Sequester Day!

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The U.S. sequester begins today! For those who do not know, the sequester is an $85 billion federal budget cut over the next year, almost exclusively in discretionary spending. I am hearing sensationalized horror stories about longer lines at airport security and at borders, slower food inspections, increased readiness, etc. I was just wondering a.) your thoughts on it, and b.) if you expect the sequester to reverse at some point.

I am ambivalent about it, frankly. While I can definitely see the macroeconomic argument for government spending, the cuts are not bad relative to what other organizations have been through. In fact, given the small portion of the overall federal budget this represents, the government should absorb it easily.

I heard this on the Dutch news, but the news item didn't explain very much. If they cut spending by letting people go, what happens to these people? If they just lose their jobs they will get unemployment benefits right? If that is the case, then it doesn't save a lot of money if you still have to pay these people.

They probably just shut down certain things a few days here and there. Things like airport security and nuclear missile silos are probably not gonna be abandoned (i hope).

What is an 85 billion dollar cut in the face of a 16 -trillion dollar- national debt?

This is all bullsh*t!

ruveyn

My understanding is that the U.S. federal government is not letting many people go, if at all. Rather, much of the workforce will be furloughed for one day a week or a month, depending on the agency. They have had a hiring freeze for years because they determined that was the best way to retain existing employees. Even with furloughs, many of these employees will have it easier than in the private sector.

I expect the pain to be felt most by contractors, especially defense contractors. They are facing steeper cuts than other contractors, and given their high fixed investments, have less ability to absorb them.

I agree with you, but on different grounds. I do not really think cutting discretionary spending helps the U.S. fiscal situation, even if the cuts were 100 percent. The only way to get the government on a track to long term fiscal sustainability is entitlement reforms. There are some tax changes I am willing to support, but unless entitlement reform comes, the government is on the road to destitution.

I am not optimistic about entitlement reform, though. Seniors are the most powerful lobby, and changing entitlements has proven very hard in the past.

Since money to the States will be reduced and policy in the states is more sensitive to the first and second time derivatives of revenue than to the revenue level itself, you will see cops, teachers and fireman put out on the streets. After which you will see crime increase houses burning down and and growing stupidity and ignorance in the young.

ruveyn

What are first/second derivatives of revenue?

I think it would be better to do nothing for a while. The US pays low interest rates on the debt, and could probably wait for the economy to turn around, and then either raise taxes or cut spending (since both will impact purchasing power in some way). The austerity in the EU could also wait a while in my opinion. Consumer confidence in the Netherlands is at its lowest since forever.

Sooner or later the United States need to come to terms with the fact that expenditure cannot exceed income in the long run.

People with no formal education running a household usually arrive at this realisation quite early in life.

Governments, however, somehow systematically fail at this simple exercise...

Increases/decreases and rate of increases/decreases. Calculus 101.

ruveyn

I don't even bother following this political theater anymore. It's all just a game and the results are predetermined like professional wrestling. Sequestation cuts or whatever are just a drop in the bucket when it comes to our national debt. They're creating fake crises in order to justify to making cuts(just enough for payment to our lending GODS but not enough to make a dent in our debt so we stay in debt slavery forever) and to raise taxes. I believe I heard Maxine Waters say we'd lose a 170 million jobs if we allowed sequestation to happen, only about a 140 million people are working in America and there are people that actually buy into this crap.

It's not that our governments don't understand the most basic concept of not spending more than you take in, it's a rigged game. Our governments are already bought and paid for by these lenders, we're being sold into slavery and you don't even know it. There probably won't be a sudden collapse, just a long steady decline in our standards of living while these criminals make out like bandits. In the end, we'll be completely dependent on whatever crumbs these leaches throw our way and we'll be powerless to stop it. This is fascism.

Oh, I thought you meant the financial products.
Here they don't want to raise taxes anymore because they are afraid it will affect spending, so they cut the money going to provinces and municipalities... I predict they are going to raise local taxes, and the effect will be the same.

Our government needs to quit spending more than they are taking in. It's just as simple as that! Our government is being bought for and lobbied so they can continue their corrupt ways. I wish the American people would wake up and force some changes in the ballot box. But I am afraid we a lot of uninformed people who watches cable news to form their opinions.

It's not really that hard to understand - the people in our government who control what money gets spent and where have no incentive to be frugal. The money isn't theirs, and there's no P&L sheet to account to - as the Government as a whole is a non-profit, but the individual agencies and pieces of the government essentially operate at a loss.

No one in the Government actually cares how much money they're spending, because they don't have to.

A Dutch reporter in Washington suggested that a major reason why negotiations for budget cuts failed was the strong two party system in the USA. I wonder what Americans think of that? Do you think that a multi party system, which invariably leads to coalition governments, and coalition oppositions, could be a solution?

Ask Greece or Italy.

Multiparty systems are interesting since allow for representation of different viewpoints(which can be good or bad) but I don't see how that would improve governability since you'd have to negotiate with more people all of which with their own agendas.