Feb 01 2013
WASHINGTON — Lawmakers were stunned Wednesday to learn that the U.S. economy officially dove toward a double-dip recession at the end of 2012, contracting for the first time in three and a half years amid steep declines in government spending and sluggish exports.
Policymakers were similarly stunned in Europe when reductions in government spending led to continued economic malaise, leading top economists there to question the logic behind austerity recommendations. European austerity programs are a major driver of the slowdown in U.S. exports, and several economists have argued that reductions in government spending, here and abroad, are almost solely responsible for the suddenly tanking economy.
“Austerity has been terrible for Britain and the rest of Europe,” said Chad Stone, an economist with the Center on Budget and Policy Priorities, a liberal think tank. “We’ve not been as bad as them, but we haven’t given our economy the support it needs.”
Congress is still driving headlong into the forced austerity known as sequestration, scheduled to take effect in March, which requires across-the-board spending cuts at the Pentagon and among domestic policy programs.
“Today’s GDP numbers show the toll that political conflict over fiscal policy is taking on U.S. economic growth,” said Adam Hersh, an economist at the Center for American Progress, a think tank closely allied with the Obama administration. “The 0.1 percent economic contraction puts the United States on the precipice of recession. Our economy would certainly have grown at a faster rate last quarter, were it not for political brinkmanship over the debt ceiling and the risk of sharp fiscal contraction in the form of automatic ‘sequestration’ budget cuts. That contraction is now unfolding.”
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