As I’ve said, with the economy in the dumps, I hate to see us either cutting spending OR raising taxes — even though if we’re going to deal with the deficit, we need to do both.
But I was reminded of the price of it in this piece in The Wall Street Journal today:
Government Spending Holds Key to Growth
As goes government spending, so goes the U.S. economy.
This is the unpleasant reality a weak recovery and already stretched Federal Reserve have bequeathed. Absent a sudden pick-up in private sector activity, economic growth in the months ahead will largely take its cue from Congress and the White House. No wonder markets are jittery.
For one, the hit from spending cuts across all levels of government has already been a major drag on growth. Indeed, these declines shaved 0.7 percentage-points on average from gross domestic product growth in the first two quarters of 2011. Typically, that would be no disaster. Trouble is, this recovery has been unusually weak. So the government cutbacks effectively halved real GDP growth in the first half of 2011, leaving it at just 0.8% annualized.
The pace of underlying growth is expected to pick up a bit in coming months. But so, too, is the pace of government spending cuts. A glimpse of this will come Wednesday with the release of July federal budget figures….
Yeah, I know. Rock and a hard place.