Courtesy of Mish.
President Obama said the sequester cuts would be “catastrophic”.
Reader Tim Wallace pinged me with a few comments to help put those catastrophic cuts in perspective.
Tim asks: If you were making $50,000 per year in 2007 and you income went up to $70,000 (a 40% increase in six years), would a $1,750 pay cut to $68,250 be catastrophic?
Apparently it would be for the Obama administration. The federal budget is up 40% from 2007 and the Democrats and President are telling us they cannot afford to cut spending 2.5%.
Not that the “cuts” are real in the first place. All that is really being cut is a decrease in the projected increase. A chart of Federal Spending from PJMedia will add another perspective.
Federal Spending in Inflation-Adjusted Terms
Backing Away From Catastrophic Talk
For obvious reasons (shown above) Larry Kudlow notes The ‘Catastrophic’ Sequester Narrative Dies a Quick Death
However you calculate the sequester spending cuts, and however uneven they may be, the reality is that the sequester at least moves the ball in the right direction. I maintain that by reducing the government spending share of GDP, the sequester is pro-growth.
The White House and the CBO are predicting a 0.5 percent to 0.7 percent decline in GDP, post-sequester, and a loss of 750,000 jobs. All this from a spending reduction of roughly 2.4 percent over the next ten years, in which Uncle Sam’s spending growth will be $44.8 trillion rather than $46 trillion.
Fed chairman Ben Bernanke and other demand-siders have called for a slow, gradual federal-spending reduction. Well, that’s exactly what they’re going to get. The first fiscal year of sequester will see $44 billion in spending cuts, which is about one quarter of 1 percent of GDP. That’s pretty gradual. …
