Friday’s spending cut apocalypse

We are facing another financial deadline in Washington in three days.  Not a fiscal cliff, nor a debt ceiling crisis.  On Friday, March 1, if nothing happens, federal spending will automatically be cut by $85.4 billion.  This so-called “sequester” was part of the deal to raise the debt ceiling.   Republicans put in cuts for domestic programs, while Democrats put in cuts for the military.  Both sides assumed that these would never go through, since they go against the respective priorities of each party, but it looks like they will.  The Obama administration is decrying the cuts in apocalyptic terms, saying air traffic control will be shut down, our military will be crippled, the elderly will go hungry, and children will lose their schools.  After the jump, see what will really be affected. [Read more...]

$1.2 trillion in automatic cuts might kick in

Remember the “sequester,” the automatic budget cuts that were supposed to go into effect on January 2 but were kicked down the road to March 1?  The result of last year’s agreement on the national debt and the recent “fiscal cliff” deliberations?  Since the cuts would hit Republican causes (the Pentagon) and Democratic causes (social programs) alike, it was assumed that Congress would get rid of them.  Well, it looks like they may go into effect after all. [Read more...]

Congress fails again

Back in August, Congress averted a government shutdown at the last minute by kicking the can to a “Supercommittee” that was assigned to find $1.2 trillion in savings.  The incentive was a provision that if the bipartisan task force failed to do so, $1.2 trillion would automatically be cut, with half from social programs (to get the liberals to co-operate) and half from defense (to get the conservatives to co-operate).  The deadline for an agreement would be Thanksgiving.

Well, that would be this Thursday and it is evident that no agreement is likely, with the sticking points being the same ones that stymied Congress back in April:  Democrats want not only cuts but new revenue, and Republicans won’t agree to any tax increases.

But doing nothing will be just as good, given the automatic cuts that will take place (though not until 2013).  Right?  You would think so.  That was the agreement.

But now the word is that Congress will renege on that deal by adding back what would have been cut out of  social programs and national defense!

Supercommittee Expectations Wane on Tax Divide – Bloomberg.

How government agencies avoid competitive bidding

Are you an Eskimo from Alaska?  Are you part Eskimo?  Do you know an Eskimo?  (That term, by the way, according to Wikipedia is NOT pejorative when referring to the Alaskan tribes.)  If so, you can start a company and get a government contract without having to compete for it.  Then you can sub-contract the actual work to other companies, pocketing millions for yourself.

That’s one of the ways the federal procurement process avoids having to comply with time-consuming but money-saving laws about taking the lowest bid .  From The Washington Post:

United Solutions and Services, known as US2, had just three employees and several small contracts for janitorial services and other work. It was based in a four-bedroom colonial, where the founder worked out of his living room.

But the firm had one quality the Army prized: It was co-owned by an Alaska native corporation (ANC) and therefore could receive federal contracts of any size without competition, under special set-aside exemptions granted by Congress to help impoverished Alaska natives.

On Sept. 2, 2008, US2 was granted a deal worth as much as $250 million – 3,000 times the $73,000 in revenue the firm claimed the year before. The contract enabled the Army to quickly fund a wide array of projects, including a global campaign to prevent sexual assault and harassment, without seeking outside bids.

US2 could not do the work by itself, though. With the Army’s knowledge, the firm subcontracted the majority of it to more established companies, a Washington Post investigation has found.

Federal rules generally require prime contractors on set-aside deals to perform at least half of the work, something US2 did not do on more than $100 million worth of jobs, according to interviews with Army officials and an analysis of federal procurement data.

via Alaska native status gave tiny, inexperienced firm a $250 million Army contract.

British coalition talks hinge on cutting the deficit

The efforts of the Brits to forget a coalition government is centering, according to this article, on how to drive down the deficit, avoiding another Greek syndrome.  Notice that the American deficit is just as bad, suggesting that cutting budgets and imposing austerity measures will be the task of all responsible governments:

Inside the stately buildings of Whitehall in the shadow of Big Ben, party leaders trying to forge a government hunkered down for talks this weekend with a 167-billion-pound elephant in the room: the British budget deficit.

Investor panic over Greece’s debt problems is engulfing Spain and Portugal, and political officials here are racing to head off speculation that Britain could be next. Thursday's election yielded no clear majority in Parliament, plunging parties into intense rounds of horse-trading to assemble a workable coalition. Their most critical goal: the creation of a government willing to undertake what is set to be the most painful round of spending cuts in Britain since World War II.

The focus of the coalition talks underscores the rising alarm over yawning deficits and crushing debt in developed nations since the onset of the global economic crisis. In Britain, stimulus spending and collapsing tax rolls have left the budget deficit — the shortfall between what the government takes in and what it spends — set to jump to 12 percent of national income this year, the highest in the European Union and roughly on par with that of the United States.

via British coalition talks continue as parties focus on deficit.


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