Economic Snapshot | Budget, Taxes, and Public Investment

Repealing Sequestration Would Create 900,000 New Jobs in a Year

Canceling the automatic, across-the-board spending reductions known as the “sequester” today would have a sizable short-term impact on our economy, according to a recent letter from the Congressional Budget Office (CBO) to House Budget Committee chairman Chris Van Hollen (D-MD). CBO estimates that canceling sequestration would increase the level of real GDP by $113 billion (0.7 percent) and generate 900,000 new jobs in the third quarter of calendar year 2014; a number akin to 40 percent of the total number of jobs created over the last twelve months.

When Congress returns from their August recess next month, they will have nine days to hammer out a continuing resolution to fund government operations for fiscal year 2014. The fate of the sequester, which began on March 1 and is scheduled under current law to continue through 2021, is likely to hold up negotiations. Replacing the sequester with other cuts, as conservative lawmakers are suggesting, would not produce the same outcome as outright repeal, as it would still involve taking demand out of a weak economy. The CBO’s letter clearly shows that if our objective is strong economic growth and increased employment, canceling sequestration is a no-brainer.

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