Wyckoff Questions Economics of Sequester in Huffington Post Op-Ed
In a Huffington Post essay titled “The New Washington Economics,” Government Professor P. Gary Wyckoff questioned the financial soundness of the sequester. In the March 21 posting, he addressed the economic reasons why the sequester may be quite detrimental to the economy while not reducing the deficit significantly. Wyckoff, who is director of the public policy program, pointed out that:
- Despite trillion-dollar deficits for four years, the stock market has reached record highs.
- Higher interest rates potentially precipitated by borrowing don’t seem to be a threat since current interest rates are at historic lows.
- The prime rate has been at 3.25 percent, the lowest rate in five decades.
- Austerity hasn’t worked in other countries. The United Kingdom and Spain have embraced austerity, and their economies are mired in an economic quagmire.
- According to Congressional Budget Office's numbers, which are widely respected on both sides of the aisle, each dollar of deficit reduction appears to reduce future income by two dollars and eighteen cents.
Wyckoff concluded, “CBO says that the sequester will slow down economic growth by about six tenths of one percent, which amounts to about $97 billion. So for every dollar we reduce the deficit this year, we sacrifice about two dollars and twenty cents in GDP. The cuts will also result in the loss of 750,000 jobs. In order to save two cents, we are sacrificing two dollars and twenty cents. This is equivalent to discovering that your car needs a $500 repair bill, so you decide it is more cost effective to buy a new $50,000 car.”