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Four Myths about Spending Cuts

Many analysts believe that the ongoing political discussion regarding automatic spending cuts has complicated the public’s understanding on the issue. Presentation Solutions takes a look at several myths circulating in America.

Myth #1: Obama should be blamed for the spending cuts. This idea has been thoroughly discussed and argued by both sides of the aisle.  The dreaded sequester was included in an initial deal proposed in 2011 to help resolve the ugly debt ceiling fight.

According to the Price of Politics by Bob Woodward, the current administration came up with the idea to include the measure, and this was supported by both chambers through the passing of the Budget Control Act in 2011, signed into law by President Obama.

Most observers believe that neither of the two sides has genuinely pushed for talks to negotiate for the replacement of the sequester.

Myth #2: Sequester will impact the world as we know it immediately. The sequestration law led to the establishment of measures to undertake cuts by federal agencies. In reality, it will take some time before the actual execution is implemented. Effects will take months to sink in, not a couple of weeks.

For instance, we will see the laying-off of many federal workers but the scheduling and duration of the lay-offs will vary considerably. Public impact by such cuts will not be immediate.

Myth #3: It’s easy to cut $85 billion. It will be easier to prove this statement if the cuts were evenly subtracted from all sectors of the $3.5 trillion federal budget. It would be more acceptable if cuts were done strategically in a manner that would not adversely affect sectors that are working properly. Unfortunately, this is not the way the bill has been structured. Agencies will have no choice but to cut efficiently-run programs in  the same way as over-staffed ones.

The $85 billion is to be removed from a tiny portion of the budgetary allocation, and worse still, it has to be cut in slightly over seven months – March 1 to September 30 – and not twelve months.

Myth #4: The cuts will either have a negative impact on the economy or they won’t felt at all:  The cuts will definitely affect the economy, but it’s not easy to tell the extent to which it will be affected. Based on assumptions, the spending cuts, if conducted throughout the year, will slow down economic progress by 0.6 percent in 2013, and cut down on the number of full-time positions by 750,000.

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