Government Downsizes Amid GOP Demands for More Cuts

Government downsizes amid GOP demands for more cutsBy TOM RAUM

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.

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gmydogbud

With Respect: The Sequester was President Obama's Idea. The idea for the sequester came from the White House and President Obama Signed it!

Question: Why do the Presiednt, the Democrat & Republican Politicans who have caused all of this, now find it necessary to Punish their fellow American Citizens, when he and they could cut from other areas? Why not stop sending the Hundreds of Billions to countries and people who hate us and want us dead? Why not stop paying the Billions for Illegal Aliean Anchor Babies to be born? Why do they not only allow but do all in their power to aid Illegal Aliens to stay in this country after they have thumbed their collective nose at American Citizens, Our Country & Our Laws? Their are many areas which could be cut without punishing the American People who have paid their taxes for generations and respect the laws of this land!

February 25 2013 at 5:42 PM Report abuse rate up rate down Reply
Artie

Interesting that Mr. Rubio ONLY blames Gov't's reckless policies for the housing crisis which precipitated the global financial meltdown. He doesn't address the unconscionably greedy "banksters" and Wall Street wise guys at all. It was the banksters, along with their AAA rated POS mortgage backed derivatives, credit default swaps and other crap that was being sold to unsuspecting pension plans, large investors and other financial institutions. It was these same thieves and wise guys along with the gov't knit-wits in their pocket that pushed for the repeal of the Glass Steagal Act and opened the flood gates for the unconscionable investment bankers and their ilk to run their investment schemes along with the global economy over a cliff. Get with it Rubio....it wasn't just the Gov't you "mollokka."

February 22 2013 at 10:03 PM Report abuse -2 rate up rate down Reply
nthereoff

Greek Government Fails to sell wage cuts. Guess who's next?

February 22 2013 at 12:21 PM Report abuse +6 rate up rate down Reply
rgmac12

JOBS JOBS JOBS .. is the answer. Four + years later .. and still very little growth in jobs. Put people back to work
and we can pay for the some of the marginal programs. Ask a section of the population to continue to pay more and more
creating class warefare ... is why 50% of the nation dislikes the guy

He's not standing up for anyone .. he's buying your vote!!

February 22 2013 at 11:25 AM Report abuse +2 rate up rate down Reply
1 reply to rgmac12's comment
gmydogbud

He has provided the American people with the "New Normal" and from what they say there will not be any JOBS - Why - Because Both Parties Not only Allowed But Passed NAFTA, To Make Sure That The American People, Would Not Have JOBS! This is what the highly educated, ivy league, professorial types have done to their fellow Americans!!!

February 25 2013 at 5:47 PM Report abuse rate up rate down Reply
jack

For starters, This article was written by TOM RAUM another left wing reporter, notice his use of Republicans and austerity in the same sentence... As previously noted but missed by left wing Raum, the government is not cutting anything..there is no AUSTERITY

February 22 2013 at 11:13 AM Report abuse -2 rate up rate down Reply
richperry05

reduce there wages to the worth of there job. use the private sector as a scale for this . and make them contribute to there health plan/benefits. the train is coming to a halt . we the people are out of fuel to run this monster any longer...........

February 22 2013 at 11:06 AM Report abuse +1 rate up rate down Reply
mbzmc

Government employees make 40 to 50% more than private sector workers and they get much better benefits. This article states "layoffs for hundreds of thousands of federal workers" may happen. Simple solution: Cut all government worker's pay by whatever it takes, maybe 10 or 15% so those "hundreds of thousands of workers" can keep their jobs at a reduced pay along with all the other overpaid government workers. Problem solved. Just be sure to keep cutting government spending!!! Our government can't keep spending over a trillion dollars more than it takes in every year and tax increases just for the rich doesn't put a dent in that. Everyone must pay more in taxes and thank their elected officials for causing a rediculous amount of debt.

February 22 2013 at 10:49 AM Report abuse +3 rate up rate down Reply
cpo1514

what cuts.... reduced spending INCREASES are not cuts... this is the math for dummies to say these are cuts..

February 22 2013 at 9:47 AM Report abuse -3 rate up rate down Reply
Robert Leonetti

WHAT I REALLY MISS ABOUT OBAMA'S SPEECHES IS WHEN NANCY PILOSI USE THE STAND UP AND APPLAUD EVERY 5 SECONDS. I THINK OBAMA HAS STOPPED THAT BECAUSE HE KNOWS SHE MADE HIM LOOK LIKE AN IDIOT. NOW ALL HE HAS TO DO IS GET RID OF THE ONE WITH ALSHIMERS...BIDEN.

February 22 2013 at 9:19 AM Report abuse -1 rate up rate down Reply
Robert Leonetti

YOU DON'T MEAN THAT OBAMA (MR ROCKHEAD) IS ACTUALLY GOING THE LISTEN TO THE REPUBLICANS AND START CUTTING THE PORK FAT GOVERNMENT? UNBELIEVABLE. SO FAR HE HAS SAID THAT WE ARE NOT OVER SPENDING EVEN THOUGH WE SPEND AT A RATE OF 3.5 TRILLION AND TAKE IN 2.5 TRILLION. DA

February 22 2013 at 9:16 AM Report abuse -2 rate up rate down Reply