How’s that austerity workin’ for ya? Just as sequestration takes hold here in the US, Europe is looking to go the other way, releasing more Euros (and even Pounds) in order to get things going again. The new US “policy” of budget balancing, backed into without thinking, is now being formally abandoned by everyone else.
There is probably some kind of requirement that any blog on economics has to write about Europe every so often, even if nothing new is happening. But today there may well be something worth writing about as the Central Banks develop the whiff of panic that has been absent so far. As Japan becomes more urgent and the US shoots itself, Europe has some tough choices to make. What, or better yet can, they do?
Sequestration. It’s a big word that most people have never heard before. Constant repetition in the media doesn’t help explain or define it, and the implications of what is pending (barring a last minute deal) are brutal.
The word “sequester” means to “set apart”. In this case, $108B per year is planned to automatically be set aside from the US Budget, half from the military and half from other discretionary programs (that is, not including Medicade and other entitlements). This is not a sequestration, it is a meat axe to the budget.
Assuming there isn’t a plan to stop this at the last minute, either by delaying it or passing a real budget for the first time in four years, what we have is the axe. You’re probably tired of hearing about it by now, but the use of words is important. The lack of a clear, common talk shows just what this is all about – an inside game that has to stop. How do we get past it?
As the slow ride towards sequestration continues it’s hard to find anything more to say. The possibility of a significant economic downturn and genuine pain being felt by many people has failed to move the parties towards any progress. How can government be this dysfunctional? How did it get this bad?
In attempting to answer this question I decided to take the Zen approach of unasking it instead. This led to a wisdom all parties must take heed of – both in this quote and in the larger context:
As we peer into society’s future, we – you and I, and our government – must avoid the impulse to live only for today, plundering for, for our own ease and convenience, the precious resources of tomorrow. We cannot mortgage the material assets of our grandchildren without asking the loss also of their political and spiritual heritage. We want democracy to survive for all generations to come, not to become the insolvent phantom of tomorrow.
This is a part of President Dwight Eisenhower’s Farewell Address, delivered 52 years ago. The whole address, beyond the famous parts, is well worth absorbing today.