Photo: Wikimedia Commons
We’re just a few days away from the dreaded “sequester”, a series of automatic spending cuts that will result in $85 billion in spending cuts across every part of the US government, with defence getting particularly hard hit.The conventional wisdom is that it’s probably going to happen, and so now both sides are just jockeying to blame the other side.
Republicans say that the sequester was Obama’s idea. Obama is saying that the Republicans won’t agree to a compromise to avert it.
But while everyone is talking about how horrible it will be, let’s remember that the sequester was a great idea.
Remember, the sequester was agreed to as part of the 2011 debt ceiling negotiations. The GOP was threatening to cause a disastrous debt ceiling breach, and the only way to get enough votes in The House to raise the debt ceiling was to promise future cuts that were equal in dollar value to the amount that the debt ceiling was being raised.
But the economy was much weaker in 2011, and instant cuts would very likely have put the US right back into a UK-style, austerity-induced recession.
It’s this forced recession that the sequester averted. The sequester already did its job. We didn’t get a debt ceiling crisis or a recession in 2011, thanks to the future promise of spending cuts starting in 2013.
Now of course, there’s another choice. Do we do the sequester, or do we cancel it, and let current discretionary spending trajectories continue. Most economists (and the military) agree that the sequester is a bad piece of legislation. Even those in favour of cuts don’t like the across-the-board way that spending is cut this way.
The bottom line is this: Compared to a debt ceiling crisis or an austerity-induced recession in 2011, the sequester was and still is a brilliant play. But compared to current options, keeping it as is is not the best move.
Here’s how much the sequester cuts would actually cost…
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