Effect of sequester on 2014 growth & employment

[oldfart]

On September 26, the head of the Congressional Budget Office sent a letter to Congress correcting and spelling out the CBOs estimates of the economic effects of eliminating the caps of the Budget Control Act (sequestration). Here is what he said:

This letter responds more fully to the question you posed at today’s hearing about the economic effects of eliminating the automatic spending reductions specified in the Budget Control Act. In particular, I would like to correct and clarify the answer I provided this morning.

I stated at the hearing that eliminating the automatic spending reductions specified
in the Budget Control Act beginning in fiscal year 2014 would increase real gross
domestic product (or GDP adjusted for inflation) by 0.5 percent and increase fulltime-equivalent employment by 600,000 relative to the amounts under current law. Those figures refer to the averages during calendar year 2014—not to the effects by the end of 2014, as I incorrectly stated.

Those figures represent CBO’s central estimates, which correspond to the assumption that key parameters of economic behavior (in particular the extent to which lower federal taxes and higher federal spending boost aggregate demand in the short term) equal the midpoints of ranges used by CBO. According to the full ranges for those parameters, in calendar year 2014, real GDP would be between 0.2 percent and 0.8 percent higher, and full-time-equivalent employment would be between 200,000 and 1 million higher.

By the fourth quarter of calendar year 2014, that policy would increase real GDP by 0.6 percent and full-time-equivalent employment by 800,000, by CBO’s central estimates. According to the full ranges, real GDP would be between 0.2 percent and 1.0 percent higher, and full-time-equivalent employment would be between 300,000 and 1.2 million higher.

Emphasis mine.

http://www.cbo.gov/sites/default/files/cbofiles/attachments/44630-Van-Hollen.pdf

So in a nutshell, sequester is costing us a half-percent of real growth rate and over a half million employed in 2014. It appears austerity and fiscal restraint are effective policies, if the goal is to reduce employment and lower standards of living.

 

[Rshermr]

On September 26, the head of the Congressional Budget Office sent a letter to Congress correcting and spelling out the CBOs estimates of the economic effects of eliminating the caps of the Budget Control Act (sequestration). Here is what he said:

This letter responds more fully to the question you posed at today’s hearing about the economic effects of eliminating the automatic spending reductions specified in the Budget Control Act. In particular, I would like to correct and clarify the answer I provided this morning.

I stated at the hearing that eliminating the automatic spending reductions specified
in the Budget Control Act beginning in fiscal year 2014 would increase real gross
domestic product (or GDP adjusted for inflation) by 0.5 percent and increase fulltime-equivalent employment by 600,000 relative to the amounts under current law. Those figures refer to the averages during calendar year 2014—not to the effects by the end of 2014, as I incorrectly stated.

Those figures represent CBO’s central estimates, which correspond to the assumption that key parameters of economic behavior (in particular the extent to which lower federal taxes and higher federal spending boost aggregate demand in the short term) equal the midpoints of ranges used by CBO. According to the full ranges for those parameters, in calendar year 2014, real GDP would be between 0.2 percent and 0.8 percent higher, and full-time-equivalent employment would be between 200,000 and 1 million higher.

By the fourth quarter of calendar year 2014, that policy would increase real GDP by 0.6 percent and full-time-equivalent employment by 800,000, by CBO’s central estimates. According to the full ranges, real GDP would be between 0.2 percent and 1.0 percent higher, and full-time-equivalent employment would be between 300,000 and 1.2 million higher.

Emphasis mine.

http://www.cbo.gov/sites/default/files/cbofiles/attachments/44630-Van-Hollen.pdf

So in a nutshell, sequester is costing us a half-percent of real growth rate and over a half million employed in 2014. It appears austerity and fiscal restraint are effective policies, if the goal is to reduce employment and lower standards of living.

And it appears that austerity in the US is working similarly to how it has in Europe. That is, it may be helpful to the wealthy, but bad for the rest of the people of the country. And, in general, bad for the US economy.
The less quantitative question is WHY. Why are those that back sequestration doing so. I know what they say, but I wonder if they are that ignorant, or if the reason is much more driven by gains in wealth and power that those financing the movement believe they will enjoy.