The News Courier in Athens, Alabama

State and Nation

March 2, 2013

Consequence to cuts no one thought would happen

— WASHINGTON (AP) — It's not the first time that government economic engineering has produced a time bomb with a short fuse.

Back in 2011, few lawmakers, if any, thought deep and indiscriminate spending cuts, totaling about $85 billion and now starting to kick in, were a smart idea.

The across-the-board cuts, set up as a last-resort trigger and based on a mechanism used in the 1980s, are a reality largely because President Barack Obama and House Speaker John Boehner, R-Ohio, failed to find a way to stop them.

Republicans, influenced by tea party and other conservative factions, insisted on just spending cuts to narrow the deficit. Tax increases were out.

Obama and the Democratic-run Senate didn't budge from a mix of cuts and increased tax revenues.

"Arbitrary" and "stupid" Obama called the auto-pilot cuts, known as sequester.

But history shows a long trail of unintended consequences from government actions — or inaction:

—President Franklin D. Roosevelt, after a solid re-election victory in 1936, believed that the Great Depression was winding down. Unemployment was declining and economic activity was coming back.

Roosevelt and Congress believed it was time to cut free-flowing government spending and raise taxes. The Federal Reserve tightened its financial reins. But the fragile economy couldn't withstand the blows. The Depression roared back, lasting until the 1940s when U.S. involvement in World War II finally revived the economy.

—President Ronald Reagan's ambitious 1986 overhaul of the tax code simplified taxes and closed many loopholes, including repealing the popular tax deduction for credit-card interest. Then people started borrowing heavily against fast-rising equity in their homes; that interest still was deductible.

But the practice eventually helped put millions of homeowners under water on their mortgages when the housing bubble burst, contributing to the 2007-2009 recession.

Text Only
State and Nation
Photos


Poll

Do you believe America will ever make another manned flight to the moon or another planet?

Yes
No
     View Results
Facebook
AP Video
Crashed Air Algerie Plane Found in Mali Israel Mulls Ceasefire Amid Gaza Offensive In Case of Fire, Oxygen Masks for Pets Mobile App Gives Tour of Battle of Atlanta Sites Anti-violence Advocate Killed, but Not Silenced. Dempsey: Putin May Light Fire and Lose Control Arizona Prison Chief: Execution Wasn't Botched Calif. Police Investigate Peacock Shooting Death Raw: Protesters, Soldiers Clash in West Bank Police: Doctor Who Shot Gunman 'Saved Lives' 'Modern Family' Star on Gay Athletes Coming Out MN Twins Debut Beer Vending Machine DA: Pa. Doctor Fired Back at Hospital Gunman Raw: Iowa Police Dash Cam Shows Wild Chase Obama Seeks Limits on US Company Mergers Abroad Large Family to Share NJ Lottery Winnings U.S. Flights to Israel Resume After Ban Lifted Official: Air Algerie Flight 'probably Crashed' TSA Administrator on Politics and Flight Bans Raw: National Guard Helps Battle WA Wildfires
Twitter Updates
Hyperlocal Search
Premier Guide
Find a business

Walking Fingers
Maps, Menus, Store hours, Coupons, and more...
Premier Guide
Stocks
Parade
Magazine

Click HERE to read all your Parade favorites including Hollywood Wire, Celebrity interviews and photo galleries, Food recipes and cooking tips, Games and lots more.
Business Marquee