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Will Economic Contraction Affect Debate Over Sequester?


Wednesday, January 30, 2013

There are some people who viewed the news that the economy shrank toward the end of the year as a bracing wake-up call, a gloomy foreshadowing of what could happen if even bigger automatic reductions start March 1. But don’t count on it changing the dynamics of the current debate over the so-called sequester.

If Congress fails to reach agreement to stop a sequester, the Defense Department would take a $600 billion hit; an equal amount would come from other domestic discretionary programs.

Steve Bell, of the Bipartisan Policy Center in Washington, D.C., worked on Capitol Hill for 39 years, on and off, much of that time as a top aide on the Senate Budget Committee when Republicans were in charge. He’s still in touch with people in Congress.

Asked in an interview how much his Hill contacts reacted to news that a 22.2 percent drop in defense spending led to the U.S.’s fourth quarter gross domestic product shrinking by 0.1 percent, Bell said:

“Not much. There is a sense of resignation among many members on the Hill. The pro-defense people have kind of lost momentum. The big deficit hawks have gained momentum. And the general, not a majority yet, but certainly a strong minority consensus is: ‘Let the sequester occur. It’s the only spending cuts we’re ever going to get out of this entire mess from the last four years.’ And I think that idea is gaining momentum. It is beginning to make the defense hawks deeply concerned.”

2013-01-30 00:00:00
“Wednesday’s GDP report was a serious warning of the kind of economic disruption that will occur if the sequester is allowed to go forward.”