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Greenspan called sequestration a pretty much expected event while concluding that if the stock markets can hold up through it, the effect would be rather minor. During a CNBC interview on Friday, Greenspan was asked, If [sequestration] does, in fact, take effect on March 1 and those spending cuts take place, what kind of an impact would you expect on the broad economy?"
Greenspan responded, Well, I think the odds of it occurring are very high. In fact, and I find it very difficult to even think through a scenario in which it doesn't happen. The effect is not going to be horrendous, but it's going to be marked. At the moment, I think the critical issue is how does it affect the stock market, and he reason for that is the stock market is the really key player in the game of economic growth at the moment, because there are two factors about stock prices, which I think, are important to understand. The first is that the so-called equity premium that is, the rate of return that equity is required is a very high number close to the highest number probably in American history, he said. This means that it's going to be very difficult to get stocks down through it. It's very much like saying the earnings-price ratio is at a level at which it cannot basically go down very much- I should say the price-to-earnings ratio cant go down very much, Greenspan said. And so what you have to do here is to find a way to get through this particular pretty much expected event, which will have a negative effect on the economy, but if the stock market can hold up through this, I think the effect would be rather minor, the former Fed chairman said.
Sequestration, as it is known in Washington, is the package of automatic cuts from both defense and non-defense spending that will go into effect next month unless Congress reduces federal spending by $1.2 trillion. The automatic cuts, agreed upon by both parties in 2011, will slash about $44 billion from the federal budget in 2013 and about $1 trillion during the next decade.
Greenspan: Odds of Sequester ?Very High? | CNS News
In a letter last week to Senate Appropriations Committee chairwoman Sen. Barbara Milkuski (D-Md.), Kerry said the across-the-board cut of $2.6 billion would seriously impair our ability to execute our vital missions of national security, diplomacy and development. Some $850 million would have to be cut from the State Department operations budget and another $1.7 billion from foreign assistance programs. Kerry went on to outline some of the implications, among them issues that engender strong bipartisan sentiment on Capitol Hill, such as military aid to Israel and Jordan and a heightened concern in the post-Benghazi era efforts to enhance the security of U.S. government facilities, the platform for safe and secure diplomatic operations, both domestically and overseas. But neither the letter nor an accompanying factsheet mentions Pakistan.
In his former capacity as chairman of the Senate Foreign Relations Committee, Kerry in 2009 co-authored with then ranking member Sen. Richard Lugar (R-Ind.) the Enhanced Partnership with Pakistan Act, which authorizes $1.5 billion in non-military assistance to Pakistan for each fiscal year 2010 through 2014. In its FY2013 budget request, the State Department asked for a total of $2.4 billion for Pakistan, of which the majority ($1.29 billion) is earmarked for peace and security, with progressively smaller sums for economic development ($649 million), democracy, human rights and governance ($132m), education and social ($80m), health ($70m) and humanitarian assistance ($5m). $800 million is for the Pakistan Counterinsurgency Capability Fund (PCCF), designed to build the counterinsurgency capabilities of Pakistans security forces operating against militants in the countrys north-west and tribal regions.
Under the section on foreign military financing (FMF) funds to help coalition partners and friendly foreign governments $350 million is requested for Pakistan. Kerrys correspondence with Milkuski is silent on the PCCF. It does refer to the need to cut FMF spending by more than $300 million (the departments total FMF request for FY2013 was $5.472 billion), but only mentions Israel, Jordan and Egypt in that context. The factsheet states that sequestration would require cutting FMF by $300 million, potentially reducing our military assistance to Israel, Jordan and Egypt, and undermining our commitment to their security at an especially volatile time. State Department spokeswoman Victoria Nuland during a press briefing Friday read excerpts from Kerrys letter to the Appropriations Committee chairwoman.
Asked how the sequestration cuts would affect assistance to Pakistan, she said, I dont have those kinds of details at this point, and added, If we have something to share with you, we will. Nuland said it was her understanding that sequestration requires a total percentage cut, allocated across different accounts. I believe that within accounts, we have some flexibility.
MORE
Cuts to our office of healthy homes and lead hazard control and related programs would result in more than 3,000 of the most vulnerable children not being protected from lead poisoning or other hazards in their homes, Donovan said Thursday at a hearing on the sequester portion of the Budget Control Act of 2012. The Senate Appropriations Committee held the hearing to allow members of President Barack Obamas cabinet including Donovan, Education Secretary Arne Duncan and Homeland Security Secretary Janet Napolitano to detail the damage that would be done with the implementation of the federal statute, which was signed into law by President Barack Obama on Aug. 2, 2011.
Donovan said the cuts -- referred to as "The Sequester" -- would be deeply destructive to HUDs programs and the hundreds of thousands of middle class and low-income individuals who rely on them. Sequestration, the imposition of automatic spending cuts in the federal budget, was placed in the Budget Control Act of 2011 to push Congress to reduce the annual deficit by $1.2 billion by the end of 2012. That deadline was postponed to March 1.
If lawmakers fail to avert the sequester, automatic cuts -- including cuts to the defense budget -- will be triggered. Danny Werfel, federal controller with the Office of Management and Budget and Deputy Defense Secretary Ashton Carter also testified at the hearing.
HUD Chief: Sequester Could Expose Thousands of Children to Lead Poisoning | CNS News
I have an opinion but I would like to hear what other people's take on what the sequester would mean for the country should it come to be.
Here is an article I saw this morning.
http://www.nytimes.com/2013/02/04/opinion/a-million-jobs-at-stake-with-sequester.html?_r=0
It is going to be a shock to the system.
ES
It is going to be a shock to the system.
ES
actually a real stimulus since the government will be shrinking and people will get to spend their own money as they see fit.
Also, its very very tiny, only $82 billion when we're 16 trillion in debt!!
It is going to be a shock to the system.
ES
actually a real stimulus since the government will be shrinking and people will get to spend their own money as they see fit.
Also, its very very tiny, only $82 billion when we're 16 trillion in debt!!
We're not going to take away your ability to pay your rent/mortgage payment, your food bill, your gas money, your electricity, your entertainment fund. We're only going to eliminate your ability to pay your water bill. It is such a small percentage of your overall budget.
[Off topic I guess but my thread, right?]
Dang, Rep. Debbie Schultz just resigned from the Budget Committee.
Sequestration only reduces the annual operating budget deficit. No gain to taxpayers, just a decrease for those that work for the government or contractors providing goods and services. Just step 1 in the process of legitimizing further increases in taxation.
