David R. Henderson  

Sequester: This is Supposed to be Scary?

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My local newspaper linked to a badly written story about the sequester. The author is Ryan Teague Beckwith of Digital First Media and the piece is titled "Sequester: Seven Specific Cuts the Government is Considering." My comments follow on each.

1. The USS Truman and the USS Gettysburg are staying in port and both were scheduled to leave for the Middle East.
DRH: OMG. That means that the U.S. government will be less able to attack Iran. Count me worried.

2. Airport security lines will be longer starting in April.
DRH: That one does bother me since I travel on average at least once a month. Of course, I would rather that they adjust to fewer Thousands Standing Around workers by reducing the percent of people they check, but they probably won't do that. In fact, I can imagine them going even more slowly than their lower numbers would predict, as a way of inconveniencing passengers so that the passengers will complain to their Congressional reps.

3. Unemployment benefits checks will be cut 9.4 percent.
DRH: This is good. People will have an increased incentive to find work.
Note, by the way, what Beckwith writes by way of explanation: "Starting on March 3, weekly benefit checks for long-term unemployed Americans will be cut by 9.4 percent, an average of more than $400." A cut of 9.4 percent in weekly benefits is an average of $400? So the average long-term unemployed person gets benefits of $4255 a week??!! Of course not. Clicking on the link takes you to an Obama administration estimate that the average long-term unemployed person will lose $400 in total, not just weekly.

4. Yellowstone National Park will open three weeks late.
DRH: That is too bad. But if it's known in advance, people can substitute.

5. More than 400,000 fewer HIV tests will be conducted.
DRH: The main people hurt by HIV are those who have it. So they have an incentive to get tested. It's true that there's an externality aspect if they spread it. Fortunately, those to whom they might spread it can take precautions.

6. Health care for military families would be cut. TRICARE would be cut by $3 billion.
DRH: TRICARE is one of the most out-of-control aspects of the DoD budget. Congress has been scared of reining it in. Finally it will be reined in.

7. NASA could cancel the Deep Space Atomic Clock project.
DRH: How will we get along without a Deep Space Atomic Clock? After all, our parents absolutely needed a Deep Space Atomic Clock. Oh, wait.


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CATEGORIES: Fiscal Policy



COMMENTS (27 to date)

One reaction to the sequester.

Shayne Cook writes:

Just a comment or two on a couple of these ...

3.) Limit unemployment payments to the amount paid into unemployment insurance by the employer to the employees account - in all cases, for everyone.
(There is a point in time or amount where unemployment compensation ceases to be a buffer from the sudden income loss from unemployment, and becomes instead a seemingly perpetual and reliable stream of payments to be unproductive.)

4.) Sell Yellowstone Park - with Federal stipulation that it be managed and retained as a national park, and with the expressed Federal preference that it's ownership be a publicly traded corporation.
Ditto Glacier Park, ditto Yosemite .... etc.
(It' a national treasure, not just a Federal treasure. And I'd probably [voluntarily] buy stock.)

RPLong writes:

If there's just one reason to be scared of the sequester, it's the absence of a deep space atomic clock.

egd writes:

Yellowstone is a park right? Big open area with lots of wilderness? Not some sort of traveling stage show with actors and puppets?

Why would it close? It's not as if the bears and raccoons would be furloughed.

Shayne Cook writes:

And a question ...

Regards the Atomic Clock:

Was it going to be a "Rolex" ???

Might be kinda cool if we kept that. Everyone in America would be able to say, "Yeah baby, I own a "Rolex."

Consider the "wealth effect".

Nick writes:

I'm not bothered very much by these cuts either but you should at least concede that some of them have the potential to be bad. For (5) you dismiss the externalities by saying that potential partners will take more precautions, which might mitigate the externality to some extent but it's still there.

And as for the NASA funding, space research is one thing that the government is uniquely positioned to do well, make long-term investments that may not pay off for decades. Your casual dismissal of the atomic clock aside, precise timing is important and this is a worthwhile project.

Cmot writes:

If my boss cut my pay by 3%, and I decide to stop feeding my kids but keep on smoking 2 packs a day, that makes my boss the bad guy and not me, right?

Tom Nagle writes:

GREAT Post and more insightful commentary than we are getting in the newspapers. With those "dangerous" defense cuts that will allegedly undemine out national security, we will no longer have a military budget larger than the next 13 countries combined--maybe just 12. I read that with one of the carriers in port, we won't have any carriers at all off the coast of South America! I'm going to lie awake at night in fear of that.

Regarding unemployment benefits, I agree that cutting them by 9.4% is painful and unfair to someone who has just lost his/her job, needs support while looking for another, and has paid in for years. But just this month Congress reauthorized expansion of the time for benefits from 52 weeks to 73 weeks. Unsurprisingly, the number of people who find work soon after the 73 week expiration is dramatic. I'll bet if they were motivated to find employment by week 52, we'd easily make the 9.4% cost savings.

David R. Henderson writes:

@Tom Nagle,
Thanks. And good point about South America. At least the Chief of Naval Operations, when he was at the Naval Postgraduate School last month, said (you had to cut through the diplomatic way he said it) that we wouldn't be substantially worse off because they were de-emphasizing the drug war.
Re UI, that person who just lost his job is unaffected. The cuts are in federal spending, not state, and so the 26 weeks of UI you can get when you are first unemployed would still be there.

CC writes:

Cmot nails it!

