Sequestration Watch -- The Wolves at the Door Edition.

[Hugin]

With the pending sequestration, Congress on recess, and the Corporate Media smoking something... I thought it was high time SOMEBODY started talking about it.

I'll add to this space as time permits.

Please feel free to post as replies any tid-bits you run across in your wanderings.

[Hugin]

1. Sequestration time bomb ticks

By John Nyaradi (Publisher of Wall Street Sector Selector)


With Congress on vacation and investors seemingly oblivious to the ramifications of the scheduled March 1 cuts in government spending, the sequestration time bomb continues to tick.

"The sequestration deadline and ensuing budget cuts were set up by The Budget Control Act of 2011, which left a burden on the bipartisan group of Senators and select members of Congress — also known as the "Super Committee" — to carve out $1.2 trillion in additional budget cuts to the $1.2 trillion in cuts enumerated in the Act.

The Act included a "sword of Damocles" provision, specifying that if the Super Committee could not reach an agreement on the required cuts, drastic "across the board" cuts (meaning both military and civilian) would automatically take effect on March 1. This threat is known as budget sequestration or "the sequester".

The idea was that the sequestration cuts would be so unpalatable that Congress and the White House would find a way to avoid them. However, now with just nine calendar days and four Congressional legislative sessions remaining, the possibility of a settlement becomes more remote.

Judging from recent market behavior and analysts' expectations, not to mention members of Congress and the White House, it appears that we have fallen into a "magical thinking" mindset, believing that the ultimate rescuer will make the usual, eleventh-hour appearance to patch things together. Investors and politicians are now conditioned to expect a rabbit out of the hat from either "kicking the can" down the road yet again or from the Federal Reserve stepping in to save the day. Indeed, the hoped for rabbit might appear, however, if the bunny is a no-show, on March 1 the sequestration time bomb will explode."


More here: http://www.marketwatch.com/story/sequestration-time-bomb-ticks-2013-02-19?dist=beforebell

[Hugin]

2. He doesn't mention it in this piece, but...

Elsewhere, Wall Street pundits are rooting FOR the sequestration...

Why? You may ask. Because, it would ONLY cost around 700,000 (largely middle-class with benefits) jobs and would insure that the Fed wouldn't raise Interest Rates!

Wait! I thought this was all about TAXES. Now, they throw in this thing about Interest Rates? Is that another source of revenue for the U.S. Govt? More than likely and since what Wall Street wants, Wall Street gets. This may be an indication that there is going to be a sequester.

[siligut]

8. Sequestration May Not Be The Stock Trader's Friend

http://www.forbes.com/sites/robertlenzner/2013/02/20/the-sequestration-and-gas-prices-5-a-gallon-will-suppress-economic-growth-is-another-downer-for-the-economy/

Robert Lenzner, Forbes Staff
I cover happenings on Wall Street

-snip-

But, where it cuts to the quick is the possible reduction in spending and therefore GDP of up to 0.5% this year, with the expectation of another 0.5% each year for the 9 years following. The positive payoff is the reduction of the federal budget deficit by 5% a year. This is called being between a rock and a hard place

-snip-

Then, you factor in what is definitely a worrisome depressant to economic growth– the rise in the cost of a gallon of gasoline to $5.00 a gallon in some parts of the U.S.– has cut into consumer spending and usually a warning sign of a slowdown to come. In past cycles, when gasoline a gallon rose to $5.00 it usually signaled the sputtering of a recover. Or, motorists stopped driving quite as much, using less gasoline– as took place during the summer of 2008, when crude oil hit a peak of $147 a barrel. George Soros went short crude oil at $138 and long gold at $900 an ounce, a quite spectacular trade. And, then we had the financial crisis, the recession, the market meltdown.
It’s a dangerous time for President Obama and for investors, who have enjoyed the rise back to very nearly the historic peak for the Dow of 14,100.

Maybe for the uber-wealthy. Silly me, that's who you mean, that's who controls this mess.

[siligut]

12. CNBC is pushing longs to sell

Wealthy investors are looking for another 2008 where they can pick-up blue chips at a discount.

[westerebus]

3. Furloughs for Federal employees.

As part of this package, the details of who is and who is not an essential employee, will have a ripple affect among agency staff across the Federal Government. If in fact all DHS employees get exempted, while say employees of HUS, DOE, DOT, EPA, are left to swing in the wind, one would have to ask just who is making these decisions that appear to be based on political bias and not sound economics.

If any have a recollection of the peace dividend that occurred with the collapse of the Soviet Union, the establishment of several minor companies during the legislative process that became big players in the world of Government contracting exactly because of that legislation is the proof in the pudding. Can you say Halliburton?

The bipartisanship (aka corruption) is evident.

[Hugin]

4. Ah, yes... The Furloughs (a.k.a. Pay Cuts.)

Isn't a 10% across the board pay cut for Federal Employees what that other guy... The one who didn't win the election. Say he'd do if elected?

Well, lo-and-behold, it may happen anyway.

