Contributed by Chriss Street. Specialist in corporate reorganizations and turnarounds, former Chairman of two NYSE listed companies. His latest book, The Third Way, describes how to achieve management excellence and financial reward by moving organizations from Conflict and Confrontation to Leadership and Cooperation. He lives in Newport Beach, CA.
When the dreaded sequester took effect on March 1st, the only immediate economic pain federal workers suffered was canceling White House tours eliminated Secret Service over-time. But over the last two weeks, the dirty little secrets about expected higher taxing and higher spending are pouring out of Washington D.C. As the Congress finishes work on the stop-gap budget to avoid a March 27th shut down and fund the government through September, many federal employees now expect unpaid furloughs of up to 22 days a year. With reality biting hard, Congress, department heads and federal unions seem motivated to improve government by cutting frivolous spending.
I reported last week that the non-partisan Congressional Budget Office had issued a 96 page report that doubled Obamacare’s 21 new annual taxes from $57 billion to $106 billion. Any Congressional glee about extra money to spend evaporated over the weekend with the release of the American Enterprise Institute report that Obamacare, which was supposed to be revenue neutral, is estimated to add another $6.2 trillion to the already stunning $16.7 trillion of national debt.
Congress has been working hard on a stop-gap budget they expect to pass this week that will give most government agencies significant flexibility to address spending priorities, but the plan still results in over a million federal employees receiving furloughs. The budget approved by the House this week, known as a Continuing Resolution, allows the Defense Department to prioritize its current spending needs, rather than rely on the plan originally introduced last spring. The Senate is also expected to give greater spending discretion to the Departments of Agriculture, Commerce, Justice, Homeland Security and National Institutes of Health.
Congress hasn’t passed a budget in four years and has been running the United States on Continuing Resolutions since President Obama signed House Resolution 38 on Friday, March 6, 2009. On May 16, 2012, the Senate rejected the Obama Administrations 2013 budget by a stunning 99 to 0 vote. But the Administration could take comfort that they had performed much better than in the prior year, when the Senate only rejected their 2012 spending blueprint by 97 to 0.
With federal employees facing the equivalent of an 8.5% pay cut, both the Senate and the House want to avoid another partisan showdown in Congress over spending issues as the current resolution expires one minute after midnight on March 27th. Most government managers complain that Congressional micro-management severely limits the efficiency and effectiveness of government programs. But that micro-management makes sure their crony supporters are rewarded with lavish spending. With real human “blood-in-the water,” no member of Congress wants to be seen as overtly preventing any rebalancing of spending that might cushion the negative effects of the sequester.
House Speaker John Boehner, R-Ohio, said Sunday on NBC’s “Meet the Press” that he is absolutely committed to keeping the government open and avoiding a shutdown. But if Congress fails to hammer out a friendly agreement or the President vetoes the bill, the government would shut-down for lack of appropriations for the first time since 1995.
The House Continuing Resolution does not restore any automatic cuts, but it does give agency heads new authority to shift money within programs to help manage delivery of services. The Pentagon expects to move $10.4 billion to avoid suspending military training and maintenance work by making cuts in other non-essential defense programs. To pay for half of their spending cuts, the military has already sent out 22 day furlough notices to begin one day a week in April to the majority of the Department’s 800,000 civilian employees. The only short-term funding reprieve is for 21,370 border patrol agents and 21,775 customs officers working at ports of entry, until Congress finishes the immigration bill.
Despite controversial cuts to programs to the Agriculture Department of furloughing 9,212 meat inspectors for 11 unpaid days a year starting in July and $53 million in cuts to the Food Safety and Inspection Service, Congress has refused to restore funding. The same is true as furlough notices of 116,000 at Justice Department; 17,000 at Environmental Protection Agency; 47,000 at Federal Aviation Administration, 4,700 at Labor Department; 60,000 at Customs and Border Protection; 1,600 at National Labor Relations Board; and 480 at the Office of Management and Budget. Furlough notices will soon be issued for Internal Revenue Service, Education Department, Department of Housing and Urban Development, the Interior Department and the Federal courts.
The reality of across-the-board-sequester seems to already have a silver lining. Federal labor unions and agency managers are now bargaining for ways to cut extraneous government costs, in order to soften the pain of unpaid days for Federal employees. The President is on a “Charm Offensive” and both Congressional parties are in a bi-partisan mood to cut frivolous government spending. This is a good thing! Contributed by Chriss Street.