The Sequester: Crisis Bungled

Robert Higgs’ wonderful book, Crisis and Leviathan, says that government grows in response to crises.  A crisis comes along and government responds by expanding, both in size and in scope.  After the crisis passes, government shrinks, but not back to its former level.  Government grows by ratcheting up in response to crises.

Rahm Emanuel, then President Obama’s Chief of Staff, understood Higgs’ point well.  A fan of bigger government, he said “You never want a serious crisis to go to waste.”

President Obama, despite his successes in increasing the size and scope of government in his first term, still has many unfulfilled ambitions for government expansion.  If crises do not come along often enough, one strategy is to manufacture one.  That describes the sequester.  It was an agreement made by the president and Congress to enact automatic cuts in government spending if they could not come to a budget agreement.

Prior to the sequester, President Obama warned of dire consequences.  Air traffic control would be hobbled, food inspections would be delayed, border security would be compromised, teachers would be laid off.  This was the impending crisis that the president and Congress could mitigate, and then pat themselves on the back for rescuing the economy from the devastating effects of the sequester.

President Obama’s proposed solution to this crisis was to increase taxes to fund his vision of bigger government, which would ratchet government up once more.  Unfortunately, for the president, he was unable to reach an agreement with Congress.

We are now approaching two weeks into the sequester.  Prior to sequestration (which began March 1) the news media ran lots of stories about the calamity that would occur if sequestration were to take place.  Two weeks later, the harm is difficult to see.  I’ve read a few stories, but have seen no first-hand evidence in my life.  How many people have?  As for threats about the economic harm, US stock markets are flirting with all-time highs, reached after sequestration occurred.  It appears that the financial community is not overly concerned.

The sequester was a crisis manufactured by our elected officials, with the potential for them to ratchet up the size of government once again, and emerge as heroes for averting the crisis.  Their manufactured crisis was bungled, leaving President Obama looking much like the boy who cried “wolf.”

Randall G. Holcombe is Research Fellow at the Independent Institute and DeVoe Moore Professor of Economics at Florida State University. His Independent books include Housing America: Building Out of a Crisis (edited with Benjamin Powell); and Writing Off Ideas: Taxation, Foundations, and Philanthropy in America .
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