This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.guardian.co.uk/commentisfree/2013/apr/29/sequester-hysterics-obama-budget-plan

The article has changed 2 times. There is an RSS feed of changes available.

Version 0 Version 1
Sequester hysterics obscure the reality of Obama's budget plan Sequester hysterics obscure the reality of Obama's budget plan
(5 months later)
The big talk in Washington, DC this month is the sequester. These cuts account for roughly 8% of most discretionary spending, both military and domestic. While the cuts became effective at the start of March, many will first begin to feel the pinch this month, since government contracts generally require 30 days' notice for leaves or furloughs. This means that cuts in areas like airport security, food quality and air traffic control are just now taking effect.The big talk in Washington, DC this month is the sequester. These cuts account for roughly 8% of most discretionary spending, both military and domestic. While the cuts became effective at the start of March, many will first begin to feel the pinch this month, since government contracts generally require 30 days' notice for leaves or furloughs. This means that cuts in areas like airport security, food quality and air traffic control are just now taking effect.
The Democrats have been yelling loudly about the damage that these cuts will inflict on specific programs and the economy as a whole – and they do have a case. The cuts will whittle spending in a wide variety of areas, and some, like those to airport security and food inspections, will have an immediate impact. Until Congress passed a hurried law enabling the FAA to shuffle its budget to avoid furloughs, we were seeing longer lines at airports. And we may still be more likely to find ourselves eating contaminated meat.The Democrats have been yelling loudly about the damage that these cuts will inflict on specific programs and the economy as a whole – and they do have a case. The cuts will whittle spending in a wide variety of areas, and some, like those to airport security and food inspections, will have an immediate impact. Until Congress passed a hurried law enabling the FAA to shuffle its budget to avoid furloughs, we were seeing longer lines at airports. And we may still be more likely to find ourselves eating contaminated meat.
Other cuts, such as reductions in spending on infrastructure maintenance and medical research, will only be felt over the long term, as the quality of roads, rails and medical programs gradually worsens.Other cuts, such as reductions in spending on infrastructure maintenance and medical research, will only be felt over the long term, as the quality of roads, rails and medical programs gradually worsens.
In addition, the reduction in spending at a time when the economy is already weak will further slow down growth and weaken job creation. The March jobs report reminded everyone of this problem (April's is due later this week): the economy created only 88,000 jobs in March, less the number needed just to keep pace with the growth of the labor force.In addition, the reduction in spending at a time when the economy is already weak will further slow down growth and weaken job creation. The March jobs report reminded everyone of this problem (April's is due later this week): the economy created only 88,000 jobs in March, less the number needed just to keep pace with the growth of the labor force.
For some bizarre reason, prior to the release of the report, many economists made bold claims about how the economy had turned the corner and the recovery was picking up steam. It's not clear what these folks had been smoking.For some bizarre reason, prior to the release of the report, many economists made bold claims about how the economy had turned the corner and the recovery was picking up steam. It's not clear what these folks had been smoking.
The economy was growing at just a 1.7% annual rate in the second half of last year. The most recent data on new orders for equipment show that investment was just even with its pace last year. The rate of job creation over the prior five months was actually down from this time last year, by an average of 40,000 jobs.The economy was growing at just a 1.7% annual rate in the second half of last year. The most recent data on new orders for equipment show that investment was just even with its pace last year. The rate of job creation over the prior five months was actually down from this time last year, by an average of 40,000 jobs.
None of this looks like a story of accelerating growth. Thankfully, the March jobs report helped bring discussion on the economy back to reality: the experts again recognize that we have a problem of a seriously depressed economy, which, at best, is growing just rapidly enough to keep pace with its underlying potential – and thus making up none of the lost ground from the downturn.None of this looks like a story of accelerating growth. Thankfully, the March jobs report helped bring discussion on the economy back to reality: the experts again recognize that we have a problem of a seriously depressed economy, which, at best, is growing just rapidly enough to keep pace with its underlying potential – and thus making up none of the lost ground from the downturn.
In this context, the hit from the sequester is clearly bad news. The Congressional Budget Office projects that it will reduce growth in 2013 by 0.5%, which will cost as many as 700,000 jobs. With the sequester in place, there is a high probability that the unemployment rate will be higher at the end of the year than it was at the beginning.In this context, the hit from the sequester is clearly bad news. The Congressional Budget Office projects that it will reduce growth in 2013 by 0.5%, which will cost as many as 700,000 jobs. With the sequester in place, there is a high probability that the unemployment rate will be higher at the end of the year than it was at the beginning.
