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6 degrees of sequestration

Wait, wasn’t the sequester going to crater the economy?

Scott Tong Apr 1, 2013
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6 degrees of sequestration

Wait, wasn’t the sequester going to crater the economy?

Scott Tong Apr 1, 2013
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We begin with an update, on the federal budget-cutting doom known as sequestration. Remember that? One month ago today, Congress and the president let automatic cuts kick in — amid warnings of uninspected meat, unsafe flying and worker furloughs.

But here’s the thing: didn’t happen.

On the eve of sequestration, transportation secretary Ray LaHood warned of air travel “calamity” — that we’d have fewer air traffic controllers watching the skies. “We have a 30-day window,” he said.

That window closes today. Reality?

“I think the control tower at JFK in New York is quite safe,” says Teal Group aviation analyst Richard Aboulafia. He says the sequester blade has sliced just a few regional air markets. “I don’t think you’re going to see any meaningful cutback across the entire system. What you will see is a bit of pain, here and there.”

In the meantime, Agriculture Secretary Tom Vilsack warned, pre-sequestration, “there will be disruption” in food inspection, due to furloughed inspectors.

Then, Congress came up with the cash to un-disrupt things.

“It’s about as surprising as the fact that Monday follows Sunday.” Jack Pitney is a political scientist at Claremont McKenna College. “Whenever there are cuts looming, the bureaucracy will trot out a parade of horribles.”

Now, he says, the Obama administration has lost budget credibility. There’s now a ‘crying wolf’ perception.

Thing is, defense analyst Byron Callan at Capital Alpha Partners says, many cuts do hurt. They just take time to bite. Already, two defense contractors have downgraded sales projections due to Pentagon cuts.

“And we continue to see these consolidation efforts and layoff announcements come out of defense contractors as they reposition and resize as well,” Callan says.

The point is not that the sky didn’t fall. It’s that the clouds arrived, and the rain comes later.

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