Economists warn cuts to federal spending ill-timed
Debt deal to spend less on US economy puts recovery at risk, experts say
By BINYAMIN APPELBAUM and CATHERINE RAMPELL
The New York Times
7/31/2011
WASHINGTON — The nation’s political leaders agreed on Sunday to spend and invest less money in the American economy, a step that economists said risks the reversal of a faltering recovery, in the hope of improving the nation’s long-term prosperity.
The emerging outlines of a deal to cut spending by at least $2.4 trillion over 10 years, with a multibillion-dollar down payment later this year, would complete an about-face in the federal government’s role from outsize spending in the immediate aftermath of the recession to outsize cuts going forward.
Last week brought the disconcerting news that the economy grew no faster than the population during the first six months of the year, in part because of spending cuts by state and local governments. Now the federal government is cutting, too.
“Unemployment will be higher than it would have been otherwise. Growth will be lower than it would be otherwise. And inequality will be worse than it would be otherwise,” Mohamed El-Erian, chief executive of the bond investment firm Pimco, said Sunday on ABC. “We have a very weak economy, so withdrawing more spending at this stage will make it even weaker.”
The whining continues here: http://www.msnbc.msn.com/id/43966345/ns/politics-the_new_york_times/
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