The nonpartisan Congressional Budget Office says the automatic spending cuts known as the sequester set to begin Friday will slow growth by 0.6% and cut payrolls by 750,000.
Fed Chairman Bernanke told a Congressional panel Tuesday that the $85 billion worth of cuts will create a “significant” burden on the recovery in the short term given the moderate pace of economic growth. He suggested that Congress and the White House replace the sequester with policies that reduce the deficit more gradually in the short term and more substantially in the long-term.
Also on Tuesday a more dramatic warning about the sequester came from a statement signed by 350 economists. Entitled “Jobs and Growth, Not Austerity,“ authors Robert Borosage and Roger Hickey of the Institute for America’s Future and Robert Kuttner of The American Prospect wrote, “The fragile recovery is threatened by obsessive concern with cutting deficits that has infected both [political] parties.”
Yaron Brook, president of the Ayn Rand Institute, has a very different view of the sequester and the role of government in the economy. The former finance professor at Santa Clara University in California tells The Daily Ticker that sequestration is “terrible policy” but better than no cuts at all and much better than more government spending.
Brook says government stimulus spending to boost a sluggish economy, known as Keynesian economics, is failing to revive the Japanese economy now and failed to help the U.S. economy during the Great Depression.
“Big government is the problem,” says Brook, who advocates less government spending. “Money doesn’t evaporate if the government doesn’t spend it. It just goes to people who can actually use it effectively.” Or hold onto it, like Apple is doing, says The Daily Ticker’s Henry Blodget.
The tech giant has a $137 billion in cash on its balance sheet, which is expected to be a hot topic at its annual shareholders meeting Wednesday.
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