Why Sequester Talk Is Pointless
The sequester talk is ridiculous. The amount it cuts is miniscule anyway. You could audit the government and probably find average cuts between 20 and 30 percent, yet you’d think the world was ending. What was supposed to be cuts for dealing with the debt is now an economic issue.
Even if you could get liberals to concede to massive spending cuts to reduce the deficit it wouldn’t matter.
The economy/GDP would shrink immediately. Cutting b/trillions of dollars in government spending from the budget would hurt. The GDP would shrink because it’s that much less business being done. Even though government money is often wasted and useless it still counts as GDP and somebody is depositing those checks. However if you cut the money it won’t go back into the hands of the taxpayers, it will just simply fade away. If it doesn’t go in, it doesn’t exist.
Eliminate the money and the economy shrinks. As that money leaves the market everything else will have to adjust and that will come with quite a bit of initial suffering.
Of course that’s the idea, that’s a good thing. It’s what we need. Cut the money that doesn’t actually exist because of overspending and allow the market to take the appearance of its actual size and not the inflated bubble it currently is. We have an economic bubble, not limited to just the housing or credit sectors, but the entire economy is a bubble due to the high debts we have to prop it up.
Following the first quarter of GDP shrinkage of this hypothetical cut, progressives would howl and shriek like never before. Austerity doesn’t work they’d say, you cut a trillion dollars and the economy is shrinking they’d point out. They already claim this about Europe, despite its not actually having gone through austerity, and they’re already starting to blame the last quarters shrinkage here on it as well.
The economy can’t and won’t be fixed quickly. It’s a bubble overinflated by immense government spending. $16 trillion dollars doesn’t get repaired quickly.
The reality is that the economy is not as big as we think. The numbers are not as important as the value that those numbers carry. The higher the debt, the less value our dollars have, and the higher the percentage of GDP that is government spending, the less value/strength you have in the actual private market economy.
There’s no doubt that the US economy needs a serious diet. Anyone who is in good shape knows that you can’t expect immediate results. They also know that trying to lose 20 lbs. for your wedding in three months is not as effective as trying to lose that 20 lbs. for the rest of your life. One of those goals is a gimmick that will end up reversing itself and one requires commitment and effort in order to become the standard of living.
If we got the austerity needed to correct the debt and deficit issues, the result would be proof to enough people that it doesn’t work. These are the low information voters. They somehow think we can fix this mess without having to make any sacrifices or giving anything up. That or they think if the rich alone make sacrifices, that’ll be enough. These people will believe anything and they’re more likely to believe a person who’s full of shit so long as it’s easy to understand. A soundbite is more appealing than research to them.
Correct spending, let the economy resize itself to market reality, and then you’ll have growth. That’s the way to fix it, and the growth we would see would be incredible. Unfortunately it would several quarters to get to that point and the idea would probably be hijacked by then.
We can control when and how we face the pain by taking control and doing it now, or ignore it, let it grow worse and then take an even greater amount of pain at some unexpected moment in the future that we won’t be able to control.
Posted on February 23, 2013, in No Hope For America, Problems to Ponder and tagged austerity, debt, deficit, dollars, economics, economy, gdp, growth, money, pain, quarters, sequester, shrinkage, spending, spending cuts. Bookmark the permalink. Leave a comment.