Beauty and the Beast: The Utah economy and the Sequester

By Marty Carpenter, Contributor | Posted - Apr 11th, 2013 @ 1:31pm

SALT LAKE CITY — Just over one month into the federal government's self-imposed, across-the-board budget cuts—known as "The Sequester" like it is some kind of bad summer horror flick—it is worth some discussion of what the impact has been so far, how it stacks up to the pre-sequester rhetoric and what we can expect going forward here in Utah.

There was a lot of panic about the sequester in the final days of February. We were told it would hurt the government's ability to properly inspect beef, defend our nation and a whole host of other things.

Politico reports President Obama saying: "Are you willing to see a bunch of first responders lose their job because you want to protect some special interest tax loophole? Are you willing to have teachers laid off, or kids not have access to Head Start, or deeper cuts in student loan programs just because you want to protect a special tax interest loophole that the vast majority of Americans don't benefit from? That's the choice. That's the question."

Peggy Noonan wrote in the Wall Street Journal that Maxine Waters, a 22-year veteran of the House from California, warned of "over 170 million jobs that could be lost." Of course, that's more jobs than we currently have in the entire country. So maybe some people were letting emotion get the best of them.

Just over 30 days later, a slightly modified message is taking hold. Over the weekend, Politico published a story saying the "much-feared budget ax is turning out to be a slow-rolling series of snips, with effects that have been much more gradual or modest than projected."

The full impact of sequestration will not be felt all at once… but it will be felt. And just because it is designed as an across-the-board cut, doesn't mean it will impact everyone equally.

You have probably heard that if you try to cook a frog by throwing him in a pot of boiling water, he'll jump right out. But if you put a frog in a pot of water at room temperature and slowly turn up the heat, he will sit there until he boils.

Sequestration is a slow boil. Those claiming the impacts will not be felt are like a frog just waiting to boil.

The United States government spends more than it takes in—so much more, in fact, that you cannot close the gap by raising taxes. Not on the wealthy. Not on everyone. So we have to make some cuts. The basic failure of sequestration is that it exempts Social Security, Medicare and Medicaid. Without reforming entitlements, there's no path to a balanced budget and the eventual elimination of the national debt.

What it does instead is cut national defense by 7.9 percent and must be applied equally to every "program, project and activity" across the board. We're taking a butcher's knife to the budget. What we need is a scalpel. Of course we need cuts, but we need to be thoughtful about them.

Sequestration in Utah New economic numbers released a last month show Utah's economy measured by jobs is now growing at 4 .0 percent—well above our historical average of approximately 3.1 percent and far outpacing the national economy at 1.5 percent. Our unemployment has also dropped to 5.2 percent—also much better than the national rate of 7.7 percent.

I mentioned earlier that these cuts do not impact everyone equally. That's good news for some. It's not good news for Utah.

The Salt Lake Chamber estimates Utah is 25 percent more dependent on the federal government than the average state. That means the cuts will be felt here a little more than elsewhere. Federal workers, civilian defense employees and recipients of federal aid will feel the greatest impact of the federal cuts. Utah has 32,000 federal employees and 15,000 civilian defense workers.

The full impact of the cuts has yet to be felt, but unless a new deal is cut, they are coming our way soon.

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