Sequestration Takes The Economy Hostage

Terrance Heath

In their effort to reach Latino voters with their economic message, Republicans have run into an interesting problem. In Spanish, “sequester” translates as “secuestrar,” which literally means to kidnap someone, or take someone hostage.

It’s ironic, and appropriate. Sequestration, which Republicans have embraced is slowly taking the economy hostage, though its impact on jobs and consumer spending. And this fall there are signs that the GOP will make sequestration the centerpiece of their next act of hostage taking.

 

It’s ironic, and appropriate. Sequestration, which Republicans have embraced, is slowly taking the economy hostage, through its impact on jobs and consumer spending. And this fall there are signs that the Republican party will make sequestration the centerpiece of their next act of hostage-taking.

Jobs report, after jobs report, after jobs report have shown the same thing month after month. The country is still caught in the grips of a recession, plagued by an epidemic of ongoing joblessness. State and local economies — and budgets — absorb much of the impact. Sequestration has only added to that burden.

Sequestration has contributed to unemployment – either directly, through federal, state, and local workforce cuts, or indirectly through the ripple effects of furloughs and pay reductions. The Washington Post has written that the sequester hasn’t had much of a impact. Yet, unemployment rates in the metropolitan Washington area are on the rise. The effect of federal spending cuts on the region’s labor market is beginning to show.

It’s not just the metro D.C. area that’s affected. The nation’s unemployment rate may have dropped in July, but jobless rates increased in 28 states, and stayed the same in 14 more. As the sequester continues, companies employing workers dependent upon federal contracts are facing the reality that federal spending cuts mean less work. That’s why businesses began slashing jobs almost as soon as the sequester began.

Businesses are also affected by the furloughs imposed on federal workers as a result of sequestration. For these workers, furloughs can mean as much as a 20 percent cut in wages. As a result, hundreds of thousands of federal employees have less money to spend on goods and services — money that supports private sector jobs in state and local economies.

As economist Alan Binder pointed out, for the first time since World War II America is in the midst of a recovery in which government employment is going down, rather than up. The government’s failure to create jobs, or protect existing jobs, is causing excruciatingly slow job creation in the rest of the economy, as unemployment rates rise or stay the same in many states. If things continue at the current rate, sequestration could lead to 900,000 jobs lost in the next year, and could cost as much as 1.6 million jobs through 2014.

Even as they decried its impact, Republicans bear most of the responsibility for the implementation of sequestration’s arbitrary, across-the-board cuts. It turned out that the obviously stupid, destructive nature of those cuts was not enough to dissuade Republicans from rejecting any budget deals that included tax increases. Indeed, ultraconservatives embraced sequestration, and many Republicans cheered for its devastating spending cuts.

Republicans may be retreating from a government shutdown over “defunding” Obamacare. Now Republicans will take the economy hostage again this fall, when the time comes for Congress to vote on allowing sequestration to continue for another year. House Majority Leader Eric Cantor has already indicated that Republicans may be willing to “compromise” on sequestration in exchange for cuts to Social Security and Medicare.

That would amount to a “heads I win, tails you lose” scenario for the GOP, since Republicans would get something they want in either outcome. If Democrats agree to Social Security cuts in exchange for ending sequestration, they will forever tar themselves as the party that cut Social Security, while handing Republicans the gift of getting the cuts they want made to Social Security without having to take any of the blame. Failing that, Republicans are happy to let the sequester — and its economic consequences — continue for another year or more.

Of course, any such “compromise” is just as unnecessary as sequestration itself. There’s a very simple way to deal with sequestration and its consequences: Repeal it. Just as Congress created the sequester, Congress can end it, and free our economy from its damaging consequences.

Jobs report, after jobs report, after jobs report have shown the same thing month after month. The country is still caught in the grips of a recession, plagued by an epidemic of ongoing joblessness. State and local economies — and budgets — absorb much of the impact. Sequestration has only added to that burden.

Sequestration has contributed to unemployment; either directly, through federal, state, and local workforce cuts; or indirectly through the ripple effects of furloughs and/or pay reductions. The Washington Post has reported that the sequester hasn’t had much of a impact. Yet, unemployment rates in the metro-DC area are on the rise. The effect of federal spending cuts on the region’s labor market is beginning to show.

It’s not just the metro-DC area that’s affected. The nation’s unemployment rate may have dropped in July, but jobless rates increased in 28 states, and stated the same in 14 more. As the sequester continues, companies employing workers dependent upon federal contracts are facing the reality that federal spending cuts mean less work. That’s why businesses began slashing jobs almost as soon as the sequester began.

Businesses are also impacted by the furloughs imposed on federal workers as a result of sequestration. For these workers, furloughs spell a 20 percent cut in wages. As a result, hundreds of thousands of federal employees have less money to spend on goods and services — money that supports private sector jobs in state and local economies.

As economist Alan Binder pointed out, for the first time since World War II American is in the midst of a recovery in which government employment is going down, rather than up. The government’s failure to create jobs, or protect existing jobs, is causing excruciatingly slow job creation in the rest of the economy, as unemployment rates rise or stay the same in many states. If things continue at the current rate, sequestration could lead to 900,000 jobs lost in the next year, and could cost as much as 1.6 million jobs through 2014.

Even as they decried its impact, Republicans bear most of the responsibility for the implementation of sequestration’s arbitrary, across-the-board cuts. It turned out that the obviously stupid, destructive nature of those cuts, as not enough to dissuade Republicans from rejecting any budget deals that included tax increases. Nor was it enough to stop Republicans from refusing to consider any deal to avoid sequestration that did not consist of spending cuts only. Instead, ultra-conservatives embraced sequestration, and many Republicans cheered for its devastating spending cuts.

Republicans may be retreating from the possibility of a government shutdown over “defunding” Obamacare. Now Republicans will take the economy hostage again this fall, when the time comes for Congress to vote on allowing sequestration to continue for another year. House Majority leader Eric Cantor has already indicated that Republicans may billing to “compromise” on sequestration in exchange for cuts to Social Security and Medicare.

That would amount to a “heads I win, tails you lose” scenario for the GOP, since Republicans would get something they want in either outcome. If Democrats agree to Social Security cuts in exchange for ending sequestration, they will forever tar themselves as the party that cut Social Security, while handing Republicans the gift of getting the cuts they want made to Social Security without having to take any of the blame. Failing that, Republicans are happy to let the sequester — and its economic consequences — continue for another year or more.

Of course, any such “compromise” is just as unnecessary as sequestration itself. There’s a very simple way to deal with sequestration and its consequences: Repeal it. Just as Congress created the sequester, Congress can end it, and free our economy from its damaging consequences.

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