An agency unnecessarily destroyed $170,000 worth of computing hardware, and planned to destroy $3 million more, in response to garden-variety, easy-to-guard-against malware that posed no “significant risk.” It would have destroyed far more, if it were not for the lucky occurrence of budget cuts. The agency that idiotically did this, the Economic Development Administration (EDA) “intended to resume this” destruction “once funds were available.” The fact that agencies do this sort of thing when they get enough money to afford such waste is yet another argument for budget cuts such as the sequester, which leave agencies with less money to engage in such folly. CEI has previously explained why the EDA is wasteful and economically harmful and should be abolished. (The EDA wastes money on “convention centers” that “are economic losers,” and its meddling resulted in “the loss of 331 jobs and millions of dollars in economic activity in Brisbane,” California.)
The sequestration’s automatic budget cuts will help the economy in the long run, as we previously pointed out, citing the Congressional Budget Office’s analysis of the so-called “fiscal cliff.” Wells Fargo’s chief economist now says that the sequestration will be economically helpful in the long term. As Wells Fargo economists noted, the sequester will “eventually help the economy grow faster than it would have otherwise,” since “the sequester will reduce future budget deficits — and with them the odds of federal borrowing costs increasing several years from now.”
In its unsuccessful attempt to repeal the sequester’s budget cuts, the Obama administration exaggerated the sequester’s short-run impact (such as falsely claiming it would result in budget cuts at a non-existent agency that had already closed its doors.) Obama administration officials claimed that there was little room for cuts in the federal budget. But they were plainly wrong. A June 30 Washington Post story provides additional evidence, noting that while “They said the sequester would be scary. Mostly, they were wrong.” “Before ‘sequestration’ took effect, the Obama administration issued specific — and alarming — predictions about what it would bring. There would be one-hour waits at airport security. Four-hour waits at border crossings. Prison guards would be furloughed for 12 days. FBI agents, up to 14. But none of those things happened.” All of these alarmist predictions by the Obama administration were false.
While the sequester will help the economy in the long run, less clear is its economic impact in the short run. Harvard University economist Jeffrey Miron argues the “sequester will be good for the economy” right now, helping the real economy by reducing government spending that includes “pure waste,” yet is classified as part of GDP; and by increasing production of things of real value. In his view, “the main problem with the sequester is that it is too small; it will reduce the deficit only slightly and scale back misguided government only a little. But it’s a start.” The economy grew after the sequester went into effect, although the unemployment rate has been consistently high for the last four and a half years, even as federal spending mushroomed upwards from 2008-2012, violating Obama’s 2008 campaign pledge of a “net spending cut.”
The sequester has already had an impact on wasteful government spending, such as cutting unnecessary agency “conference expenses.” As Cato Institute budget experts have noted, most of these cuts are long overdue, and would be justified even if the budget deficit were not so huge.