The Sequester's Hidden Risks for the U.S. Economy
It didn’t take long for sequestration to bite. Lines more than doubled at some of the nation’s largest airports on the first weekend after the across-the-board spending cuts took effect on March 1; and importers of tomatoes, peppers, and eggplants braced for long lines at border crossings as the Department of Homeland Security reduced overtime to save money.
The impact is almost certain to grow after agencies begin to furlough workers, which requires a one-month notice. If there are further delays at border crossings, at terminals for air passengers, and at food plants that don’t have enough inspectors, the ripple effects could reduce economic growth and hurt jobs and profits more than has been generally estimated. That’s a possibility that seems to have been ignored on Wall Street, where the Dow Jones industrial average surpassed its 2007 record on March 5. …
… Markets and many economists have taken sequestration in stride so far, with some dismissing the Obama administration’s warnings of trouble as scare tactics. Bhaskar Chakravorti, an economist at Tufts University’s Fletcher School, says he’s more worried about the long-term damage to U.S. competitiveness from cuts in education and scientific research than he is about short-term blockages.
Read the full piece