Foreign and Defense Policy, Defense

Sequestration’s first casualty: The US economy

Image Credit: The U.S. Army (Flickr) (CC BY 2.0)

Image Credit: The U.S. Army (Flickr) (CC BY 2.0)

It is happening. The impact on the economy by “soft sequestration” is here. How this could be characterized by anyone as a surprise or unexpected is a little bit beyond belief. The term “soft sequestration” is often used by my fellow AEI defense policy focused colleagues, other Beltway defense gurus, politicians, and those from the defense industry to describe what they have been predicting for months and which was finally validated by Uncle Sam this morning when the Commerce Department announced its 2012 fourth quarter numbers on the health of the US economy:

Real gross domestic product … decreased at an annual rate of 0.1 percent in the fourth quarter of 2012 … Real federal government consumption expenditures and gross investment decreased 15.0 percent in the fourth quarter … National defense decreased 22.2 percent.

This morning’s report is only tangential to the real specter of what is to come: The severely degraded readiness and capability of the US military in an increasingly dangerous world.

Policymakers must thoughtfully consider the real impact of the tremendous cuts DOD has already made under the current administration, what it means to our national security and our role in the world. It must also be contrasted with the prioritization of considerable “stimulus” spending seen in other parts of government over the same period. While defense spending is inextricably linked to — and often a force multiplier of — the economy, as recently noted in a paper by AEI’s Mackenzie Eaglen, the intrinsic value of maintaining our liberties is quite different than paving a “shovel ready” road project.

The very real possibility of sequestration occurring (Sen. Carl Levin, D-MI, gives it 50-50 odds of being implemented) is deadly serious. Our adversaries are taking notes and the nation is dangerously close to slipping off the edge of an abyss that can only be avoided by a show of political courage. Let’s hope to see that courage by March 1, because right now it’s not looking very promising for America’s finest.

9 thoughts on “Sequestration’s first casualty: The US economy

  1. Our adversaries are taking notes and the nation is dangerously close to slipping off the edge of an abyss that can only be avoided by a show of political courage.

    Your nation committed suicide when it took the path of big government as it followed Europe down the road to hell. Since both parties support big government and only concern themselves with who is in charge there will not be an improvement until both the GOP and the Democratic Party have been rejected by an electorate that has had enough. Sadly, that will not happen until after Congress has defaulted on obligations promised to SS and Medicare contributors and the Fed/Treasury orchestrate a default on the debt through hyperinflation.

    • Political courage is not usually a profitable path for the taker because it involves persuading the public to face reality. Much more profitable to maintain that you can divert resources to big government without any penalty to growth and productivity. Much more profitable to assume that you can reduce defense capabilities without emboldening your enemies.
      And in any case, when the s**t really hits the fan it will all be George Bush’s fault.

      • You have to stand in principle, no matter how politically difficult the situation. And it will be Bush’s fault just as it will be Obama’s, Clinton’s, Bush I’s, Reagan’s, and any other president who did not stand up to the big government goals of the progressives and authoritarians.

        • i only know a couple of politicians personally, but for both of them it’s a career, and they’d rather be successful in their careers without principles than have to change careers.

          • I agree. That is why only the worst of men and the least principled become successful politicians.

  2. And what exactly is wrong w/ cutting defense spending drastically? Our military spending exceeds the combined military spending of China, Japan, UK, Russia, Saudi Arabia, India, Germany, France & Brazil. Being the world’s “Police Force” is not the role our military play. I would suggest that our military spending is focused on missile defense technology and implementation as well as securing our border. Republican Decepticons should remember the [r]epublican principals that this Nation was founded upon.

    • Printing does get you there. Eventually any external event will set off a crisis of confidence in fait money because fiat money has no intrinsic value when its supply is expanded continually.

    • Printing more dollars will cause inflation. For example if you double money supply and keep goods and services constant you will have twice as many dollars chasing the same goods and services. Prices for goods and services will go up.

      This is not a problem, per se, it does penalize people who hold cash(savers). It will help people(speculators) who borrow money at the current low interest rates and buy things with it that tend to index with inflation like dividend earning stocks and real estate.

      All my cash has been in the stock market for a while. I own a house I bought after the crash and pay ~3% interest. It is appreciating faster than this.

      If you cant change idiocy, at least benefit from understanding the implications.

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