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
Poll

A recent national telephone survey found 75 percent of respondents believe the sale and use of pot will eventually be legal nationwide. Do you think marijuana should be legal in Alabama?

Yes
No
No, but I don’t think pot smokers should go to jail
Yes, but only for medical use
Yes, but only for personal adult use
     View Results
Facebook
AP Video
Disbanding Muslim Surveillance Draws Praise Hundreds Missing After South Korean Ferry Sinks Passengers Abuzz After Plane Hits Swarm of Bees Boston Bomb Scare Defendant Appears in Court Pistorius Trial: Adjourned Until May 5 Diaz Gets Physical for New Comedy Raw: Ferry Sinks Off South Korean Coast Town, Victims Remember Texas Blast Freeze Leaves Florida Panhandle With Dead Trees At Boston Marathon, a Chance to Finally Finish Are School Dress Codes Too Strict? Raw: Fatal Ferry Boat Accident Suspicious Bags Found Near Marathon Finish Line Boston Marks the 1st Anniversary of Bombing NYPD Ends Muslim Surveillance Program 8-year-old Boy Gets His Wish: Fly Like Iron Man Sex Offenders Arrested in Slayings of CA Women India's Transgenders Celebrate Historic Ruling Tributes Mark Boston Bombing Anniversary Raw: Kan. Shooting Suspect Faces Judge
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