STOCK MARKET WATCH -- Monday, 11 March 2013

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17. Sequester Facts You Should Know By Kevin Zeese

http://www.nationofchange.org/sequester-facts-you-should-know-1362672981

Right now, the American people are like frogs in warm sequester water. For some, inundated with all the corporate media talk about out-of-control spending, the cuts to the deficit feel good right now. But as the sequester takes hold and federal spending is pulled from the economy, those views are likely to change. US elected officials seem to be focused primarily on making sure the other party is to blame, when in fact both are to blame, and on measuring the political fallout. In many ways, this is part of the battle to determine which arm of the corporate duopoly will have a majority in Congress after the 2014 year elections.

But for the rest of us, a large spending cutback by government in the midst of a jobs crisis and shrinking GDP is exactly the wrong policy for the economy. The US economy is likely to find itself in a recession, shedding more jobs in 2013 with an increased deficit to GDP level in part because of the sequester, but also because the federal government was already in austerity, shrinking at a very fast rate (despite what the corporate media, pundits and politicians say). Thus the road to a double-dip recession has sped up due to the sequestration. Here are some facts you should know. In fact, Zero Hedge published a disconcerting list of twelve recent events that show the next economic collapse may almost be upon us. And, they point out that the sequester will make things worse. Less money in the economy when big business is not spending is a sure sign of economic disaster, potentially even deflation which could lead to worse than a recession.

Federal Government Spending Percentage Change

The sequester will cut $85 billion in government spending from March 1 to September 30. It is a 5% cut for most federal spending, but because the fiscal year began on October 1, 2012, five months have already passed and thus the one year cut is jammed into 7 months. Some agencies, like those providing unemployment benefits have been unable to prepare so there are likely to be 10% or so cuts in checks to the unemployed. Other agencies have been able to prepare somewhat by not filling vacancies and taking other budgetary actions since last October. And others, which give out grants for research, will be giving out fewer funds in grants. How the sequester will impact agencies will vary from program to program. It will also vary from state to state. States like, Virginia, New Mexico, Alabama and South Carolina, with high federal spending will face more severe cutbacks, while states like, New York, Ohio, Illinois and Oregon, with less federal spending will face less. But there will be budgetary pain all across the nation in health care, housing, education, security and immigration, among others.

The sequester does not seem to bother Wall Street, as the stock market approaches record highs, but then Wall Street has always desired cuts rather than the kinds of job program spending that the economy needs. Big business made its money in large part by increasing production and shrinking wages. A hungry, desperate unemployed and underemployed work force is good news for them – and that is very likely what the sequester will produce. (But check #1 on this list of 12 recent events. It may be the Wall Sreet bubble is about to burst.) In fact, probably the best comment on the sequester came from Chris Hayes who pointed out that if the White House and Congress really want to scare themselves, the next threat should be a trillion dollar spending program, half to create government jobs and half to pay-off peoples debts!

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This article is from a weekly newsletter published by It’s Our Economy. To sign up for the newsletter, click here: http://itsoureconomy.us/2013/03/horror-care-how-private-health-care-is-shortening-our-lives/