US economic growth will slow to 1.4 percent in 2013, partly as a result of austerity measures dividing Washington, a study by the Congressional Budget Office released Tuesday found.
The CBO projected that the US gross domestic product will rise 1.4 percent this year, down from 1.9 percent in 2012. That is less than growth estimates of the IMF (2.1 percent) and the Federal Reserve (between 2.3 and 3.0 percent).
The CBO estimated that 2013 growth would be twice as strong without the automatic across-the-board budget cuts that go into effect March 1 unless the administration and Congress agree on an alternative.
“If all of the fiscal tightening still embodied in current law for 2013 was removed, growth in real GDP would be about 1.5 percentage points higher this year than CBO currently projects,” the study said.
“About 1.25 percentage points of that effect comes from the automatic reductions in federal spending described in Chapter 1, the expiration of the cut in payroll tax rates, and the increase in marginal tax rates on higher income; the spending changes and the combined tax changes account for about equal portions,” it said.
But, the public deficit will be two times smaller than in 2009, the peak year of President Barack Obama’s economic stimulus program, and will fall to 5.3 percent of GDP by the end of fiscal 2013, which ends September 30, the study found.
For the first time since 2008, the deficit will drop below the symbolic trillion dollar mark to $845 billion, it said.
Study predicts US deficit cuts will slow growth
