The Sequester’s Hidden Risks for the U.S. Economy

The sequester is already showing its negative affects throughout the country.  The across-the-board spending cuts, which took effect on March 1, have led to longer lines at airports and border crossings.  The decrease in staff at agencies like the Federal Aviation Administration could have serious effects on the economy, an unfortunate result that has been downplayed by the federal government and Wall Street.  The lack of flexibility of the sequester also poses serious threats. The terms do not allow funds to cross between different departments without special permission from the government subcommittees assigned to oversee the agencies.  Unfortunately, the situation is expected to worsen as lay-offs within these agencies must be accompanied by one-month notices.

The main question is whether or not these spending cuts will have a serious affect on GDP.  Some believe that the inconvenience of long lines should not be enough to have a significant influence on the U.S. from a macroeconomic standpoint.  On the other hand, there are those who disagree and, additionally, emphasize the severity of the 750,000 jobs cut by the sequester.

Written by: Constantine Kostikas

Source: Businessweek.com

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