Click amount to donate direct to CounterPunch
  • $25
  • $50
  • $100
  • $500
  • $other
  • use PayPal
Support Our Annual Fund Drive! We only shake you down once a year, but when we do we really mean it. It costs a lot to keep the site afloat, and our growing audience, well over TWO million unique viewers a month, eats up a lot of bandwidth — and bandwidth isn’t free. We aren’t supported by corporate donors, advertisers or big foundations. We survive solely on your support.
FacebookTwitterGoogle+RedditEmail

Obama’s Absurd Sequester Scheme

by DEAN BAKER

The big talk in Washington this month is the sequester cuts. These cuts are roughly 8 percent of most areas of discretionary spending, both military and domestic. While the cuts became effective at the start of March, many will first begin to pinch this month since government contracts generally require 30 day advance notice for leaves or furloughs. This means that cuts in areas such as airport security, food inspectors, and air traffic controllers 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. They do have a case. The cuts will whittle back spending in a wide variety of areas. Some of these, like the cuts to airport security and food inspections will have an immediate impact. We will see longer lines at airports and are more likely to find ourselves eating contaminated meat.

The impact of other cuts, like reductions in spending on infrastructure maintenance and medical research, will only be seen over the long-term. We will see a gradual worsening in the quality of the infrastructure and less medical progress.

In addition, the reduction in spending at a time when the economy is already weak will further slow growth and weaken job creation. The March jobs report helped to remind everyone of this problem. The economy created just 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 were making 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 percent annual rate in the second half of last year. The most recent data on new orders for equipment showed that investment was just even with its year ago pace. And the rate of job creation over the prior five months was actually down by an average of 40,000 from the same months a year earlier.

None of this looked like a story of accelerating growth. Thankfully the March jobs report helped bring the discussion of the economy back to reality. The experts again recognized that we have a problem of a seriously depressed economy that is at best just growing rapidly enough to keep pace with its underlying potential, meaning that it is 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 percentage points costing 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 about the sequester. The reason is that President Obama himself set a course for large cuts in discretionary spending. His budget for 2012, which was put out before the deal with the Republican Congress, called for discretionary spending to be 7 percent less in 2021 than it had been in 2010, in nominal dollars. This budget would have implied cuts in services of more than 40 percent since the economy was projected to be more than 60 percent larger in 2021 than in 2012. This means that most of the bad stories that we are hearing about from the sequester cuts likely would have been the result of the cuts that President Obama had laid out himself, 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?

And President Obama basically accepted the Republicans’ framing of the story of the downturn which turned reality on its head with the line about out of control budget deficits. Fans of arithmetic know that the large budget deficits are the result of the economic collapse. In fact budget deficits were modest prior to the downturn and were projected to remain small even if the Bush tax cuts were no allowed to expire at the end of 2010 as originally scheduled.

In this context, it is 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 the sequester. And yes, it will slow growth and increase unemployment, but we were already looking at a government that seemed content to allow the country to 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 the sequester should be recognized as the theater it is.

Even worse the idea pushed by President Obama, that we should be prepared to accept large cuts to Social Security and Medicare to get back to the slow motion sequester is almost too absurd for words. If he raised 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.

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of Plunder and Blunder: The Rise and Fall of the Bubble Economy and False Profits: Recoverying From the Bubble Economy.

This article originally appeared on The Guardian.

Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University.

More articles by:

2016 Fund Drive
Smart. Fierce. Uncompromised. Support CounterPunch Now!

  • cp-store
  • donate paypal

CounterPunch Magazine

minimag-edit

September 28, 2016
Eric Draitser
Stop Trump! Stop Clinton!! Stop the Madness (and Let Me Get Off)!
Ted Rall
The Thrilla at Hofstra: How Trump Won the Debate
Robert Fisk
Cliché and Banality at the Debates: Trump and Clinton on the Middle East
Patrick Cockburn
Cracks in the Kingdom: Saudi Arabia Rocked by Financial Strains
Lowell Flanders
Donald Trump, Islamophobia and Immigrants
Shane Burley
Defining the Alt Right and the New American Fascism
Jan Oberg
Ukraine as the Border of NATO Expansion
Ramzy Baroud
Ban Ki-Moon’s Legacy in Palestine: Failure in Words and Deeds
David Swanson
How We Could End the Permanent War State
Sam Husseini
Debate Night’s Biggest Lie Was Told by Lester Holt
Laura Carlsen
Ayotzinapa’s Message to the World: Organize!
Binoy Kampmark
The Triumph of Momentum: Re-Electing Jeremy Corbyn
David Macaray
When the Saints Go Marching In
Seth Oelbaum
All Black Lives Will Never Matter for Clinton and Trump
Adam Parsons
Standing in Solidarity for a Humanity Without Borders
Cesar Chelala
The Trump Bubble
September 27, 2016
Louisa Willcox
The Tribal Fight for Nature: From the Grizzly to the Black Snake of the Dakota Pipeline
Paul Street
The Roots are in the System: Charlotte and Beyond
Jeffrey St. Clair
Idiot Winds at Hofstra: Notes on the Not-So-Great Debate
Mark Harris
Clinton, Trump, and the Death of Idealism
Mike Whitney
Putin Ups the Ante: Ceasefire Sabotage Triggers Major Offensive in Aleppo
Anthony DiMaggio
The Debates as Democratic Façade: Voter “Rationality” in American Elections
Binoy Kampmark
Punishing the Punished: the Torments of Chelsea Manning
Paul Buhle
Why “Snowden” is Important (or How Kafka Foresaw the Juggernaut State)
Jack Rasmus
Hillary’s Ghosts
Brian Cloughley
Billions Down the Afghan Drain
Lawrence Davidson
True Believers and the U.S. Election
Matt Peppe
Taking a Knee: Resisting Enforced Patriotism
James McEnteer
Eugene, Oregon and the Rising Cost of Cool
Norman Pollack
The Great Debate: Proto-Fascism vs. the Real Thing
Michael Winship
The Tracks of John Boehner’s Tears
John Steppling
Fear Level Trump
Lawrence Wittner
Where Is That Wasteful Government Spending?
James Russell
Beyond Debate: Interview Styles of the Rich and Famous
September 26, 2016
Diana Johnstone
The Hillary Clinton Presidency has Already Begun as Lame Ducks Promote Her War
Gary Leupp
Hillary Clinton’s Campaign Against Russia
Dave Lindorff
Parking While Black: When Police Shoot as First Resort
Robert Crawford
The Political Rhetoric of Perpetual War
Howard Lisnoff
The Case of One Homeless Person
Michael Howard
The New York Times Endorses Hillary, Scorns the World
Russell Mokhiber
Wells Fargo and the Library of Congress’ National Book Festival
Chad Nelson
The Crime of Going Vegan: the Latest Attack on Angela Davis
Colin Todhunter
A System of Food Production for Human Need, Not Corporate Greed
Brian Cloughley
The United States Wants to Put Russia in a Corner
Guillermo R. Gil
The Clevenger Effect: Exposing Racism in Pro Sports
FacebookTwitterGoogle+RedditEmail