[Frustratedlady]

5. Does across the board mean Congress, as well?

It would be a drop in the bucket, but fun to watch them complain. Has Congress EVER had a pay cut?

(Oh, you silly thing, Frustrated Lady! Watch your mouth!)

[amandabeech]

10. They are going to have to furlough staff.

The wonks will probably work for free, but other staff won't.

Many of these men and women really can't do much of anything without their staff and the committee staff, who will also be subject to furlough.

The furloughs will also effect local offices, where staff help constituents wrestle with the federal government.

Whether congressional pay itself will be cut, I don't know.

[jtuck004]

16. If the runner that brings Boner his Kleenex is laid off, it might be over sooner than we think n/t

[westerebus]

6. The divide and conquer is in full swing.

Playing into the all federal employees' are over compensated compared to the private sector side meme, while exempting themselves and their staff, simply reinforces, at least for me, the fact that we have few if any allies in government.

It's the 21st century, do we really need all these politicians? I though streamlining the government means all the government.

Getting back to a representative government as opposed to a captured corpse of contentious gadflies may be past due.

sarc/off

[libodem]

7. Seems like a Wealthy Elite

Global conspiracy, to force austerity on the little people, so they can tell us to go eat cake, when we've run out of bread. Madame DeFordge, anyone?

Sound cannons, tazers, and prisons, await our future, protests.

[westerebus]

9. Washington Post poll this am.

Who has the upper hand in the sequestration debate?

2217 replies 83% favor the democrats vs 17% repbs.

[amandabeech]

11. I'm waiting to see how TSA, and, more importantly, air traffic controllers are hit by

the sequester.

The public usually pays attention to problems at airports even if they do not fly regularly.

[siligut]

13. Don’t Underestimate the Economic and Financial Effects of the Sequester: Nouriel Roubini

-snip-

Roubini says the market should not underestimate the impact of the sequester cuts. “It doesn’t look like there will be a last minute deal on the sequester ….the question will be how long the sequester will last.” If it continues to many months, says Roubini. “The fiscal drag will be another 0.7% or 0.8% of economy” which could lead to another shock in the financial markets and another rating agency downgrade.
In the latest game of chicken [between the Republicans and Democrats] Roubini says the advantage has shifted to Republicans. “At the time of the fiscal cliff all the bargaining power was with the Democrats because the automatic stuff was the tax increases. This time the automatic stuff is the spending cuts” which gives the Republicans the upper hand. He expects they will continue to try to force Democrats to accept entitlement reform.

http://finance.yahoo.com/ Then click on the story, the direct link is a behemoth.

This is the repugs big play, this is how they screw Obama for his existence and his interference with their plans. They have a storm going in the media blaming Obama and the Democrats and they are pushing the meme that the stock market is going to take a big hit so sell now.

[Hugin]

14. Good find, siligut.

Any more sequestration effects articles out there?

[siligut]

15. Since I am compelled to watch CNBC in the morning . . .

I can cover the market effects and media spin. I see that some others on the thread are concerned with government shut down.

Here is Paulie Ryan at the end of January with his denial rhetoric. Who us? Oh no.

-snip-

Ryan, the House Budget chairman, signaled that even though Republicans will push hard for spending cuts, they are “more than happy” to continue spending at levels written into law if the alternative is a government shutdown.

“We’re not interested in shutting the government down,” Ryan said.

There are two looming budget deadlines. The sequester — part of the August 2011 debt limit deal that tried to force the parties to reduce the deficit — kicks in March 1. The continuing resolution on the budget, which keeps the government funded, expires on March 27.

“I think the sequester’s going to happen, because that $1.2 trillion in spending cuts, we can’t lose those spending cuts,” Ryan said.

http://tpmdc.talkingpointsmemo.com/2013/01/paul-ryan-no-government-shutdown-spending-cuts.php

He does go on the explain that all they really want is to starve the poor, oppress the middleclass and consolidate all the wealth into the hands of, well, the wealthy.

'Now if Obama and the Democrats will just cooperate, we won't have to do this thing we really, really don't want to do.'

[siligut]

17. Just Explain It: How Will The Sequester Impact The Economy?

According to the White House Office of Management and Budget, here’s what will happen if there is no resolution.

Law enforcement agencies, like the FBI and Border Patrol, would lose over 1,000 agents. At the same time, the automatic cuts will trim the Department of Defense budget about $500 billion over the next ten years.

-snip-

$1 billion would be cut from FEMA’s (Federal Emergency Management Agency) budget. Some of that money is earmarked for first responders who react to natural disasters like Hurricane Sandy.

Furloughs at the U.S. Department of Agriculture would lead to fewer inspections at food processing plants. The department would also have to drop about 600,000 women and children from its WIC (Women, Infants and Children) supplemental nutrition program. 1,600 jobs connected to the program could be at risk too.

http://finance.yahoo.com/blogs/just-explain-it/just-explain-sequester-impact-economy-215045202.html

The oversight in food processing is already quite lacking and FEMA cuts? Now? The people who are in need most are the ones who will be hurt.