The sequester goes after everything on the government ledger EXCEPT Social Security, Medicare and Medicaid.
But it's still expected to pack a wallop, especially in the defense sector and in the federal courts where layoffs, furloughs, and cancelled government contracts could become the norm.
Some say the sequester will take a full percentage point or more off the GDP in the coming year.
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But don't believe the hype. Cutting government spending is almost always bullish for the economy, providing the economy is not in a complete shambles to begin with. Sure, our economy now is not as strong as it could be. But the private sector is showing enough resilience right now - no thanks to higher taxes and added regulations from Washington – but it is happening.
Now imagine if you take away a good chunk of government spending. The worry warts will focus on the loss of "demand," despite the fact that government-created demand is never real and never lasts. But what is real is the inflation that over-bloated government spending costs everyone in everything from food to construction materials. Lower prices always help create more consumer demand and buying power.
Now throw in the private sector firms and individuals who will rush to fill the vacuum created by big cutbacks in government social spending. Not all the holes will be filled to everyone's satisfaction, but you have to like the idea of a competitive marketplace being created thanks to the no-competition,no-accountability government getting out of the way.
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So if the sequester happens, don't be surprised if at this time next year all the economists are scratching their heads trying to figure out how the economy still managed to grow through all the cuts.
And of course the answer will be that our GDP grew because of the cuts, not in spite of them.
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