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The Sequester: Its Impact and Proposals for Resolving the Congressional Impasse

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The sequester took effect this week, with President Obama acknowledging that the event would go forward. As planned, the cuts will impact federal programs in many areas, including the Transportation Security Administration, the Department of Education, Border Control and civilian furloughs at the Department of Defense, to mention just a few.

Practically speaking, military training will be cut. There are added cost savings: the Iraq War is ended and the Afghanistan  engagement is concluding next year.  There will be fewer education grants, and programs like Headstart will be trimmed. There may be fewer teachers hired and larger class sizes, all at a time when the population is growing by over a million people a year.

Essentially, the Democrats are looking for a combination of spending cuts and tax increases, while Republicans want just cost cutting; a meeting of the minds is necessary to provide better predictability in government spending over time.

The Democrats are amenable to cutting spending up to $110 billion, and during the campaign, former Governor Mitt Romney supported the idea of fine tuning the deductions for higher income taxpayers in addition to looking at closure of some corporate tax loopholes. Herein lies a potential resolution of the current stalemate. Such a compromise solution could include not only the Democratic proposal to go forward with cuts of $110 billion by reducing agricultural subsidies and defense (although, as explained above, the sequester itself will result in some defense cuts), but also a modification of this proposal could be combined with former Governor Romney’s campaign suggestion to fine tune deductions for higher income taxpayers while closing some corporate tax loopholes.

There are other options down the road, including phasing in the Clinton administration’s tax rates or migrating Medicaid to the states over time. The Clinton era tax rates helped to balance the federal budget, so a return to these rates could be phased in. In addition, Congress could consider the Forbes flat tax proposal offered previously.

If the economy continues to grow and spending can be held to the current levels, the budget can be balanced. This result could happen as a byproduct of the government receiving greater tax revenues from increased business activities coupled with holding spending to the current levels.

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About Dr Joseph S Maresca

I've taught approx. 34 sections of collegiate courses including computer applications, college algebra, collegiate statistics, law, accounting, finance and economics. The experience includes service as a Board Director on the CPA Journal and Editor of the CPA Candidates Inc. Newsletter. In college, I worked as a statistics lab assistant. Manhattan College awarded a BS in an allied area of operations research. The program included courses in calculus, ordinary differential equations, probability, statistical inference, linear algebra , the more advanced operations research, price analysis and econometrics. Membership in the Delta Mu Delta National Honor Society was granted together with the degree. My experience includes both private account and industry. In addition, I've worked extensively in the Examinations Division of the AICPA from time to time. Recently, I passed the Engineering in Training Exam which consisted of 9 hours of examination in chemistry, physics, calculus, differential equations, linear algebra, probability/ statistics, fluids, electronics, materials science/structure of matter, mechanics, statics, thermodynamics, computer science, dynamics and a host of minor subject areas like engineering economics. A very small percentage of engineers actually take and pass the EIT exam. The number has hovered at circa 5%. Several decades ago, I passed the CPA examination and obtained another license in Computer Information Systems Auditing. A CISA must have knowledge in the areas of data center review, systems applications, the operating system of the computer, disaster recovery, contingency planning, developmental systems, the standards which govern facility reviews and a host of other areas. An MBA in Accounting with an Advanced Professional Certificate in Computer Applications/ Information Systems , an Advanced Professional Certificate in Finance and an Advanced Professional Certificate in Organizational Design were earned at New York University-Graduate School of Business (Stern ). In December of 2005, an earned PhD in Accounting was granted by the Ross College. The program entrance requires a previous Masters Degree for admittance together with a host of other criteria. The REGISTRAR of Ross College contact is: Tel . US 202-318-4454 FAX [records for Dr. Joseph S. Maresca Box 646 Bronxville NY 10708-3602] The clinical experience included the teaching of approximately 34 sections of college accounting, economics, statistics, college algebra, law, thesis project coursework and the professional grading of approx. 50,000 CPA examination essays with the American Institute of Certified Public Accountants. Additionally, membership is held in the Sigma Beta Delta International Honor Society chartered in 1994. Significant writings include over 10 copyrights in the name of the author (Joseph S. Maresca) and a patent in the earthquake sciences.