Sequester: Here Come the Clowns II

The administration, Obama and his minions have made a full court press exclaiming about all the doom and gloom that will befall us if we DARE to allow any sequester cuts to take place.
Obama stands before first responders, firemen and policemen and tells his audience we will not be as safe after Mar 1 as we once were never mind the fact that most first responders are paid by local governments. He stands before an audience and claims that 100s of kids will not be eligible for Head Start and 1000s will not have schools lunches and hundreds of thousands will not have day care. He even threatened that health care providers will not be able to provide immunizations or flu shots in spite of the fact that these are reimbusable expenses through Medicare and Medicaid and MUST be paid for. Then he trotted out all his Cabinet Secretaries to increase the gloom and doom. Defense would not be able to buy ammunition or deploy aircraft carriers. Transportation would be forced to lay off Air Traffic Controllers, Homeland Security would lay off border security, Justice of course would lay off FBI agents and Federal prosecutors. On and on it went, fear mongering, demigogury, scare tactics all in an effort to pressure the Republicans to back down on their pledge to let the sequester cuts be enforced. Make no mistake, this was simply a ploy to pressure the opposition to back down. The cuts represent less than 2% of the overall budget and the federal spending for 2013 will still be higher than 2012.
     Now in the final hours before the cuts will take affect Mar 1 President Obama is singing a different tune. Now that it is inevitable that the cuts will take place the President says we may not notice the cuts for a week or a month. His greatest fear is that we won't notice AT ALL.

Sequester: Here Come the Clowns

Most of the news these days revolves around the "SEQUESTER" a form of budget cutting that requires across the board cuts when the various Congressional players and the President cannot agree on specific cuts. Designed to be "drastic" and "so egregious" as to encourage the Congress to actually CUT the budget. The result of this is the circus we see playing out in the media on a daily basis.
    The President, in an effort to avoid any cuts at all has revved up the scare tactics. "Our National Security is at risk, FBI agents will get laid off, US Attorneys will have to let criminals go and not prosecute, no air traffic controllers, no border security, no day care, no funding for disabled children or school lunches. No money bullets for soldiers in harms way. No money for training for troops deploying to Afghanistan." I was born at night but I wasn't born last night.
    The Federal Budget has increased an average of 6% since the 1986 Budget Control Act defined "baseline budgeting" which allows the government to grow at approximately 6% from the previous years "base" Add to that the fact that somehow Obama's Stimulus has been added to the baseline.
The long and the short of this is that government continues to grow. Even after the sequestration the government will spend more money in 2013 than it did in 2012 and is projected to spend more money in each successive year than the previous. We are barely slowing down the rate of growth much less actually cutting government spending.
    The President already has tranfer authority and could decide that it is more cost effective to cut the economists at the Labor Department rather than Air Traffic Controllers or cut conferences at GSA rather than school lunches. However, this President is a political animal and any admission that we have spending that we can cut is an admission that is agenda may be wrong for the economy.
  At this point it looks like the sequester will happen inspite of all the rhetoric and demagogury. The Democrats and the Presidents worst fear is that no one will notice. 

High Prices Cure High Prices

Being from an area not particularly impacted by the drought of 2012 I am sympathetic to farmers and ranchers who are impacted. While it is part of farming, it is never fun to see crops you have worked so hard for wither in the field. Likewise ranchers with their animals struggling to find something to eat and drink when normally they would be on their own for the summer. As we go into the fall, unfortunately the damage is done. Cattle and pigs are headed for slaughter because at $8.00/ bushel it is just too costly to feed them corn to fatten them up. This will impact the food chain across the board and not for the good. The good part of this scenario is that with high prices in the Spring many farmers planted way more than a typical normal year. This additional acreage in production may somewhat offset the looses in the drought areas. We will have to see what happens at harvest. One thing is sure. This entire system gives us a lesson in Economics 101. As supply drops and demand remains the same the price will increase. Prices will continue to increase until one of two things happen. Either the price gets so high that people stop buying which reduces demand or the high price brings on additional supply from foreign sources which will mitigate further increases. Either way the market will act in a way that both rations supply and increases supply on the one hand or reduces demand as buyers find alternatives that are cheaper on the other.
This process works in virtually any market. In my area the gasoline price is approaching $4.00/gal. Up to that point, I have noticed that people continue to fill up and while they bitch, they don't change their behavior. At $4.00, something happens. People begin to change their habits. They no longer fill up, rather get $20 or $40 and hope the price goes down. If and when the price drops $.15 or $.20 they swarm to the station to fill up. I do it too. If I think the price will continue up I fill up. If I think it has peaked and likely will come down, I get $20. My own form of rationing. High prices cure high prices.