But there is a limit to how much President Obama and the Democrats can really complain. The reason is that President Obama himself set a course for large cuts in discretionary spending. His budget for 2012 called for discretionary spending to be 7% less in 2021 than it had been in 2010, in nominal dollars. This budget would have implied cuts in services of more than 40%, since the economy was projected to be more than 60% larger in 2021 than in 2012. This means that most of the bad stories we're hearing about the sequester cuts likely would have been the result of the cuts that the president himself planned for, even if they would have been phased in more slowly.But there is a limit to how much President Obama and the Democrats can really complain. The reason is that President Obama himself set a course for large cuts in discretionary spending. His budget for 2012 called for discretionary spending to be 7% less in 2021 than it had been in 2010, in nominal dollars. This budget would have implied cuts in services of more than 40%, since the economy was projected to be more than 60% larger in 2021 than in 2012. This means that most of the bad stories we're hearing about the sequester cuts likely would have been the result of the cuts that the president himself planned for, even if they would have been phased in more slowly.
The furloughs and layoffs of public sector workers also have their roots with President Obama. After all, it was his idea to freeze the pay of federal employees back in 2011, implying that we have a problem with overpaid government workers. Is it a surprise that the Republicans want to push the attack one step further?The furloughs and layoffs of public sector workers also have their roots with President Obama. After all, it was his idea to freeze the pay of federal employees back in 2011, implying that we have a problem with overpaid government workers. Is it a surprise that the Republicans want to push the attack one step further?
And the president has basically accepted how Republicans have framed the story of the downturn, which turned reality on its head with the line about budget deficits being out of control. Fans of arithmetic know that large budget deficits are the result of an economic collapse, not the cause. In fact, budget deficits were modest prior to the downturn and were projected to remain small, even if the Bush tax cuts were not allowed to expire at the end of 2010 as originally scheduled.And the president has basically accepted how Republicans have framed the story of the downturn, which turned reality on its head with the line about budget deficits being out of control. Fans of arithmetic know that large budget deficits are the result of an economic collapse, not the cause. In fact, budget deficits were modest prior to the downturn and were projected to remain small, even if the Bush tax cuts were not allowed to expire at the end of 2010 as originally scheduled.
In this context, it's a bit hard to get too excited about the sequester. Yes, it is very bad news, but we were looking at the prospect of large cuts to the budget even before Congress failed to make a deal. And yes, it will slow growth and increase unemployment, but the government was apparently long content to let the country needlessly lumber through a prolonged period of high unemployment.In this context, it's a bit hard to get too excited about the sequester. Yes, it is very bad news, but we were looking at the prospect of large cuts to the budget even before Congress failed to make a deal. And yes, it will slow growth and increase unemployment, but the government was apparently long content to let the country needlessly lumber through a prolonged period of high unemployment.
The sequester makes a terrible situation somewhat worse, but the idea that everything would be just fine if we just stopped the sequester is nuts. We should be talking about reversing the austerity agenda more generally; the Democrats' hysterics about sequester cuts should be recognized as the theater it is.The sequester makes a terrible situation somewhat worse, but the idea that everything would be just fine if we just stopped the sequester is nuts. We should be talking about reversing the austerity agenda more generally; the Democrats' hysterics about sequester cuts should be recognized as the theater it is.
Even worse than their dramatics, though, is an idea pushed by President Obama: that we should be ready for large cuts to social security and Medicare, just to get back to his slowmotion sequester plan. It's almost too absurd for words. If he suggested this plan anywhere other than Washington, he would have been laughed out of town.Even worse than their dramatics, though, is an idea pushed by President Obama: that we should be ready for large cuts to social security and Medicare, just to get back to his slowmotion sequester plan. It's almost too absurd for words. If he suggested this plan anywhere other than Washington, he would have been laughed out of town.
Certainly, those of us who do not work for hacks and hedge funds should treat this scheme with the derision it deserves.Certainly, those of us who do not work for hacks and hedge funds should treat this scheme with the derision it deserves.
Our editors' picks for the day's top news and commentary delivered to your inbox each morning.