Republican Congress Seeks to Slow Economic Growth
James Politi and Stephanie Kirchgaessner:
FT.com / US / Economy & Fed - Goldman sees danger in US budget cuts: The Republican plan to slash government spending by $61bn in 2011 could reduce US economic growth by 1.5 to 2 percentage points in the second and third quarters of the year, a Goldman Sachs economist has warned... Alec Phillips, a forecaster based in Washington.... The Goldman analysis also points out that a potential compromise deal with $25bn in spending reductions this year – a more likely scenario – would lead to a smaller drag on growth of 1 percentage point in the second quarter.... Goldman, which is currently forecasting US gross domestic product growth of 4 per cent in the second and third quarters of 2011, also pegged the cost of a government shutdown to the US economy at $8bn in reduced spending per week, based on the experience of the federal closures of 1995 and 1996. A government shutdown in the world’s largest economy will occur if Congress and the White House do not agree on a budget measure by the end of next week. Tough rhetoric from Republicans and Democrats has engulfed Washington in recent days, as both sides are positioning themselves for the final round of negotiations and trying to avoid blame if a shutdown occurs...
