Nancy Pelosi (D-California) weighed in on Tuesday, February 26, on the looming sequester saying, "Sequestration equals unemployment." She also said, "Most people don't even know what the sequester means." For those who don't understand it, sequestration is a process that automatically cuts the federal budget. The fact that we don't currently have a federal budget means the automatic cuts will actually bring about reduced spending.
What will be cut?
The sequestration deal brokered by President Barack Obama and congressional Republicans in 2011is designed to cut $1.2 trillion over 10 years. When we hear the first round of cuts will add up to around $85 billion for the fiscal year ending September 30, it is important to keep in mind that these are not actual spending cuts but a reduction in the amount of increased spending.
However, that isn't how it sounded when President Obama addressed shipbuilders in Virginia on February 26. He told his audience that "The sequester will weaken America's economic recovery." However, if President Obama really thought the sequester would trigger a recession, why did he sign it into law? It sends a mixed message, and with all the finger pointing, blame, and partisanship going on, this leaves people worried about jobs, unemployment, and the future.
Sequestration and unemployment
Was Nancy Pelosi right when she said the sequestration equals unemployment? While it may not cost the number of jobs some people are talking about, it will result in cuts that affect the long-term unemployed. If the sequestration is not averted, those who receive long-term unemployment benefits will feel the pinch in the first round of cuts when unemployment benefits will be cut by 9.4%.
"The president has many options, including "transfer authority," which would allow the cuts to be shifted between departments." -- Judge Andrew Napolitano FOX Business Network
While all the political rhetoric makes it sound like the country is headed toward Armageddon, the fact is the president does have options including transfer authority, to make sure nothing essential is cut.
What can be done?
When it comes to jobs and unemployment, the issue can be boiled down to the need to cut spending without hurting jobs. Is that possible? Congressional Republicans have said it is up to the President to come up with alternative sequester cuts that won't harm essential services. Yesterday on FOX Business Network's Markets Now, Judge Andrew Napolitano suggested that "the cuts are "political theater," and nobody will be fired or furloughed." He also clarified that with the sequestration the federal government will spend more in 2013 than it did in 2012. "We are not talking about the president firing or furloughing soldiers or TSA workers or FAA Air Traffic controllers, we are talking about him hiring fewer of them."
The Washington Business Journal reported February 26 that the federal government is "hiring like crazy" right now, and as of February 27 there are more than 1,500 job postings just for the Department of Defense.
With the president's authority to make sure nothing essential is cut, perhaps the focus should be on job creation. That's the real answer to unemployment.