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Commentary: Impact of Sequestration–People Will Die

The sad fact of the budget sequestration being played out in Washington is how avoidable it was. The sadder fact is that however temporary it might prove to be--and that appears from a distance to be more of a wish than a forecast--it will affect real people, and not well.

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How we got here has been hashed and rehashed, and in the process has made Washington Post editor, columnist, author--Bob Woodward--a new parlor game in Washington because he pointed the finger at President Obama as the ""author"" of the sequester concept.

That President Obama proposed the sequester--setting a deadline for harsh budget cuts as part of a deal to wrest an unnecessary debt-ceiling increase from recalcitrant Republicans--kinda doesn't matter since the very same Republicans who criticized the arrangement voted for it.

The president has tried repeatedly to describe the impact of sequestration, a mandatory across-the-board cut in federal spending exempting only a small handful of social safety net programs. Despite those exemptions, a simple fact is that people will die as a result of these cuts and lives could be changed irrevocably.

If the Food and Drug Administration, as a result of the cuts, takes even longer to test and approve potentially life-saving medication or medical treatments, people will die. If the FDA cuts corners to approve medication, people will die.

If the U.S. Department of Agriculture can't keep up its schedule of food safety inspections, people will die.

If the U.S. Department of Education is forced to cut back on Head Start or other early childhood education programs, someone--or several someones --15 years from now may not graduate from high school, not to mention college.

These effects are beyond the impact of jobs loss because defense or other contractors are not hired or because federal workers are furloughed, putting even more homeowners at risk of delinquency, or worse, foreclosure, just at a time when the housing sector is recovering.

Indeed the last few weeks have produced some strong housing numbers (despite ""flattening confidence"":http://dsnews.comarticles/south-leads-builder-confidence-down-in-feb-2013-02-19 among builders), with an increase in ""housing permits"":http://dsnews.comarticles/starts-plunge-in-jan-permits-at-4-1-2-yr-high-2013-02-20, a modest ""increase in existing-home sales"":http://dsnews.comarticles/existign-home-sales-inch-up-prices-at-10-month-low-2013-02-21, and a ""strong increase"":http://dsnews.comarticles/new-home-sales-soar-to-4-1-2-yr-high-2013-02-26 in new home sales--even as prices for both categories of homes showed some month-over-month transactional declines. On the other hand, the ""Case-Shiller home price index"":http://dsnews.comarticles/case-shiller-indexes-show-fastest-gain-in-6-plus-years-2013-02-26 continues to improve.

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The month-over-month price drops--despite weak inventories of both new and existing homes for sale--underscore the fragility of the housing recovery, a recovery put at risk if would-be homebuyers are unable to jump into a market fostered by lower prices and low interest rates.

The tragedy in this is not what might happen--although that’s pretty severe long-term--or any of the other impacts; both sides know (or should know that). The tragedy is they have the means to fix it without resorting to face-saving techniques.

First, they have to acknowledge a simple truth that while the federal deficit is a problem, it is not a problem that requires an immediate solution. Congressional Republicans have sucked the White House into believing immediate action is required. There is nothing the government should do that it can't because we have a deficit. Nothing. It is not an immediate problem.

Just look at the GDP report for the fourth quarter for evidence of what reduced federal spending does to the economy. Though the revised report Thursday showed the economy ""expanded"" by 0.1 percent in the quarter (reversing the original report, which showed a 0.1 percent contraction), any real growth was held back by a 6.9 percent quarterly drop in government spending, a 14.8 percent decline in federal spending.

The ""0.1 percent"":http://dsnews.comarticles/revised-gdp-report-barely-positive-reversing-initial-drop-2013-02-28 ""growth"" was the weakest since the first quarter of 2011 when, guess what, all government spending fell 7.0 percent, led by a 10.3 percent drop in federal spending.

So the first budgetary rule has to be to defer any harsh reductions in government spending until we can afford them, perhaps setting a target of a 6.0 percent unemployment rate sustained over a set number of months. Cuts to reduce the deficit could be programmed but more importantly planned for. While they would still hurt, the shock could more easily be absorbed at a 6.0 unemployment rate than 7.9 percent.

And since the unemployment rate reduction would be achieved gradually, agencies would be able to adjust. Indeed, since so much of the federal budget goes to countercyclical spending--unemployment insurance and food stamps for example--some of the budget reductions would occur automatically as the unemployment rate falls.

In the last fiscal year, unemployment insurance and the food stamp program cost a combined $194 billion and the year before $226 billion. While the programs won't disappear even with unemployment at 6.0 percent, they would drop considerably (even more if the president's higher minimum wage proposal were enacted). The sequester cuts which go into effect because of Washington inaction, are valued at $85 billion.

People will die.

_Hear Mark Lieberman on P.O.T.U.S. Radio (SiriusXM 124) on Friday at 8:45 am EST and again at 11:45 am EST._

*EDITOR'S NOTE:* _Every opinion merits a counter-opinion, and we'd like to hear yours. In the interest of presenting both sides to every story, we welcome rebuttals or response commentary. Want to write a counterpoint to this commentary for publication here on DSNews.com? *Please send your submission to_* ""editor@dsnews.com"":mailto:editor@dsnews.com.

About Author: Mark Lieberman

Mark Lieberman is the former Senior Economist at Fox Business Network. He is now Managing Director and Senior Economist at Economics Analytics Research. He can be heard each Friday on The Morning Briefing on POTUS on Sirius-XM Radio 124.
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