GDP: Dems, Media Prep to Use Sequester Against GOP

Today's dismal GDP report has put Democrats and their media allies into a furious spin cycle. Economists had expected a slight uptick in the economy of just over 1% growth. Instead, the Commerce Department reported that GDP in the 4th Quarter shrank by 0.1%. The left is attributing the surprise contraction to quirks in the data and a slowdown in government spending. Beyond just explaining away an inconvenient truth about the economy, they are trying to lay the groundwork to blame the GOP for automatic spending cuts set to take effect in March. 

My colleague, John Nolte, already called out the lie that the contraction of GDP was due to reduced spending by the federal government. Government spending in the 4th Quarter was the second highest in 2012 and more than both the 2nd and 3rd Quarters. 

Yes, there are quirks in the data, and GDP numbers, like the jobs report, can be subject to revisions as the overall picture becomes clearer. The fact that the question of whether or not the economy is expanding revolves around a noisy set of data underscores the weakness in the private economy. If one is arguing over the "rounding-errors" of a number, it is a pretty good sign that the underlying number is weak.   

The economy is precariously close to recession territory. After trillions in stimulus and fed easing, the private economy remains stuck in neutral. The chief problem for the Democrats is that their preferred stimulus, i.e. unemployment benefits, food stamps, green energy "investments", etc., does nothing to boost economic growth. The twin hits of recently passed tax hikes and looming implementation of ObamaCare are likely too much for the fragile economy. 

Enter Sequester, stage left. 

As part of the debt ceiling deal in 2011, the government enacted automatic, across-the-board spending cuts totaling around $1 Trillion over ten years. The cuts are restricted to discretionary spending and split roughly evenly between Defense and domestic programs. The House GOP has recently signaled that they will let the cuts take effect in early March, because, at least, they are real cuts from spending. 

The Democrats and the media will seize on these cuts to explain away the coming recession. Their focus on phantom cuts contributing to the economy's contraction in the 4th Quarter simply sets a predicate to blame the GOP for the downturn when actual spending cuts come into force. 

It's an unserious argument. The Sequester, if it happens, will trim just $109 billion from the federal budget this year. That's just over 2% of total federal spending. It is just around 0.7% of the overall economic output. If our economy is so precarious that a 0.7% shift in spending pushes us into recession, then we have deeper problems than we realize. 

We've unfortunately reached the point where the trajectory of federal spending is the margin between growth and recession. The private economy is on life-support, sustained only by borrowing and irresponsible monetary tricks from the Fed. That is the true Obama legacy. 

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