Joseph W.H. Lough
Even based on the simplest model,
substituting $133B for the model’s $100B,
the sequestration, at existing .6 MPC, amounts to a net decline of $332B in disposable income over the course of the year. Any employer or investor who had based her or his investment decisions on a GDP $332B more than its post-sequestration level will not add jobs at the same rate and may even eliminate planned hires entirely based on an anticipated decline in consumption.
According to the Republican leadership’s model, this decline in government outlays will be more than compensated by private sector job growth and investment. The latest job figures offer strong evidence that private sector employers are not buying it.