Today’s teachable GDP moment: Slower government spending => slower GDP growth | Economic Policy Institute
"Today’s GDP report, while overstating the current weakness in the economy, clearly illustrates what economists have known since the 1930s: Government fiscal contraction during periods of excess capacity—particularly when interest rates are already near-zero—is exactly the wrong thing to do. The coming year will see further cuts called for in the Budget Control Act (BCA) as well as possible cuts depending on the resolution of the “sequester” negotiations in March. These cuts will slow economic growth. Maybe not quite as dramatically as this quarter’s numbers indicate, but inevitably."
