Stop Sequestration for the Good of the Country?

July 31, 2013
The CBO says that cutting sequestration will create 300,000 to 1.6 million jobs. Are we hurting American job seekers by reducing federal spending?

The headline is unambiguous “Sequester cuts would cost up to 1.6m jobs through 2014.”  That headline is the result of a CBO study that purports canceling sequestration would create 300,000 to 1.6 million jobs, with the most likely being the addition of 900,000 jobs.  These changes are to occur in 2014 and are relative to current projected levels under existing law.  

That is an exceptionally bold statement to make given that there is wide disagreement as to how effective all the stimulus spending from 2009 forward has actually been in terms of job creation.  The concept is a philosophical one at heart as there is little in the way of empirical evidence that the government (as opposed to normal business dynamics) has created hundreds of thousands of jobs by their actions over the last year. 

Another way to look at the CBO study is to ask the question historically.  If the cost of sequestration ($80 billion) is expected to create 900,000 jobs in 2014 (mid-road estimate), than why didn’t the $800 billion stimulus package in 2009 create 9 million jobs?  The actual number of jobs created in 2010 was 1.2 million.

The article I came across also contained a serious warning much further down then I assume most people would read (paragraph eight).  It states that the CBO warns that boosting debt by canceling sequestration would limit policymakers’ ability in the future to respond to future fiscal crisis.  They went on to say that canceling sequestration would increase the risk of fiscal crisis in the future. 

The question becomes one of perspective.  Do we spend the money and hope it helps or do we apply logic and work toward a more fiscally sound country in the years to come? Washington will have to decide. 

About the Author

Alan Beaulieu Blog | President

One of the country’s most informed economists, Alan Beaulieu is a principal of the ITR Economics where he serves as President. ITR predicts future economic trends with 94.7% accuracy rate and 60 years of correct calls. In his keynotes, Alan delivers clear, comprehensive action plans and tools for capitalizing on business cycle fluctuations and outperforming your competition--whether the economy is moving up, down, or in a recession.

Since 1990, he has been consulting with companies throughout the US, Europe, and Asia on how to forecast, plan, and increase their profits based on business cycle trend analysis. Alan is also the Senior Economic Advisor to NAW, Contributing Editor for INDUSTRYWEEK, and the Chief Economist for HARDI.

Alan is co-author, along with his brother Brian, of the book MAKE YOUR MOVE, and has written numerous articles on economic analysis. He makes up to 150 appearances each year, and his keynotes and seminars have helped thousands of business owners and executives capitalize on emerging trends. 

Prior to joining ITR Economics, Alan was a principal in a steel fabrication company and also in a software development company.

Sponsored Recommendations

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!