Wednesday, February 27, 2013

Are You a Naive Rube when It Comes to the Sequester?

Gary North explains:

We have heard about the trillion dollars in automatic spending cuts. It’s headline news.

That’s part of the decade flim-flam. The government always reports one full decade’s cuts. But it never, ever mentions in these reports regarding the Congressional Budget Office’s estimate of total federal spending over the decade: $47 trillion.

You mean that the proposed trillion dollars in cuts are 2% of projected spending? You’ve got it.
This assumes that there will be cuts. There won’t be. There will be automatic add-ins that will offset any cuts. How large are these add-ins? About $110 billion more than the proposed cuts. Forbes reports:
The sequester has been advertised as “cutting” discretionary spending over a ten year period by $995 billion. After inflation adjustments and exempting more than a trillion dollars of defense and non defense discretionary spending from the sequester, the CBO projects (in its Table 1.1) discretionary spending to increase by $110 billion over the decade. There is no actual $995 billion cut after the CBO applies its magic adjustments. Rather there is a $110 billion increase.
The government treats voters as if they were naive rubes. This usually works.

The politicians assume that the financial media will go along. This usually is correct.

1 comment:

  1. its always funny to mess with keynesians on this fact.

    if you forget about these cuts, the government this year will be spending more than last year even if the cuts go through, yet the keynesian tells me this will be catastraphic to the economy. I thought bigger budgets were good for the economy? Which one is it keynesian, are bigger budgets good or bad?