Sequester of Fools

http://www.nytimes.com/2013/02/22/opinion/krugman-sequester-of-fools.html?emc=eta1

http://www.nytimes.com/2013/02/21/business/budget-cuts-may-stall-economic-growth.html?emc=eta1

***************

"One good thought does not make a life. Success comes to those who have an entire mountain of gold that they continuously mine." (John C. Maxwell)

***************

The title of today's "Krugman" was just so good that I had to use it! I'm thinking that Krugman feels anything good that Congress does is by accident. Given the track record, it's hard to argue.

I didn't realize that it was just two years ago that Erskine Bowles and Alan Simpson (as co-chairmen of the debt commission) came up with a plan to deal with U.S. debt. Nobody paid attention.

So, the "sequester" was created as a threat down the road of major financial cuts (what Krugman calls a  "...fiscal doomsday machine that would inflict gratuitous damage...") which would incentivize both sides to do something "reasonable" before it could happen. Except, nobody has. What a shock!

From Krugman: "Janet Yellen (vice chairwoman of the Federal Reserve) recently emphasized (that) one main reason for the sluggish recovery is that government spending has been far weaker in this business cycle than in the past. We should be spending more, not less, until we're close to full employment; the sequester is exactly what the doctor didn't order."

There would appear to be no agreement between Republicans and Democrats on this issue so, right now, the cuts will cost 700,000 jobs. It's too bad we couldn't elect people whose priority it was to save those jobs.

However; in the bad news, there is good news: according to a range of government and private forecasters, "sequestration" will reduce economic growth by one-half of a percentage point in 2013. Instead of another recession, it will just be another year of sluggish economic growth.

Quoting from Annie Lowrey's article (with Binyamin Appelbaum) which I have also attached, "Whether the government's repeated flirtation with fiscal turmoil is causing businesses to postpone or reduce planned investment is also unclear." Whether or not it's "unclear," it's happening. For those who track stalled capital investment, cash on hand at S&P 500 or Top 500 companies is at an all time high somewhere between $1.7 & $2.2 trillion. With every passing month, those numbers go higher.

Mark Zandi, chief economist for Moody's Analytics, and one of the most informed and "listened to" economists during and after the worldwide financial crisis, says that it's the nature of the sequestration cuts that is the most pernicious: "It's impossible to calculate in terms of dollars and cents what you're doing when you have mindless cuts." It's more than the money involved.

So, we're going to furlough air traffic controllers - we don't have enough of them and their entire system needs a technology update, but we're going to "furlough" some of them. That way, the ones who are left can be even more overworked! Oh, and we're going to "shrink" early childhood programs.

I have an idea: why don't we get rid of the people who decided that these were the programs that would be reduced?