KingMidget's Ramblings

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What’s Wrong With The Sequester?

Over the past few months, I’ve done just about everything I could to avoid the stories about the dreaded sequester.  Here’s what dribbled through.  From Democrats and the President, the sequester is a catastrophe of epic proportions and if the Republicans don’t agree to an alternative that includes more tax revenue, we’ll never recover from this horrible, I mean HORRIBLE, thing.  From Republicans, it seems like their response has been nothing more than a shrug.  No more new taxes.  Sequester away.  Yeah, they don’t want any defense cuts, but I get the sense they’d give up on that.

The one other thing was about how the sequester required $85 billion in across-the-board cuts in 2013.  This number goes up to $109 billion in the years following.  Half of all cuts must come from defense.  And, I kept waiting for the other shoe to fall.  The big … BIG … number that reflected the massive cuts that would result from the sequester.

Turns out the big number is $85 billion, growing to $109 billion.  Which represents slightly more than 2% of the federal budget and something less than .4% of the entire U.S. economy.  The sequester, if not modified, will result in savings over the next decade in  of $1.2 trillion, with a couple hundred billion of that being interest saved because less money will need to be borrowed.

Look at it another way.  Even if the economy doesn’t grow over the next ten years, the economy will still produce somewhere in the neighborhood of $140-150 trillion in economic activity.  And the sequester requires actual government program spending to be reduced by a little less than $1 trillion, or about .7% of the entire economy, assuming the economy didn’t grow during that time.  But, since we’re a capitalist country and growth is good, you can probably expect the economy to grow significantly in the next decade, dropping that .7% to a microscopic number.

And this is bad.  This is the catastrophe.  I say bring it on.

Yes.  Some people will lose their jobs.  Some programs will be cut, but when dealing with a deficit of epic proportions there are people who will suffer as a result.  And, yes, I’d like to see more revenue to contribute to fixing the problem, but even with the sequester and recent tax increases in place, we’re still looking at an annual deficit in excess of $400 billion in Obama’s final year.  So, look for new revenues to plug that last hole.

Most Americans are still paying federal tax rates at the lowest levels in decades.  There’s some cushion there that could be absorbed through slightly higher rates.  It wouldn’t kill the economy.  It might actually help, when all that money invested in government debt is freed up to invest in other things.

The sequester and how the Democrats are handling it are one of those moments when I’m embarrassed by my party and the people I generally support.  You’re crying wolf.  I’m not sure it’s going to work this time.


2 responses to “What’s Wrong With The Sequester?

  1. butimbeautiful March 5, 2013 at 11:21 pm

    At the risk of sounding like a dumb brunette, I don’t really understand the sequester and all that kind of thing. BUT (and this is the place where people like me say idiotic things regardless) I think I agree with you, basically. It seems to me a government has got to live within its income at some point. To do that, you’ve got to decide what you can’t afford. Cuts are inevitable with a deficit like that of the USA. I don’t know what you should cut though. With China rising, it’s perhaps risky to cut defence too much (although the US could get out of the Middle East to good effect).

    • kingmidget March 6, 2013 at 6:48 am

      All of your points are valid. This has been my point all along … with a deficit the size of ours, we need both revenues and cuts. The sequester — which is basically automatic, across-the-board cuts — provides a relatively small level of cuts. I think what bothers most people is that they are automatic and across-the-board, so there’s no judgment being made about what should and what should not be cut. But, maybe that’s the only way we get to real cuts. The other problem is that it does nothing about some of the fundamental issues … like “fixing” Social Security and Medicaid.

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