Why You Don’t Need to Care About the Sequestration

It seems as if nearly every news source, politician and policy organization has something to say on the upcoming sequestration, a series of automatic federal spending cuts scheduled to go into effect March 1st. The hysteria has left many concerned and an equally as large number confused. One Huffington Post article by Jason Linkins asserts that, “everyone agrees that these cuts would be terrible”, and President Obama has urged Congress to accept his budget proposal, which includes ‘modest’ cuts and a series of tax increases. So what is the sequester exactly?

Essentially, if Congress does not come up with a spending reduction plan totaling $1.2 trillion by the end of the month, then over the next decade, spending will only increase by $2.4 trillion as the $1.2 reduction will occur automatically and be distributed arbitrarily, with an allegedly disproportionate portion falling on defense spending. What is being referred to as a ‘cut’ is actually just a slowed rate of growth in spending. The Congressional Budget Office released data outlining the placement of the ‘cuts’ over the next ten years, and in a recent article the Cato Institute featured a graph analyzing the same data. The ‘cuts’ seem, as Daniel Mitchell puts it, ‘anti-climactic.’ What then is all the fuss about?

In the aforementioned Huffington Post article, Linkin suggests that perhaps the “dyed-in-the-wool deficit crack pots” are finally, “acknowledging the laws of Keynesian gravity”, by which I assume he means that Keynes would warn against tax hikes and spending cuts during hard economic times as they will have a short term contracting effect. However, either through the sequester’s arbitrary cuts or a consensus on a spending plan, cuts must equal $1.2 trillion by the end of the month. Through either automatic spending reductions or Mr. Obama’s tax increases, the $1.2 trillion requirement must be met. In other words, it would seem as if, sequester or no sequester, the ‘laws of Keynesian gravity’ would be disregarded either way. So why are politicians and interest groups really upset about the sequester?

The answer is that tax hikes and spending cuts are unpopular. Our leaders know that if the public views them as responsible for cuts, hikes or any of the resulting economic consequences, they will lose the confidence of their constituents, while our interest groups know, that if cuts are ‘arbitrary’ instead of ‘targeted’, they’ll lose their ability to lobby for special treatment. So what will I be doing on March 1st? Studying for my economic midterm, going out for dinner and leaving the Sequester panic to Washington.