Wednesday, February 27, 2013

When Is a Cut Not a Cut? When It Is a U. S. Government Sequester

As Paul Roderick Gregory points out on Forbes.com, according to the Congressional Budget Office's baseline budget projections, the supposedly horrific $995 billion sequester cut will actually be a $110 billion increase in spending. Such smoke and mirrors have been used inside the Beltway for a long time. You know the entire financial industry and economy is on shaky ground when people like Ben Bernanke are concerned that what amounts to a $110 billion increase over ten years will drag the economy down due to a supposed decrease in aggregate demand.

As Gregory notes, however,

Sequester alarmists will respond that it is impossible to run the federal government without annual inflation adjustments and without exempting certain government spending. We American voters might respond that most of us do not receive automatic inflation adjustments to our earnings and we are expected to tighten our belts when times are tough and our personal debt has gotten out of control.

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