Washington, sometimes called, “Hollywood for ugly people,” is making a lame sequel following the drama at the end of 2012. Call it, Fiscal Cliff 2: Sequestration.
“Sequestration” is the fancy DC word for the $1.2 trillion of automatic, across-the-board spending cuts over 10 years that are set to go into effect March 1. Bloomberg’s Dominic Chu shows us why it would hurt the economy.
No one in Washington intended for these cuts to occur. It was an incentive for Congress to craft more sensible spending reforms. Unfortunately no deal was struck, and we’re now watching a sequel worse than Speed 2. Half the cuts will come from defense and half from other discretionary spending.
Sequestration would impair the national defense. The Wall Street Journal reports, “[T]he Pentagon, Wednesday, said it would delay sending the USS Harry S Truman, an aircraft carrier, to the Middle East because of the budget constraints. That would leave the U.S. with one carrier in the volatile region.” Also, defense contractors that build and maintain America’s military will have to layoff workers if DoD has to suddenly cut funding.
The White House and Congressional Democrats are behind the bad idea of delaying the cuts by substituting them with a smaller package of spending cuts and tax increases. Remember, however, that taxes went up by billions of dollars at the beginning of this year but not a dollar of spending was cut. Less than two months later, the administration and Congressional Democrats are going for another round of tax increases that won’t have a material impact on the deficit, won’t help grow the economy (GDP decreased last quarter), and won’t put Americans back to work (unemployment rose last month).
U.S. Chamber Executive Vice President for Government Affairs Bruce Josten rejected calls for higher taxes and urged Washington to address the main drivers of the debt and deficit, entitlement programs:
The Chamber has long stated that the sequester should be replaced with prioritized spending cuts. The latest proposals are simply gimmicks that fail to address our country’s spending and deficit problems. Imposing punitive and targeted tax hikes on the energy sector, as well as successful small businesses, is not the answer. Instead of punishing America’s job creators, the president and Congress should focus on comprehensive tax and entitlement reform to get this country back on track.
Instead of an unthinking, meat ax approach to spending cuts, Congress and the White House need to act like any other American with money problems–like a producer dealing with a movie that’s gone over budget–by setting priorities.
I’m giving this flick a thumbs down.