Is GDP drop a sign that federal budget cuts hurt the economy?

[ErikJ]

Last edited Thu Jan 31, 2013, 06:23 PM - Edit history (1)

Is GDP drop a sign that federal budget cuts hurt the economy?

Source: Business Journal

Is GDP drop a sign that federal budget cuts hurt the economy? VIDEO

Careful what you wish for, budget hawks: Preliminary numbers show the U.S. economy shrank in the fourth quarter, largely due to a 15 percent decline in federal spending.
The Bureau of Economic Analysis reports the nation's gross domestic product declined 0.1 percent in the fourth quarter. This number is subject to further revision, but it still came as a shock to most economists. Real GDP increased 3.1 percent in the third quarter.

So what happened in the fourth quarter? Some disruptions can be blamed on Hurricane Sandy, but much of the decline in the economy in the fourth quarter was due to a 15 percent decline in federal spending.

Defense spending plummeted 22 percent — the largest quarterly decline in 40 years. Much of that decline was attributed to sequestration -- the across-the-board cuts to the federal budget that were scheduled to go into effect Jan. 2.

Congress' fiscal cliff deal postponed sequestration until March 1, but there's been no progress on coming up with an alternative deficit reduction plan to replace these cuts.
...................................
video> http://www.bizjournals.com/jacksonville/blog/morning-edition/2013/01/is-gpd-drop-a-sign-that-federal-budget.html

Read more: http://www.bizjournals.com/jacksonville/blog/morning-edition/2013/01/is-gpd-drop-a-sign-that-federal-budget.html


So the health of the US economy is dependent on supplying the world with bombs and guns?

[DonViejo]

1. Yes, n/t

[reteachinwi]

2. Dean Baker's take.

http://www.alternet.org/economy-shrinks-heres-why-its-not-bad-news

[PA Democrat]

3. Yes. And shows what total idiots the Republicans are for

pushing for deeper spending cuts when the economy is still weak. Cuts to overall government spending will have a negative impact on GDP. Some cuts (like food stamps and unemployment) will have a greater multiplier effect and cause a large downturn than others.