Sequester Update

If you're a trader who's interested in market commentary and current events, DYDD (Doing Your Due Diligence) is a website worth checking out. The following post below was written by Robert P Lehman and can be found here. You can follow bob on twitter here.

Sequester Update
Well, the days tick by and there is really little of substance to report, although the political game playing continues in SIZE. The deadline for the Sequester is March 1, 2013 and it appears that nothing will be done to avoid it. I alluded to that in the addendum to my last post on the Sequester, it appears the Republicans have concluded they can win this fight.

The Republicans efforts around the upcoming Sequester thus far have been limited to pointing to Bob Woodward’s account that Jack Lew, current nominee to become Treasury Secretary, came up with the idea of the Sequester. The beauty of the idea, supposedly, was that a Congressional Super Committee would be “forced” to come to an agreement or face painful cuts to sacred cows of the Republicans (defense department) and the Democrats (discretionary spending). According to Woodward’s book, the White House was gleeful about the “genius” of their idea. That glee has apparently diminished and the President and his acolytes, have been treating the idea like an ugly stepchild. Meanwhile, the republicans seem to delight in reiterating that the idea was the President’s to begin with.

The White House’s recent strategy is to attack, and some might say strike fear amongst the electorate regarding the impact of Sequester. A parade of Cabinet leaders have been paraded on news shows warning of the harsh consequences of allowing the Sequester to be implemented. They paint a dire picture, but hosts have frequently countered with confusion as to how the Sequester impact can possibly be severe. Political commentators have suggested that the Administration will make cuts where they can be easiest to put on television, specifically reducing staffing in certain major airports. The thought is that doing so would increase pressure of recalcitrant Republicans, but the strategy poses risks Equity markets seem largely indifferent to the debacle.

At 11th hour, Sens P. Toomey and Inofe are looking to move a bill forward to allow President special authority to allocate cuts. No idea if this comes to fruition.