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Is Sequester Impact Real or Imaginary?


With just one week to go now for the White House and Congress to reach agreement over how to deal with $85 billion in automated spending cuts that are slated to take place March 1st, it would seem like a good time to sit down and negotiate. And yet, the two sides remain so divided on the issues that they have, instead, decided to stay busy trying to sway public opinion for their causes, rather than trying to reach consensus with their colleagues.

The predictions from the White House, if nothing is done to delay the spending cuts, are dire and calamitous, while those from the Republicans range from unfortunate to unnecessary to inevitable.

"If you listen to some of these politicians, the Mayans were just a couple of months off, because the world will indeed end once we cut some spending," says Michael Pento, the president of Pento Portfolio Strategies, in the attached video.

As he sees it, the across-the-board cuts amount to "absolutely nothing" in the scheme of the $4 trillion that is slated to be spent this year by the Federal government. "Somebody will have to explain to my why our world will come to an end if we adopt some semblance of fiscal austerity," Pento laments.

A scathing editorial in the Wall Street Journal this week entitled President Armageddon takes a similar tack, calling the Obama tactics ''an old ploy" that is simply looking to stir public support by shutting down vital services first. In their words, "voters should scoff at the idea that a $3.6 trillion government can't save one nickel of every dollar that agencies spend. The $85 billion in savings is a mere 2.3% of total spending."

For his part, in a speech posted on WhiteHouse.gov, the President points out that these automatic cuts were designed to be so "unattractive and unappealing that Democrats and Republicans would actually get together and find a good compromise," adding that we must do "something smarter" at such an economically delicate time. If they go forward, the President predicts the cuts "will hurt our economic growth, add hundreds of thousands of Americans to the unemployment rolls, and threaten military readiness."

While true that the Department of Defense would have to shoulder the largest share of the cuts at 7% of spending, it is not certain how the cuts would actually be implemented or how they would effect readiness.

"We have enough bombs to blow up the world 50 times over," Pento says, "but if we cut the deficit to $865 billion, the nation's sovereignty is in jeopardy. I don't really buy it."

As much as he'd like to see cuts go through, Pento is betting on Congress kicking the can down the road, saying "if history has taught us anything it's that every time every opportunity that comes to cut spending, they punt." Of course, since he and many other policy-watchers think there's no way the Republicans are going to budge on more tax increases, the ability to punt has effectively been cut in half, while the odds of the "unattractive and unappealing" appear to be growing.