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Former CBO head on the numbers of sequestration

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    Douglas Holtz-Eakin speaks out on 'Special Report'

  • Duration 6:16
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We are nine days away from the implementation of reductions in the growth of federal spending we've been calling it the sequester we've been talking about it a lot as we learned earlier not everyone thinks it's a bad thing.

Across the board.

But let's get some thoughts tonight from a former director of the Congressional Budget Office Douglas Holtz -- Doug thanks for being here my pleasure okay.

How does this work.

These sequester is an across the board cut.

There's one for defense and is wanted on defense.

When you get underneath the surface.

The federal budget is divided into thousands of different accounts each account gets cut by the same amount regardless of what's in it so we have some accounts that are payroll.

Some accounts that are conferences travel whatever maybe they'll get the same cut regardless of what's in there so.

When we say this is a cut to -- overall the government is still growing up year over year show.

Is still getting bigger.

But because this is.

Cutting back.

And you can't move money around.

That's the problem.

Yes I mean it's not that the federal government's -- -- get smaller will continue to grow as you said it's a group a slowdown in the growth of spending.

But you can't shifting money around so if you're you know gonna try to have priorities that's out the door.

There's no ability issue of money to high -- projects and you know low -- -- thinks the cut everybody gets a cut regardless so let's take care for example the Pentagon sure there are what.

Thousands thousands of buckets.

Buckets technical term yes budget pockets thousands of them he's with money in them they said some might be payroll so just all people -- that one.

Another one might be conferences that's all just traveling and attending professional Thompson's.

Think -- cut the -- What you might like to do is move some money from the conference bucket into the payroll pocket so that -- it's laid off only it's furloughed.

He can't do that so we cut it regardless -- it's a good idea for about it so even though year over year the budget overall is increasing.

The Pentagon is unable to.

Avoid.

Affecting personnel negatively because they have to cut across the board to those individual buckets actually they have no choice.

It seems crazy is -- is crazy if if you were doing rational you know management of anything you say all right what's important for the people more important let's make sure they get -- them won't take the -- somewhere else.

They -- the ability to do that so the people will get.

Furloughed so why doesn't congress just pass a bill and say well.

-- transfer authority for the sequestered so that they can move the money around.

The congress could give every agency transfer authority -- it doesn't because it likes to control -- money gets spent on the -- both.

Decides how much money is spent and that likes to know where it goes what state does it go to does go to projects like not like the president could call for congress could do it.

Tomorrow.

Com.

Yes and like many in the other ways toward the sequester the president has called for there are no proposals passing the Senate's there's nothing going on.

But this question so we heard -- The DOD that the furloughs these are.

Temporary him.

Essentially layoffs but they're not.

Layoffs they're just being put on hold furloughs.

422.

Day is over six months.

That's saving 45 billion dollars for the remaining in the 22013.

Fiscal -- if this question goes in place.

-- that's what.

That's roughly 80% and this is this is basically saying go take an unpaid vacations as we don't have the money for him.

And we'll have a job for you wanna get back.

They can space the mound trying to minimize the disruption and in the actual workload but they have no flexibility and this is going to handle -- What do you think of all this.

You know what I like to think of the sequester as a bad idea whose time has come we we actually do have to cut spending.

We never really gotten spending under control -- federal level this is not a good way to cut spending I think that's not in dispute.

But in the absence of someone coming up without rational proposal to cut the places that are going to rapidly we're stuck with -- And the only thing worse than this is doing nothing.

So if it comes to pass.

How bad will the story speed that we see you know how would the impact.

Of this mean to hear from the president -- you have these stories like the sky is falling on the -- -- -- -- awful -- -- the Western Hemisphere's coming to an end but the reality will be very different on the day after the sequester starts.

People get a -- go to work and federal agency shall see very minimal impacts the kinds of things you hear about you know.

The sequester causing a recession it's impossible for that to happen this is.

85 billion dollars it's a three point six -- our budget it's gonna come and go without much notice.

It's a sixteen trillion dollar -- this isn't going to -- in the economy.

Are you optimistic that this cutting process is going to go forward or we're going to see the same kind of crisis to crisis to crisis.

I'm the eternal optimists.

You -- in office to do budgets mean this is the federal budgets -- -- for my career and are always in the red.

And there's always problems but you know it is becoming more and more apparent to everyone that we need to get the big programs the -- -- Medicaid Cecil securities.

Promised sound footing not just for the dollars to for the beneficiaries -- deserve programs that are gonna collapse under them.

That's what the problem is not over here in the Pentagon budget not in.

The infrastructure budget.

Last thing this I heard some on the other -- say this wasn't even -- -- peanuts compared to what's on the table ahead for financial.

How possibilities that we're facing and that's what you're talking about next up is the continuing resolution at the end of march.

And that will be another that.

Probably another battle that's it that's the bill that funds the government and so they can't come to agreement on that.

We start doing government shutdowns and we've been through those before they also produce lots of sound and fury and not much progress on the policy front.

It would be in great benefits everyone if we put aside those battles -- and as I said looks at the big programs and everyone knows need to be fixed and fixed them.

Doug has always thank you thanks.

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