Written by Evan Gao '16        

        On March 1, 2013 forced spending cuts will begin slashing $85 billion from the federal budget unless Congress and President Obama can reach an agreement. The effects of these cuts would have a devastating global impact, as they will create hardship for families, jeopardize military readiness, decimate job-creating investments in education, and deny access to primary and preventive care to hundreds of thousands of Americans. It was calculated that in Virginia alone, 90,000 government workers would lose a fifth of their salaries.

             Nevertheless, Americans seem unfazed by these disastrous consequences as consumer confidence is at an all-time high after it reached 69.6 in February, up from 58.4 in January, and higher than last year’s average of 67.1. In the housing market, sales of new homes increased by 16% last month, the largest increase in our post-2008 recession phase. Furthermore, the Standard & Poor’s 20-city home price index rose by 6.8% in December from a year earlier.

              But the confidence extends far past the American people. According to the Federal Deposit Insurance Corporation, bank lending also increased by 1.7% over the fourth quarter of 2012 with more commercial and industrial loans to businesses, and auto loans to consumers. By the end of 2012, these banks earned $34.7 billion, up from $25.4 billion a year ago and the highest for a fourth quarter since 2006. 60% of banks reported improved earnings from the fourth quarter of 2011. For all of 2012, the F.D.I.C. said bank earnings rose 19% to $141.3 billion, the second-highest annual level ever.

           If sequestration occurs, these healthy metrics of the economy would begin to take a turn for the worse. The effects could snowball from increasing unemployment and falling consumer confidence to rising interest rates, a mounting federal deficit, and a weakened economy. However, no matter the outcome, we need to partially view sequestration, albeit very real and incredibly painful for many, as an opportunity to revisit our spending habits. The government needs to understand where our spending should be focused on. It needs to make sensible cuts to expendable programs such as agriculture and support those that are indispensable such as education and national defense.

                    We are at a period when our economy is still recovering from the 2008 financial crisis. Even though our economy is growing quickly, a recession might be imminent due to sequestration and even if a deal is agreed upon, how long will it be before politics in Washington become strangled in another mess? America needs a wakeup call if it wants a long and healthy future.

Sources:

http://www.nytimes.com/2013/02/06/us/politics/obama-congress-budget-cuts.htmlhttp://www.washingtonpost.com/business/economy/the-sequester-and-the-debt-ceiling-explained/2013/02/11/b4fe7260-7205-11e2-ac36-3d8d9dcaa2e2_gallery.html#photo=4http://www.washingtonpost.com/blogs/innovations/post/is-sequestration-the-innovation-opportunity-america-has-been-waiting-for/2013/02/26/fa936386-803c-11e2-b99e-6baf4ebe42df_blog.html