It's 'Unbelievable' How Much The Economy Is Getting Slammed By The Government Spending Slowdown

It’s finally going mainstream. Government spending isn’t growing like crazy. It’s shrinking. And It’s hurting the economy.

Ben Casselman and Conor Dougherty at the WSJ (via Ben White) have a great look at how cuts in federal spending are hampering the recovery.

They write:

Recent economic data show that long before the fiscal cliff hits, federal spending already is falling—and taking a toll on the recovery. Federal spending and investment fell at an annual rate of 0.4% in the second quarter and has fallen 3.3% in the past year. Federal employment has fallen by more than 52,000 jobs in the past year and for the first time is lower than when the recovery began.

Deutsche Bank’s usually bullish economist Joe LaVorgna is quoted as saying: “It’s unbelievable how much the economy is getting hurt already by the sharp drop in federal spending.”

Some other points from the article:

  • In 2012, state and local governments will get just over $20 billion in stimulus funding from the Federal government, down from over $180 billion in 2010 and 2011. That will shrivel even further next year.
  • Military spending has fallen for three straight quarters.
  • Even planned spending is getting delayed. An asphalt maker saw earnings drop 26% due to gridlock over the highway bill.
  • Even excluding postal workers, federal government employment has fallen by 34,000.

Read the whole article >

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.