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  • aretired_1998t aretired_1998t Jan 30, 2013 2:32 PM Flag

    White House blames Sandy, spending cuts as economy

    White House blames Sandy, spending cuts as economy
    shrinks
    By Olivier Knox, Yahoo! News | The Ticket – 4 hrs ago
    The White House on Wednesday blamed the devastation from Superstorm Sandy
    and disruptions from deep scheduled spending cuts for the surprise 0.1 percent
    drop in gross domestic product (GDP) in the fourth quarter of 2012. It was the
    first such contraction since early 2009 when the country was in the grips of the
    Great Recession.
    The chairman of President Barack Obama’s Council of Economic Advisers, Alan
    Krueger, said in a post on the official White House blog that the bad news came
    “amid signs that Hurricane Sandy disrupted economic activity and Federal
    defense spending declined precipitously, likely due to uncertainty stemming
    from the sequester.”
    That law will slash some $1.2 trillion in spending over 10 years by targeting
    domestic and defense programs with across-the-board cuts. Obama and Republicans in Congress have been starkly at odds
    over how best to replace the sequester with less disruptive debt-battling measures. The president has said spending cuts must
    be paired with tax revenue increases, something Republicans oppose.
    Meanwhile, Republican Senate Minority Leader Mitch McConnell renewed the GOP’s calls for spending cuts on the Senate
    floor on Wednesday, urging a look into “the dark corners that often evade real scrutiny” on a mission to make government
    programs more efficient and scrap those that don’t work.
    “We need to root out waste, which will serve as the first real test of Democrats’ seriousness in this debate,” he said.
    McConnell added, “Why is the federal government funding Chinese studies on pig manure, and research into the smoking
    habits of Jordanian college students and reality TV shows in India? Are Democrats prepared to cut this kind of waste?"
    Krueger took pains to defend Obama’s first-term economic record, stressing that “over the last fourteen quarters, the
    economy has expanded 7.5 percent overall,” and touting private sector growth, investment and consumption. Over all of
    2012, the economy grew 2.2 percent. And economists largely agreed with the White House's take on the impact of Sandy and
    spending cuts.
    “Federal defense purchases declined at an annual rate of 22.2 percent in the fourth quarter of 2012, the largest quarterly
    decline in 40 years,” Krueger said. “The decline in government spending across all levels reduced real GDP by 1.33 percentage
    points in the quarter.”
    Sandy also played a role, Krueger said, notably by disrupting trade, “although a precise estimate of the effect of the
    hurricane on GDP is not available.”
    Krueger also warned Congress against dealing the economy any “self-inflicted wounds.”

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