1/31/2013

Keynesian claims about Sequestration

Will spending cuts really government spending cuts hurt the economy?  Yet, despite what Keynesians believe the evidence doesn't support that.  From The Hill newspaper:
A sharp decline in defense spending led the U.S. economy to contract at the end of 2012 by 0.1 percent, but it did little to change the fight over further cuts to the Pentagon set to begin in March. 
The White House used the report to lash out at Republicans, arguing the GOP should agree to a deficit-reduction package that includes spending cuts and tax hikes to replace the $85 billion in scheduled cuts known as sequestration. 
“Our economy is facing a major headwinds, and that's Republicans in Congress,” White House press secretary Jay Carney said. “It can't be 'we'll let sequester kick in because we insist tax loopholes remain in place for corporate jet-owners.' ” 
Republicans counter that they agreed to raise tax rates on households with annual income above $450,000 in a deal earlier this month and that they will not raise taxes again. Instead, they say President Obama must accept spending cuts. . . . .

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