Cutting deficits in a recovering economy just isn’t economically smart…
This is a sure way to slow growth and possibly drive the economy into a double dip recession.
However, that’s what the Republicans really want…
If the economy stalls, it theoretically increases the odds they can beat President Obama in 2012 and pick up more seats in the House and Senate.
That’s the real game plan- not cutting spending or growing jobs.
The GOP really couldn’t care less about either….
The Republican plan to slash government spending by $61bn in 2011 could reduce US economic growth by 1.5 to 2 percentage points in the second and third quarters of the year, a Goldman Sachs economist has warned.
The note from Alec Phillips, a forecaster based in Washington, was seized in the ongoing US budget fight by Democrats as validating their argument that the legislation approved by the Republican-led House of Representatives last Saturday would do significant damage to the US recovery.
Chuck Schumer, the Democratic senator from New York, said: “This nonpartisan study proves that the House Republicans’ proposal is a recipe for a double-dip recession. Just as the economy is beginning to pick up a little steam, the Republican budget would snuff out any chance of recovery. This analysis puts a dagger through the heart of their ‘cut-and-grow’ fantasy”.
The Goldman analysis also points out that a potential compromise deal with $25bn in spending reductions this year – a more likely scenario – would lead to a smaller drag on growth of 1 percentage point in the second quarter.
via FT.com / US / Economy & Fed – Goldman sees danger in US budget cuts.
Lost in the 21st Century 