SN Blog | Sequestration and the Case for Space Spending

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WASHINGTON — News this morning that the U.S. economy contracted slightly during the final three months of 2012 due to a sharp drop in defense spending provides an urgent reminder of why it’s a very bad idea to pull $85 billion out of the economy beginning March 1.

But according to a front page story in the Washington Post Jan. 30, U.S. lawmakers appear increasingly resigned to letting the automatic, across-the-board spending cuts known as sequestration take effect less than five weeks from now.

As the Post reports:

An array of proposals are in the works to delay or replace the cuts. But party leaders say they see no clear path to compromise, particularly given a growing sentiment among Republicans to pocket the cuts and move on to larger battles over health and retirement spending.

Adding to the sense of inevitability is the belief that the cuts, known as the sequester, would improve the government’s bottom line without devastating the broader economy. Though the cuts would hamper economic growth, especially in the Washington region, the forecast is far less dire than with other recent fiscal deadlines, and financial markets are not pressing Washington to act.

Cuts to the military and the defense industry remain politically problematic. But Tuesday, even some of the Pentagon’s most fervent champions seemed resigned to the likelihood that the cuts would be permitted to kick in, at least temporarily.

No, the United States does not want to become the next Spain. But neither should it want to become the next Britain, which is facing a triple-dip recession due in large part to a general pullback in government spending. Sequestration would slow the U.S. economy’s stubbornly anemic growth, if not touch off another recession, putting greater demand on entitlement programs at the root of the nation’s deficit problem while forcing Treasury to float more bonds to make up for the millions that will be back to filing for unemployment again instead of filing tax returns.

If U.S. policymakers are intent on emulating their British counterparts, they should look past the penny-wise austerity measures and focus on the forward-leaning posture the U.K. has taken on space spending: Even as it makes cuts elsewhere, Britain is increasing its European Space Agency (ESA) contributions by 25 percent, putting the nation on track to replace Italy as ESA’s third biggest contributor starting in 2014.

Here in the United States, continued investment in aerospace should be a high priority. While the United States has been consistently running trade deficits since the 1980s due to its twin dependence on oil and low-cost manufactured goods, the U.S. defense and aerospace sector exports much more than it imports from abroad, making it the nation’s top net exporter. No other sector makes a bigger contribution toward a favorable U.S. trade balance.