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If You Think the Sequester Cuts Will Tank the Economy, I’ve Got a Bridge In Brooklyn You Might Want to Buy
February 25, 2013, 11:01 am
Filed under: Uncategorized

If You Think the Sequester Cuts Will Tank the Economy, I’ve Got a Bridge In Brooklyn You Might Want to Buy:

Or some prime real estate in Florida. Really,
it’s not swamp land at all. And those aren’t alligators, they’re
dogs.
Our story thus far: Back in August 2011, as a condition of
raising the debt limit by as much as $2 trillion, Congress and the
president agreed to cut about $900 billion in anticipated spending.
They also created a committee that was charged with coming up with
an additional $1.2 trillion in cuts over the next decade to
expected spending by the end of 2011. If Congress didn’t pass those
cuts, then come January 1, 2013, automatic cuts – a sequester –
would kick in, split between defense spending and non-defense
discretionary (with a light sprinkling of some even smaller cuts to
entitlements). Congress failed to pass anything and then, when the
2013 deadline arrived, it pushed the deadline for the cuts to start
to March 1.
Widely quoted as $85 billion for spending in fiscal year 2013
(which ends on September 30), the Congressional Budget Office (CBO)
underscores that just
$44 billion of spending reduction
 are slated for 2013,
with the rest coming in later years. So what we’re talking about is
trimming $44 billion from total federal spending expected to be
$3.6 trillion this year. If you use the $85 billion number, that’s
about 2.4 percent of the budget. If you use the $44 billion, you’re
looking at 1.2 percent.
For The New York Times, the sequester signals “an era of
government austerity.” For the White House, it’s the end of the
world.
As USA Today reports
, President Barack Obama has made it clear
that everything from unemployment insurance to school lunch
programs to cops on the beat will be scaled back.

In his weekly Saturday radio address, Obama said the cuts will
slow the economy, eliminate jobs and “leave many families who are
already stretched to the limit scrambling to figure out what to
do.”

The unkindest cut? Energy
Secretary Steven Chu has revealed that sequestration would result
in the number of houses being “weatherized” by the feds by “more
than a thousand.”
We should try to define austerity. In its latest budget
document, the CBO notes in
table 1-1
(look at outlays) that, assuming sequestration
happens, there will be a slight dip from 2012 to 2013 in
discretionary spending levels. Then discretionary spending rises
every year through 2023. Total federal spending is projected to
rise from $3.5 trillion in 2012 to $5.9 trillion in 2023. Good luck
matching that sort of austerity in your salary gains over the next
decade.
Here are three questions for folks wetting their pants
about the sequester:
1. Under what sort of math do you figure that cutting $44
billion or $85 billion from a total tab of $3.6 trillion is
anything more than a rounding error? Half of the cuts are slated
for defense spending, which has grown massively over the past
decade-plus. Do you really think that the military can’t
cope?
2. Do you really believe that the sequester
cuts will tank a $16 trillion economy? And if so, what’s the
multiplier on that? GDP is counted in such a way that most
government spending automatically gets counted as increasing the
amount of economic activity (the same doesn’t hold for private
spending, where different conditions hold). Do you at least agree
in theory that
government spending has been cut
in the past without ruining
the economy (and if you don’t, why not)?
3. When will conditions be right to actually cut spending?
There’s a raft of anti-sequester people – such as Barack Obama –
who pay lip service to the idea that government spending
(especially government deficit spending) needs to stop or be
reduced at some point in the future. But like St. Augustine in his
partying period, they don’t want to get straight just yet. So when
might that be? If we can’t afford to cut a tiny fraction of current
spending now – after a year-plus of knowing this was coming and a
major punting on the original deadline – when might we?


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