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WP: Sequester Will Sock A Vulnerable Economy

From the Washington Post:

Sequester will sock a vulnerable economy

By Jim Tankersley | February 26, 2013

The U.S. economy won’t collapse when the automatic spending cuts start hitting after Friday’s deadline. A few economists even say the sequester and its indiscriminate whack at the budget could eventually help the economy grow faster than it would have otherwise.

But somehow the headline doesn’t reflect that. And the Washington Post is counting on the fact that most people will only read the headline.

And, in fact, the article never mentions this aspect again, until its final paragraphs. Where it is immediately shot down. (See below.)

That’s the silver lining. Here are the clouds: The sequester is coming at a particularly inopportune time in the still-fragile U.S. recovery, it promises to bite consumers and business activity quickly, and the Washington area will feel its pain acutely.

Women, minorities and government bureaucrats are always hurt the most.

While the cuts represent a relatively small slice of federal spending — about $44 billion this year in actual dollars — most forecasters say they are large enough to reduce economic growth by at least half a percentage point for the year. They will kill public- and private-sector jobs and drain precious buying power out of the economy.

Cutting government spending by 1% (or rather, reducing its increase) will drain the buying power out of the economy? Then what did Obama’s payroll tax and tax hike on the so-called rich do?

Oh, wait, the Post does actually mention that in passing — for once:

Forecasters also expect the economy to lose a full point of growth this year from the payroll and income tax increases that lawmakers agreed to in the “fiscal cliff” deal at the end of 2012…

You see? It was lawmakers who increased taxes. Not Obama. He had nothing to do with that.

In other words, the sequester would hit exactly when you wouldn’t want it to, just as the slowly strengthening economy is struggling to shake off other drags on growth.

If we wait for the economy to stop "struggling" under Obama, we are in for a long wait. The recession has been over for three and a half years.

Federal Reserve Chairman Ben S. Bernanke told a Senate committee Tuesday that the sequester and tax increases “could create a significant head wind” for the economy. Given how slowly the economy is growing as is, he added, “this additional near-term burden on the recovery is significant.” …

Again, with the ‘headwinds.’

In other words, the Obama administration is setting up the House Republicans and ‘their sequester’ to replace ‘Bush’s fault’ for their explanation of their endless failures.

But the Washington Post has to do its part to continue to fan the flames of hysteria.

Where economists see silver linings from the sequester… they stem from the hope that the sequester will reduce future budget deficits — and with them the odds of federal borrowing costs increasing several years from now…

[But] in his testimony Tuesday, Bernanke warned that the opposite could be true, that the sequester, by reducing growth, could “lead to less actual deficit reduction in the short run.”

So don’t even think that reducing federal spending could help the economy. That is a pipe dream.

Even though it has worked every time it has been tried.

This article was posted by Steve Gilbert on Wednesday, February 27th, 2013. Comments are currently closed.

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