U.S. SEQUESTER SHOULDN’T BE CAUSE FOR PANICKING AT LEAST FOR NOW

The U.S. is $ 16.4 trillion economy. The broad US $ 85 billion spending cuts, known as sequestration that take effect today would be phased in over seven months. According to the IMF the U.S. growth forecast for 2013 is 2.0 percent and economists expect that full implementation of the sequestration will substract at least 0.5 percentage points from that growth but growth in the economy would still be around  1.5%. and it will not hit the global economy as predicted. The sequester is not big enough to cause a recession.

Politicians keep talking about $85 billion in spending cuts. Technically, you should halve that figure because agencies can draw from stockpiles of unused funds from past years. The sequester applies to how much money is authorized, not how much federal agencies actually spend. Programs can use this excess budget authority to count towards their sequester requirements. Actual spending cuts would be about $42 billion for the seven months left in this fiscal or on an annualized basis, $72 billion for 12 months, according to Bank of America.

More important than the sequester itself is the $200 billion in tax increases slated for this year as part of the fiscal cliff deal approved on New Year's Day. Also failure to extend the current budget resolution or defaulting on the debt -- both possibilities in the months ahead – certainly would be cause for panic.