The idea the the U.S. Congress is about to institute serious austerity cuts is beginning to lose steam, and what once was meant to be $100 billion in cuts may fall to $32 billion, according to Rudy Narvas of Societe Generale.The Republican’s who were elected on a platform of drastic cuts, have pulled back from their earlier aims. We already knew they wouldn’t be as big as they campaigned on. Now we know they might not be even half of what was originally proposed.
From Societe Generale (emphasis ours):
Now there are reports that they are looking at only $54bn, but still $100bn on a FY annualised basis based on a 4 March start date (i.e. the expiry of the continuing resolution). Digging deeper into the maths, the Washington Post and other outlets are suggesting that the cuts really amount to around $32bn. This is because since Obama’s FY 2011 budget was never funded the government is already running at a lower funding level.
So the cuts won’t be as big because the spending was never as big as everyone believed. And that means, for the all important 2011 GDP number, than Republican cuts are barely going to register an impact at an estimated 0.2% of GDP.
So with no government shut down planned and no real cuts plotted it seems we have little to worry about in terms of the downside effects of austerity in 2011.