Greenspan: Sequester cuts will not be horrendous for the economy

[King]

Alan Greenspan knows a horrendous economy when he creates sees one.

[King]

If we want to get out of the economic hole, we're going to want to to grow about about 4% this year; to avoid a recession, we'd just have to stay above 0%.

The government will shrink about 4% because of the sequester (-4%).  Europe is still a mess, so net exports will be pretty flat (assume 0%).  This means the private sector has to grow at least 2% (since it's larger) over to avoid a recession and 5% to bring serious growth.  I'm pretty confident they can do both.

Republicans when challenging the President has always attacked him for creating uncertainty in the private sector.  Assume that they are correct--uncertainty is over.  Tax rates are permanent and the healthcare law is permanent.  The private sector and consumer confidence does not care about the sequester.  The economy shrank at the end of the 2012 over the tax part of the fiscal cliff.  That's over.  The economy is going to grow and it's time for the government to shrink.

We're not ready to balance the budget as it would require the private sector to grow by nearly 10% in 2013 to avoid a recession.  But we're definitely in position to absorb the sequester.

[King]

Assume that they are correct--uncertainty is over.

Uncertainty is not over until Obamacare starts (or ends if it proves to be a disaster) and fiscal responsibility is restored to Washington. Truth be told, uncertainty will not be over until Obama is out of the White House.

There is no uncertainty about Obamacare.  Businesses know what they have to do to comply with the law and most have already made the necessary changes.

Whether you think it works or not is one thing, but the uncertainty had nothing to do with the success of the program.  Only about what businesses would have to do to get in the guidelines.

As for your second comment, private sector does not care about the deficits.  They only care about taxes.  Taxes have been resolved.

...the private sector has to grow at least 2% (since it's larger) over to avoid a recession and 5% to bring serious growth.  I'm pretty confident they can do both.

Why on earth would you be confident of that?

Because the private sector is clearly in expansion and consumer confidence is back up with the election behind us.