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GDP growth up 5 percent over two quarters since the sequester

By   /   November 7, 2013  /   News  /   No Comments

By Eric Boehm | Watchdog.org

New economic data released Thursday indicates the U.S. economy grew by 2.8 percent during the third quarter of 2013, following on the heels of 2.5 percent growth in GDP during the second quarter.

All told, the economy has grown by more than five percent since the federal “sequester” took affect in March, at the end of the year’s first quarter — an economic reality that seems to further undercut the argument made by the Obama administration that the forced cut in federal spending would send the U.S. economy into another tailspin.

 Source: Bureau of Economic Analysis

GROWING AND GROWING: The U.S. economy has grown in 10 consecutive quarters, and seems to do better when the politicians are minding their own business.

If anything, the sequester seems to have given the economy a slight tailwind.

According to the Bureau for Economic Analysis, a slight reduction in federal government spending during the third quarter was offset by growth in exports, personal consumption and both residential and nonresidential investments on the part of individuals and businesses.

Antony Davies, a professor of economics at Duquesne University in Pennsylvania, said it’s hard to draw a direct link between the slight reduction in federal spending and the recent growth in GDP. After all, the cut of about $50 billion amounted to less than 1 percent of the federal budget, he said.

The more important connection, according to Davies, is that the federal government has limited its attempts to stimulate the economy during 2013.

“The longer we can go without any new meddling in the economy, the more comfortable businesses and people are to start planning for the future,” Davies said in an interview with Watchdog.org. “As people and businesses start planning for the future, hiring, production and consumption pick up.”

Those advocating for the repeal of the sequester have suggested it costs the economy about 0.7 percent in GDP growth each quarter.

The third quarter of 2013 was the 10th consecutive quarter in which the U.S. economy has grown. The smallest growth during that period took place in the fourth quarter of 2012, when GDP growth was limited to only 0.4 percent due to fears about politicians pushing the economy over the so-called “fiscal cliff” at the end of last year.

It might be difficult to say the sequester caused the economy to take off.  But it certainly doesn’t seem to have hurt.