How worried should Californians be about sequestration?

sequest.jpgThe answer is..... I'm thinking, I'm thinking. Elected officials say it will be devastating. Economists say it will noticeably dampen the recovery. The rest of us are scratching our heads. All we know for sure is that effective March 1 - that's next Friday - many levels of federal spending will be arbitrarily curtailed, everything from airport security to weapons purchases. California could be among the hardest hit states because of all its defense-related jobs. If you believe the estimates, we're talking about 200,000 or more employees being affected, which over the long term would amount to a serious economic hit. But be careful about reading too much into those numbers. Thing is, there's very little chance that this will be a long-term crisis. A month-long aggravation, perhaps - and even that is unclear since many of the so-called cuts would be spread out over a long period of time. Plus, come March 28 Congress has to pass an actual budget bill that keeps the government operating. That, combined with the impact of several weeks of sequestration-related actions (whatever they turn out to be), should move Congress and President Obama to some kind of agreement. Most likely the deal will be ugly, but at least it will keep the lights on. In other words, some dislocation and inconvenience, but not a disaster. What's striking about this latest Washington crisis is how little attention it's receiving outside Washington. The stock market, for example, has been flirting with an all-time high earlier this week (putting aside Wednesday's bumpy session) and you wouldn't expect that to happen if investors were freaking. Consumer confidence isn't plummeting. Hiring appears to have slowed, but not horrendously so. People just seem to be working around the fact that their government is incompetent. Life goes on. Anyway, here's a good overview on sequestration from the Washington Post and here's a look at the potential California impact.

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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
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