Sequestration: A Positive in the Distant Future

Sequestration: A Positive in the Distant Future

Sequestration has come to refer to the automatic spending reductions that will result when there is a dollar difference between the federal budget and current appropriations (approved expenditures). This total dollar difference is withheld equally from discretionary programs and even some mandatory programs if legislation to reduce the budget deficit is not passed. Originally, these reductions were intended to be implemented equally "across the board" (Page & Reichling, 2012). The country should know as soon as Friday whether these automatic cuts will be enacted. Therefore, it is important to understand the potential effects of this act. After recent study, I have concluded that sequestration could prove to be beneficial to the United States economy as a whole over the long term.

The original intent was never for sequestration to occur. Instead, sequestration was supposed to serve as a motivator for Congress to find a more flexible and lasting solution. This solution should better distribute the budget reductions to areas that can better sustain them. Sequestration cuts the "good" and "bad" programs equally and is not the best solution. Nevertheless, it will ultimately benefit the economy if it leads to budget negotiation and compromise as expected. This benefit will be evident in the distant future as the unsustainable growth in federal debt would be reined in. The federal debt is currently more than 70 percent of GDP and is growing at a pace higher than GDP (Page & Reichling, 2012). Without current sequestration or a similar solution, the United States would become insolvent much sooner.

According to a non-partisan economic study, removing fiscal tightening like sequestration would boost output and employment in the short term. Conversely, the United States' output and employment would suffer and lead to larger increases in interest rates over the long term (Page & Reichling, 2012). Higher interest rates would prove extremely detrimental to the economy. Not only would it stifle growth in general, but it would also increase the amount of money the government would have to spend to service its debt. This would hamper government spending that produces a benefit to the economy.

Sequestration offers limited austerity now and could reduce the need for more drastic, Greece-like austerity measures in the future. In my opinion, sequestration will benefit the economy by providing an impetus to a reform in government budgeting that includes more intelligent spending cuts and by slowing government spending and debt until a more permanent solution can be found. I also believe that reduced government spending will benefit the economy because the more efficient private sector will become a larger contributor to GDP on a percentage basis.