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 Spending cuts hurt economic growth.

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PostSubject: Spending cuts hurt economic growth.   2/28/2011, 9:49 am

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House spending cuts hurt U.S growth -Goldman Sachs

A $61.5 billion spending-cut bill passed by the U.S. House of Representatives on Saturday would slow economic growth significantly this year, according to an analysis by the global investment firm Goldman Sachs (GS.N).

"Under the House passed spending bill, the drag on GDP growth from federal fiscal policy would increase by 1.5pp (percentage points) to 2pp in Q2 and Q3 compared with current law," according to Alec Phillips, who signed the analysis that is dated Tuesday.

Quote :
Report rebukes spending cut plans by U.S. states

Balancing state budgets solely or mainly with spending cuts will hurt those depending on state dollars and set back the economy's recovery, a Center on Budget and Policy Priorities report said on Friday.

The Washington-based center's report came as the U.S. government's measure of fourth-quarter growth was lowered on Friday to reflect a reduction in government spending that was more than double the initial estimate, led by less spending by state and local governments.

In all, government spending lopped 0.31 percentage point from GDP growth. [ID:nN25247775]

"States that rely solely or primarily on widespread budget cuts to close deficits are harming residents and businesses that need immediate assistance; they also are reducing demand in the economy and impeding their state's economic recovery," the center's report said.

"While there might not be any perfect choices for closing deficits in an economic slump this deep and long, it is clear that a balanced approach -- rather than one that relies heavily or exclusively on spending cuts -- is useful in mitigating the damage," the report said.

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