Robert E Park writes:

Re the author's disdain for Tricare: It seems the author was never in the military or is too young to remember...but back when I joined in the 1950's, one of the inducements (and a strong one) was that if we committed to a career in the military, we and our spouses would receive full medical care for life. Congress later reneged on this promise, and it was not until fairly recently that a part, but not all, of the promise was restored for those who accepted the inducement. I wonder why it is that the author feels a promise made in lieu of pay should not be kept? Does he not believe that promises made by the government are to be honored? Do we not have enough politicians who act that way already?

David R. Henderson writes:

@Robert E. Park,
Before I answer, I would like to understand your assertion. What's your evidence that the government made this promise?

MingoV writes:

This process reminds me of a village school board when it's desired budget isn't passed. The first cuts are cheerleading and the most popular varsity sports. The next cut is the high school band. The next cut is the elementary school reading assistance program. Etc. This pattern of cutting popular or crucial items occurs at every level of government. The public has only one successful strategy: just say no to the misguided budget cuts. In my village, the people voted down multiple budgets until the board drafted a reasonable one. When an unacceptable federal budget is thrust on us, we need to elect new politicians.

Tom West writes:

Unemployment benefits checks will be cut 9.4 percent.
DRH: This is good. People will have an increased incentive to find work.

Isn't this a trade-off between

  • people who have an acceptable job offer (at least would if they were looking) but are declining it because of the unemployment benefits

versus
  • the misery of those who cannot find a job at all at this time (and paid into UI)
  • those who are now forced by circumstance to accept an ill-fitting (specialized skills unused, etc.) job that will cause their long term productivity to be much lower.

Not clear to me that dropping UI benefits will increase global productivity. (It might, but I'm not certain.) Seems likely, however, to increase employment, regardless of whether it increases long-term productivity.

Hazel Meade writes:

This falls under the "On no, now we'll never know whether ants can sort tiny screws in space." category.

Tracy W writes:

Robert E Park: The problem with government promises is that the people who make the promise are planning on taking other people's money to repay that promise. And the money they were promising belonged to a mixture of people who were voters at the time, and people who weren't yet voters.

Basically, when A promises B that C will pay B money, without getting C's agreement, what obligation does C have to honour A's promise?

Roger writes:

The sequester and the immature (lets make people feel the pain) response needs to be converted ino a discussion on the dangers of monopoly.

A competitive service could and would never try to hurt consumers to prove it needs to demand higher prices.

We should hold the administrators and bureaucrats accountable for this extortion. Any administrator failing to properly protect consumers wherever possible from budget cuts should be immediately replaced.

liberty writes:

"How will we get along without a Deep Space Atomic Clock? After all, our parents absolutely needed a Deep Space Atomic Clock. Oh, wait."

This argument is odd to hear from you David--after all, our parents and grandparents didn't have mobile phones, the internet, a lot of modern technology that has come from economic growth, and you usually argue that this growth and new technology has made us all better off...

dansk writes:

What stupid flippant regard towards the deep space atomic clock.

Apart from the fact that it sounds very cool, its pay off wouldn't even be that long term - it would give spacecraft navigational independence so that they don't need to waste time and money on a two way system that requires ground staff to recalculate its navigation any time it changes its course etc. Something I imagine any future asteroid mining/deflection mission would find very handy.

[edited with commenter's permission--Econlib Ed.]

blgaarder writes:

Regarding #4, the Park Service often responded to proposed budget cuts by saying that they would have to close the Washington Monument, rather than making reasonable budget cuts, because they expected that the public outcry would help get the cuts rescinded.

Bill writes:

How much of these sequester cuts are genuine cuts and not merely cuts in the growth rate of federal spending?

David Masten writes:

NASA is engaged in providing a combination of private and public goods. On the private goods side are programs such as SLS. On the public goods side are the technology research and science programs. It is the programs providing the public goods that are being cut while the private goods programs which most compete with industry are not seeing any cut.

Robert E Park writes:

To Mr Henderson (re you inquiry about military recruiting inducements): The promises of free medical care for life were made in military recruiting brochures and verbally by recruiters. Courts have since held that those promises were not legally binding. But there was sufficient belief that they were morally binding that partial fulfillment of the promise was eventually granted. Here are 2 links that can get you started in your research on the topic, if you are so inclined:

http://militaryadvantage.military.com/2012/05/is-there-a-promise-of-free-health-care-for-life/

http://mrgrg-ms.org/basics.html

The commentary that follows the primary text (from those who were there at the time) is also informative.

Kevin Driscoll writes:

As a physicist, I'm sad that the Deep Space Atomic Clock may be cancelled, but I'm not going to sit here and argue that it is absolutely vital. It would be a nice thing to have, but not a necessity.

My bigger issue is that while I'm not too scared by any of the things you list, I am scared by what you didn't list. War spending and long-term social safety net spending are basically absent.

Ken B writes:

Under 1 David I am surprised to see you argue that American naval power is so attenuated that the absence of just two ships have such a strong effect. You are the last person I expected to argue that our naval spending has been cut to the bone!

(Here I need to insert a glyph for a tongue firmly in cheek, but I don't know one.)

Dan F writes:

There must be at 8.5 billion in light rail transit. We (meaning you are paying for) are getting a light rail line between The Mall of America and Big Lake Minnesota (Pop 10k). The state got the money free and could not care less about spending it wisely.

DrC writes:

One of parties could use this as an opportunity to force the TSA to scale back its intrusive security screening. Lines wouldn't get any longer and passengers' rights would once again be respected. One political party gets to claim credit for returning some sanity to airport security. Win-Win-Win

As a consultant who travels weekly, I endorse this option. Cut the dead weight at the TSA.

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