Americans endure bigger income cut than government can handle

Americans are a lot better at belt-tightening than the people they send to Washington.

As Americans’ income fell by 3.6 percent in January, President Obama and Congressional leaders were warning of the dire consequences of sequester, the budgetary booby trap that forces cuts of as little as a third of that from the mammoth federal spending plan. Working stiffs sucked it up and absorbed the biggest monthly drop in income in 20 years, while the elected officials insisted that the federal budget had no fat to trim.

Financial planning experts say if Americans can take such a big bite out of their paychecks, Washington should be able to weather a similar cut, percentage-wise.


“If you compare [the sequester cuts] to sacrifices a regular family has had to make, you’re talking about the money you find in your couch cushions,” said Larry Winget, the best-selling author of “You’re Broke Because You Want to Be.”

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“When regular folks need to cut the household budget, they get rid of their toys, their cable TV, eating out,” Winget continued. “If they can make those kind of cuts, the federal government ought to be able to.”

The sequester cuts were put in place more than a year ago as a means of forcing lawmakers to come up with a better cost-saving solution. President Obama famously said during a debate with Mitt Romney that they would “never happen.” But as the deadline drew near and it became clear that no deal was in the offing to head off the cuts, sober warnings emerged from the nation’s capitol. Some 800,000 Pentagon workers would be furloughed. Thousands of illegal aliens would have to be freed. Teachers and firefighters would be laid off.

"These cuts are wrong," President Obama said this week, calling sequester a "dumb way" to make cuts which amount to 2.4 percent or 1.3 percent of the $3.5 trillion federal budget, depending on which calculation is being used.

The sequester cuts, which hit defense hardest but also take a bite out of discretionary spending including foreign aid and the budget of most federal agencies, add up to $85 billion when pro-rated over a full year. But since the government operates on a fiscal year, actual spending will only fall by $44 billion this year, according to the Congressional Budget.

Financial expert and television personality Ben Stein said Washington’s dysfunction is best illustrated by the fact lawmakers had a year and a half to find a more gentle way to make the cuts, but couldn’t agree. Now the spending cuts are being imposed with a sledge hammer instead of a scalpel, he said.

“The problem is not the cuts, the problem is the meat-cleaver way it was done,” Stein told “We expect a LOT more care from our legislators and our president.”

Heritage Foundation President-elect Jim DeMint, the former South Carolina senator and fiscal hawk, wrote Friday that the White House is making it “seem like sequestration means the end of the world. “ But given that the federal budget nearly doubled to $3.5 trillion from $2 trillion between 2002 and 2012, and will swell to $6 trillion over the next decade, DeMint said the cuts don’t go nearly far enough.

“The sequester barely taps the brakes on this runaway spending,” DeMint wrote.

But the spending cuts Americans are facing at home are truly painful. The Commerce Department’s announcement on Friday verified what working Americans noticed in January, starting with the expiration of the payroll tax holiday, which equated to a 2.2 percent pay cut for most employees. A chronically struggling economy further eroded incomes even as heating bills, gas prices and food costs continued to rise. The falling income figures are expected to affect spending data through the first half of the year as households adjust to smaller paychecks.

Senate Minority Leader Mitch McConnell, R-Ky., said the federal government should follow the lead of Americans, who are taking thinner wallets in stride.

“It’ absurd to think that the government cannot get by with a little more than a 2 percent reduction in spending when every working American had to figure out how to make do with 2 percent less in their paychecks just last month," McConnell said.