This post was written by Jorma, a long time member of the Stool Pigeons Wire at Capitalstool.com.
Since sequester looks by my calculation to be about 1/2% of annual GDP the macro effect should be pretty mild. Of course even the most rabid deficit scolds never propose cutting by more than 1% right away. Meanwhile the deficit has fallen from, and these are rough numbers, 12% of GDP in 09 to 6% in 13. None of which is to say anything about the advisability or sustainability of deficits. No sense going there but just to say the path since 08 of deficits is perfectly aligned with the needs of the system as it now exists. The huge deficits were in other words an existential necessity for the political economy. That is an old fashioned term for economics before economics became a stand alone ‘science’ which attempted to pretend that government was something that was grafted onto the economy, often portrayed as a parasite, when in fact government is the ground upon which the economy stands.
As in… government is the white, the faces are the economy.
In May the continuing resolution on spending expires however and another government shutdown will loom. 25% of GDP.
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