The Slow Sequester

Feb 28 2013 @ 3:24pm

David Dayen expects the sequester to phase in gradually:

The problem for the White House, despite outward projections of confidence, is that the sequester simply won’t spool out in spectacular fashion. The biggest near-term hits will be to areas largely invisible to the public, like scientific research or military readiness, or to low-income populations that have scarce political power. Events harming the broad mass of consumers, like airport chaos, mass teacher layoffs or shuttered national parks, won’t kick in for a month or more, whether the administration likes it or not. The President himself admitted this week that the impacts “will not all be felt on day one.”

TNR asked various economists, “Will the sequester start another recession?” Alan Blinder’s response:

I certainly wouldn’t expect the sequester to cause a recession—it’s not big enough. A reasonable guess is that it takes about 0.6 of a percentage point off the 2013 growth rate. That’s based on the amount of spending that would be cut, and a ‘multiplier’ around one. Now, when the economy is struggling to make 2 percent growth, losing about 0.6 percent is hardly welcome. But it’s not a recession. The possible downside, and the hardest part to figure out, is how badly the sequester will dent confidence—creating the feeling that our government is losing its mind—and what that might do to spending. I’ve estimated that as negligible—and I hope that’s right!