Given how the economy needs to perform to repair the damage from the 2008 recession, even the initial 2.5 percent estimate was the equivalent of treading water, not progress. The revision down to 1.8 percent is a big move in the wrong direction.
Yet House Speaker John Boehner’s (R-OH) spokesperson is already using the revision to slam President Obama and stump for the GOP’s economic plan, which calls for even larger budget cuts than those that have been enacted.
But sequestration — the across-the-board spending cuts enacted earlier this year as a result of the Republicans’ drive for austerity — is already damaging the economy’s ability to grow. Cuts to government spending reinforce a downward economic spiral, as shown by the effect of austerity in Europe.
Polling and reports from across the country already show the spending reductions to health care, education, infrastructure, housing, disaster response and more being felt by individual Americans. The BEA’s latest revision is evidence that damage is now being felt broadly in the economy.
Finally, and also disappointingly, the drop in economic growth is a datapoint against the case that monetary policy has been able to offset the fiscal drag of sequestration’s cuts.