Investment Adviser Survey: Sequestration Is Good Economic Medicine

Monday, 25 Feb 2013 01:08 PM

By John Morgan

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The majority of investment advisers believe Congress should allow the sequestration budget ax to fall because it will eventually help the economy, a national survey shows.

The poll by Investment News found 66 percent of the more than 200 respondents supported sequestration and the $85 billion in mandatory across-the-board federal spending cuts that it entails.

“If sequestration takes effect, it will certainly weaken the economy,” said Neal Solomon, managing director of WealthPro LLC. “The question is: Is that better or worse than continuing on a path of not addressing the problem? This problem needs to be addressed.”

Editor's Note:
The IRS’ Worst Nightmare — How to Pay Zero Taxes

The survey found 74 percent agreed the spending cuts would hurt the economy. But of those who felt that way, 73 percent said the short-term pain would be worth the long-term gain.

“Is it going to be painful? Absolutely,” said Michael Masiello, president and owner of Masiello Retirement Solutions. “I hate the concept of doing it now. It’s not a pleasant pill. But the American people need to swallow it — and hold the politicians accountable.”

Various government agencies were totaling up the potential impact on their operations, with sequestration set to take effect on Friday.

For instance, John Nester, spokesman for the Securities and Exchange Commission, said the agency would endure no staff furloughs or layoffs as a result of sequestration. However, the agency may face $100 million in cuts.

Barry Glassman, president of Glassman Wealth Services LLC, said he does not see a heavy sequestration impact, even in the Washington D.C. area where he works, if it does not last longer than one year.

“I don’t think it’s going to affect home prices, consumer spending and overall economic activity throughout the D.C. area,” he told Investment News.

Investors have accepted the sequestration as a “fait accompli” and have built the ensuing slowdown into their 2013 forecasts, CBS MoneyWatch reported.

The Congressional Budget Office estimated sequestration would trim 2013 gross domestic product growth to 1.5 percent.

On Sunday, the White House released data that it said revealed the adverse impact of sequestration on a state-by-state basis.

Politico reported “all signs” show that the cuts must first go into effect before there can be any real movement toward a fresh budget deal that might ease the sequestration cuts.

Editor's Note: The IRS’ Worst Nightmare — How to Pay Zero Taxes

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