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AP: ‘Budget Impasse’ Is Holding Back Economy

From the Associated Press:

AP survey: US budget impasse holding back economy

By Christopher s. Rugaber | February 26, 2013

WASHINGTON (AP) — The political standoff over the U.S. budget is slowing the U.S. economy — more so than any hesitance by Americans to spend freely.

That consensus emerges from the latest Associated Press Economy Survey just as the budget impasse in Washington is about to trigger automatic spending cuts across the economy.

Many of the economists think consumer spending has slowed in response to higher tax burdens but will rebound later in the year.

Huh? Who are these crackpots who believe that higher taxes cuts back on spending? And are they some of the same economists who are worried that the Republicans resistance to higher taxes is holding back the economy?

By contrast, they worry that the budget fights in Washington will persist for much of 2013 and drag on economic growth.

The AP is, in effect, claiming that if the Republicans don’t cave to Obama, and raise taxes and do away with more business deductions, they will hurt the economy. Which, of course, is crazy.

Twenty-three of the 37 economists who responded to the survey last week say the paralysis in Washington is a significant factor in slowing the economy. The next-biggest factors they cite, in order: too little job growth, excessive government regulation and taxes, stagnant wages and cautious bank lending…

Naturally, none of this is Obama’s fault. In fact, his name never appears in this entire AP article.

The budget impasse that will set off $85 billion in spending cuts starting Friday will shave an estimated half-percentage point from economic growth this year…

Sure it will. Reducing spending rate by 1 cent on the dollar will probably throw the country into a recession, if not a depression.

It will be followed by other key deadlines: Much of the government will shut down March 27 without new legislation to authorize spending. Congress must also agree to raise the government’s borrowing limit in May or the government will risk defaulting on its debt…

Oh, good, we have found our next crisis after the ‘government shutdown’ crisis at the end of March. The next ‘debt ceiling crisis,’ that is coming in May.

Meeting those deadlines could involve more spending cuts or tax increases. Either could further slow growth…

Spending cuts have never slowed growth in the entire history of the United States. Not even after WWII. Not in the 1980s. Instead, they have boosted GDP growth every time they have been tried.

On the other hand, higher taxes always hurts the economy. But apparently the economists at the AP don’t know that.

This article was posted by Steve Gilbert on Tuesday, February 26th, 2013. Comments are currently closed.

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