Will bad news delay the sequester? Wednesday the government released the fourth quarter’s Gross Domestic Product, the output of goods and service produced by labor in the United States. That number decreased by .01 percent. It doesn’t sound like a big deal, decimal point next to a digit that small, but it reflects a shrinking economy instead of a growing one. And the main reason for the contraction: Government spending.
From the report: “Real federal government consumption expenditures and gross investment decreased 15.0 percent in the fourth quarter, in contrast to an increase of 9.5 percent in the third. National defense decreased 22.2 percent, in contrast to an increase of 12.9 percent. Nondefense increased 1.4 percent, compared with an increase of 3.0 percent. Real state and local government consumption expenditures and gross investment decreased 0.7 percent, in contrast to an increase of 0.3 percent.”
In other words, government is shrinking across the board. And this is before the sequester. Those numbers will decline even more after the sequester begins.
At the White House, Press Secretary Jay Carney was asked about the data - and quickly blamed Republicans in Congress. “Talk about letting the sequester kick in as though that were an acceptable thing belies where Republicans were on this issue not that long ago, and it makes clear again that this is sort of political brinksmanship of the kind that results in one primary victim, and that's American taxpayers, the American middle class,” Carney said. “You're correct that the GDP number we saw today was driven in part by -- in large part by a sharp decrease in defense spending, the sharpest drop since I think 1972. And at least some of that has to do with the uncertainty created by the prospect of sequester.” (more…)