While the $38 billion in spending cuts Congress agreed upon last week may be necessary to start curbing the budget deficit, they also may put the economic recovery at risk, experts tell The New York Times.
Government spending reductions at the federal, state and local level have led some economists who had predicted GDP growth of more than 4 percent this year to lower that figure substantially.
For example, Diane Swonk, chief economist at Mesirow Financial, trimmed her growth projection to 3.3 percent, from 4.2 percent. And if growth dips below 3 percent, “you’re just running on a treadmill,” she told The Times.
|Donald Trump (Getty photo)
The economy expanded 3.1 percent in the fourth quarter, and 2.9 percent for 2010 as a whole.
To be sure, not everyone is pessimistic about the impact of spending decreases on the economy.
“This cut, combined with other cuts in entitlement reform, will give the economy and businesses and investors some positive news on the fiscal front in Washington,” Chris Edwards, director of tax policy studies at the Cato Institute, told The Times.
Some economists say rising oil prices are the main economic threat now. And real-estate mogul and potential presidential candidate Donald Trump agrees.
“It’s going to be a very sad day for the U.S. if oil goes up any further,” he told CNBC. “This country can never be great again.”
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