Monday, February 25, 2013

Who Do You Trust?

There are five days remaining before the controversial sequestration cuts take effect.  If you believe Democrats these cuts mark the beginning of a financial Armageddon.  If you believe Republicans these cuts are much ado about nothing.
Democrats say that the cuts will have a massive affect on our economy and our national security.  Secretary of Defense Leon Panetta says that 750,000 defense department employees have been notified that they will be furloughed.  Secretary of Education Arne Duncan says that tens of thousands of teachers have already been handed their pink slips.  Transportation Secretary Ray LaHood says that $1 billion in cuts his department in expected to implement will force the closing of 100 smaller air traffic control towers and layoffs of air traffic controllers.  Travelers can expect massive delays.  Secretary of Homeland Security Janet Napolitano said that her agency will be forced to furlough 50,000 security screeners, creating long lines at security checkpoints.   Teachers, firefighters, research, financial aid; the list goes on and on.  Democrats say that they will consider additional spending cuts but only if they are balanced with increased revenues by way of closing tax loopholes on the rich.
Republicans say that Democrats are just engaging in scare tactics.  They call it fear mongering at its best.  Republicans say that the cuts are insignificant, representing a measly 3 cents/$1.00 cut on a bloated federal government that has doubled in size over the past decade.  Senator Tom Coburn said: “The very idea that we can’t cut 3 cents/dollar out of a federal government that has doubled in size over the past decade is ridiculous.”Many Republicans say the $1.2 trillion in cuts aren’t big enough.  Senator Rand Paul believes that we need at least $4 trillion in spending cuts to avoid another downgrade in our credit rating.  Republicans say that any discussion of revenue increases is a non-starter.  They say the president got his revenue increase when congress agreed to allow the Bush tax cuts to expire for the richest Americans. 
So who do you believe?
Politicians and pundits in our local area are divided as to the effect that these cuts will have on our local economy.  But local economists and industry leaders have a pretty clear idea of the effect these cuts will have on our little tri-state area. 
-30,000 lost private sector jobs
-1000 lost teaching jobs including those who specialize in teaching children with disabilities.
-48,000 defense department employees furloughed
-4,600 students lose Head Start early education services
-$92.8 million in primary and secondary education funding
-$625,000 for vaccination leaving roughly 8,000 children without vaccines

Cutting three cents out of every federal dollar may not sound like much when you live in the Washington bubble.  But here in the real world those cuts can have a devastating effect.

The ridiculous part is that this meat axe approach to governing was suppose to be stop gap so horrific that it would force the two partisan sides to come together.  Now that the “sequester” appears to be a reality many in Washington see it as a great first step to shrinking the size of government.

There are better and more effective ways to do this.  There is a reasonable compromise that reduces long term debt while using short term investments to boost economic growth.  A compromise that avoids harsh layoffs emboldens consumer confidence and encourages economic growth.  But it is a compromise that requires strong leadership and a willingness to make the hard choices; neither of which exist in Washington.

Our guess is that the March 1st deadline will pass without a deal being reached.  Needless cuts will go into effect that will ruin lives.  The stock market will react negatively and retirement funds that are counted on for survival will take a beating.  Jobs will be lost and consumer confidence, already jittery at best, will erode.  A double dip recession will be a very real possibility.
But in Washington it will just be a measly 3 cents on the dollar.    


          
  

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