouldn't restore funding to programs bit-by-bit, Congress moved to do just that when sequester-prompted airport delays meant that members were spending more time on the tarmac as they went to and from their home districts. The Transportation Security Administration and Federal Aviation Administration are no longer furloughing employees as a result.

So who's actually affected?

The Department of Housing and Urban Development and the Internal Revenue Service have furloughed employees. Some Defense Department civilian employees are set to begin serving 11 days of unpaid leave on July 8, although originally they were projected to take off 22 days without pay.

The impact on federal contractors has been uneven. (If you're a federal contractor or work for one, I'd love to hear from you.)

Of the cuts that have gone into effect, however, The Washington Post recently found that they're the ones that affect the poorest citizens. The Labor Department says unemployment benefits have been cut, and the wait to talk with representatives of the Social Security Administration is now twice what it was before sequester. Also, very low income Americans who depend on rental assistance from the Department of Agriculture aren't going to get it.

Thus it turns out conservative commentators were right. Since the burden now falls mainly on the nation's poor, and on federal workers and contractors, the vast majority of Americans don't even have reason to notice.

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Last updated: Jul 26, 2013

BILL MURPHY JR. | Columnist

Bill Murphy Jr. is a journalist, ghostwriter, and entrepreneur. He is the author of Breakthrough Entrepreneurship (with Jon Burgstone) and is a former reporter for The Washington Post.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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