Economists: Now is wrong time for Congress to cut spending

http://www.mcclatchydc.com/2011/07/29/118762/congress-proposed-spending-cuts.html

Posted on Friday, July 29, 2011

Posted on Friday, July 29, 2011

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Economists: Now is wrong time for Congress to cut spending
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By Kevin G. Hall | McClatchy Newspapers

WASHINGTON — Lawmakers trying to reach a deal on spending cuts in order to raise the nation's debt ceiling risk causing serious economic harm if they cut government programs too much in the near term, economists warn.

The U.S. economy grew at an anemic 1.3 percent rate from April to June, the Commerce Department reported Friday. It also revised downward the growth rate over the first three months of 2011 to just 0.4 percent.

Despite the weak growth, politicians aren't arguing about stimulating the economy; rather they're debating how quickly and how much to cut spending, thus shaving economic growth in the process.

Read more: http://www.mcclatchydc.com/2011/07/29/118762/congress-proposed-spending-cuts.html#ixzz1TdpyVF22

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Some House Republicans backed by tea party groups demand even deeper front-end cuts, perhaps as much as $100 billion, arguing that politicians can't be trusted to keep their promises further out.

That'd be dangerous, warned Mark Zandi, chief economist for forecaster Moody's Analytics.

"I think the idea is a very serious policy error," he said. "This would be the fodder for another recession. The economy may be able to digest $25-30 billion more (in federal spending cuts) ... but $100 billion, I don't think it could digest that."

Zandi, who's frequently cited by Republicans and Democrats alike, favors spending cuts "when the economy is off and running," but he cautions that "to add more fiscal restraint in the latter part of 2011 and 2012 would be a mistake."

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