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What Does Sequestration Mean?

Only in America would we desecrate the English language to find a word to describe what our government is up to. Yes, March 1 is the official sequestration date. But don’t expect the government to declare the next Federal Holiday to be “Sequestration Day.”

Here are a couple of points about this word. First of all, the word sequestration means confiscation or seizure of assets. No one is proposing a seizure of assets here. What we are talking about is automatic and severe budget cuts. In this case we will defer to the Congressional Research Service which has rewritten the dictionary to expand the definition to mean… the permanent cancellation of budgetary resources by a uniform percentage. Moreover, this uniform percentage reduction is applied to all programs, projects, and activities within a budget account.

Okay, now that we know what it means, the questions that follows are… will it happen and if it does happen, what affect may it have upon our lives and especially the economy? There have been many articles written regarding what could happen if the budget is cut by approximately 10% overnight. These cuts include all discretionary spending from jobless benefits to food inspections to defense.

Not all cuts would happen immediately. For example, if there are furloughs of Federal workers, we have read that the furloughs may take 30 days or more to implement. That gives Congress and the Administration more time to come up with a solution. And you know what they do when they have extra time? Usually nothing.

There is no doubt that dropping hundreds of millions of dollars out of the budget will take some steam out of the economy this year. This could lead to lower rates and oil prices. We just don’t think that the cuts will be allowed to take hold all year. With a compromise of some kind, there will be cuts – but how much remains to be seen.


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Remigio P. Ferrara