CHARLESTON, W.Va. -- Governors, Congress members and pundits galore raise the specter of the American economy dropping off a steep cliff if the so-called federal budget "sequester" is not somehow nullified.
What is this sequester? And why is it thought to be so dangerous to the U.S. economy?
Simply stated, it's a law requiring the federal government to make automatic, across-the-board cuts of some $1 trillion from U.S. budgets over the next decade, starting Jan. 1, or find other ways to cut spending spending 3 percent each year for 10 years.
This cliff will have a negative impact on economies built around federal spending (especially in Virginia and Maryland), but in reality it is nothing compared to the huge fiscal crisis America will encounter very soon.
The unfortunate fact is that we, Americans, are spending $3.6 trillion per year with revenue of only about $2.4 trillion, creating an annual deficit of $1.2 trillion.
Even with the much-dreaded 3 percent sequester cut over a decade, the national debt will rise from the current $16 trillion to more than $26 trillion, or 160 percent of the gross national product, putting America on a larger, far more dangerous cliff. (By the way, Social Security has not contributed one penny to the national debt and will not over the next 10 years, even if nothing is done to modernize the program. Thus, this debt, sequester, etc., is not about Social Security, it is about pure reckless spending on anything and everything imaginable.)
This dilemma has been caused by a spending binge across American society, including government at all levels. As a nation, we opted to spend $5 trillion on unfunded Medicare prescription drug benefits for the elderly, borrowing from the Chinese and ultimately our kids. Plus, we decided to fight two wars in the Middle East "off the (budget) books" and we are borrowing (going into debt for) every penny we spend on military adventures abroad.
At the same time, many Americans participated in binge spending on housing, thinking there was no end to credit or profits. Then, beginning about 1990, states began to question spending money on higher education that could be spent on other things since student loans were abundantly available to anyone and everyone. Now college student debt exceeds $1 trillion and is growing fast while recent graduates cannot find jobs.
Our financial leaders joined in this recklessness; it was just 10 years ago that Federal Reserve Chairman Alan Greenspan told Congress he was "afraid we would pay off our national debt too fast," all while promoting major tax cuts that helped explode the national debt.
So, a 3 percent sequester is not the question, because we have an economy built on massive borrowing with no endgame, and this is deadly. While we most likely will avoid the 3 percent cut next year, larger and more dramatic cuts are just down the road.
Gilley, a retired Marshall University president living in Reston, Va., served in the administrations of Virginia Gov. John Dalton and President Ronald Reagan.