Thursday, January 31, 2013

2013 Sequestration Likely To Happen Despite Ominous GDP Report

Lawmakers and economists urged Congress to reconsider the massive spending cuts set to begin in March in light of Wednesday's alarming news that the nation's gross domestic product shrank for the first time in more than three years. But in a testament to beltway inertia, Congress seemed more likely than not to hit the fiscal snooze button.

Rep. Chris Van Hollen (D-Md.) said Wednesday's report from the Bureau of Economic Analysis was further proof that implementing "big austerity measures now will hurt the recovery." But the ranking member of the House Budget Committee added that the findings may not be enough to persuade lawmakers to replace the looming sequester, or a decade's worth of automatic cuts to defense and domestic spending.

"The question is how far over the ledge do we go before people take action," Van Hollen said in an interview. He said he hoped sequestration wouldn't be triggered. "But that may be required to bring some sense to the process. If you look at this report, there is no doubt that the spending slowdown contributed to the contraction and that was before the sequester. That was just in anticipation to the sequester."

Sen. John Thune (R-S.D.) said he was unsure how Wednesday's report would "be used in the debate about the sequester and what we ought to do going forward." But his outlook for a legislative compromise was pessimistic nonetheless.

"There doesn't seem to be much of an appetite by the president or Senate Democrats to do that," said Thune. "So I'm not sure how that ends up. What the Democrats want to do is they want to raise taxes to replace the sequester. That would make matters in the economy much worse in my view." POST

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