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Let the Sequester Kick In?

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    Former Bain Capital managing director Ed Conrad on cutting spending.

  • Duration 3:57
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Thank you know -- we're -- at this hour for the speaker of the house John Boehner and the big story the countdown to the mandatory budget cuts that congress has yet to address so we say.

Take a look at this little over two weeks until automatic 85 billion dollars in spending cuts will kick in congress taking a week off leaving you just six working days to get something done.

I -- former managing director of things happen all -- scholar at the American Enterprise Institute wait until the last minute has become the norm.

-- -- -- well how do you think that this plays out -- May be what the impact on the economy has.

I think the impact on the economy this would be small because it cuts are relatively small.

You had a 175 billion dollars in tax increases at the end of the year nobody was worried about what effect this is gonna have to say -- the sequester -- him but what happened don't forget we're also spending another sixty billion on hurricane sandy and 85 billion on mandatory spending increases so that spending is really going up only Washington is actually.

Appear to be going down it's actually gonna go up next year so this is tiny in comparison and I think if you don't.

Hold the line here at least negotiate.

Some compromise that reduces spending then you've pretty much demonstrated that you're never gonna cut spending.

Mr.

uninteresting to talk to people who are fiscally conservative about.

-- how they feel that's for example military cuts yes some people -- John Taylor was -- Does very well known as fiscal conservatives always name always comes up and Republican administrations possible head of the Fed and what have you and he said no we have to cut military spending and some -- -- -- that should be the last thing but what do you make of that -- -- -- -- -- an 8% cut military spending so it is significant so.

The hawks are certainly going to be concerned about the capability of the military with a cut that large.

But I think the Republicans have to get together and decide what cut they can tolerate in the military.

Because you're not gonna put a scalpel to this -- with a divided congress it's going to be an across the board cut.

So they can figure out how much military spending they're willing to cut multiply by two.

Offer that as a compromise and -- to delay the rest they might even bring some Democrats and consumer conservative Democrats into their coalition.

By doing that but I think that's an alternative strategy look.

The bid Democrat strategy lately has been hey we're almost near the end of -- -- just slowed the growth of spending somewhat.

They're almost near the end of that what do you say to them how -- half.

Did do the spending cuts need to be president talked in his State of the Union Address about infrastructure spending something we've heard about.

Every you know over and over again over the last four years so they're not backing away from stimulus.

And -- back in a way but we have 850 billion dollar deficit this year is the projection we put five trillion dollars of debt.

Sense the president was elected we're probably -- put another three trillion dollars in debt on our balance -- next eight trillion dollars.

They interest rates been 6% on average its 500 billion dollars a year of tax increases or spending cuts -- -- the interest expense which is coming from this.

This stimulus strategy which so far as -- Just quickly -- -- about that.

But to look at spending I loved -- spending as a percentage of IG -- still way above the historical average twenty to 23 per yeah -- little data we stay at that level what does our economy look like what five years out.

Yeah I think there's certainly two views in.

In economics one is that modern view rational expectations which of the private sector will dial down the public sector dials up.

And to offset you'll simply get slower growth in the private sector you look at Europe over the last two decades they have.

You know much slower growth slower productivity growth 35 to 40% less hours worked for working age -- and we have in the US.

You have median incomes under 25 to 30% lower than our median incomes it's been a disaster for the private -- thanks a lot -- told by the way -- -- -- owned Richards has been reporting -- -- fired up John Boehner will still keep it here to see what he says -- -- dared to the senate if they had this.

CA go ahead if you -- -- We're not heat and I think you talk about who you know it will be intense since -- -- invite myself for thank you that -- to say that at that.

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