Here Comes The Sequester, And Another 1% Cut To 2013 GDP

Several days ago we showed an analysis that indicated that the elimination of the payroll tax cut would likely eat into 1.5% of 2013 US GDP and subtract as much as 3.5% of 2013 growth based on one submodel - a deduction to overall US growth which already puts US GDP forecasts in borderline recession territory. We also added the caveat that "no estimates take into account spending cuts, which may happen, and which will serve as a double whammy to consumption in addition to already enacted tax hikes." Today, we present the flip side to the GDP calculation, namely what may and likely will happen to US growth once the pound of flesh is extracted by the GOP in exchange for raising the debt ceiling, which will eventually be raised even if it means a shutdown in the government for an indefinite period of time. The reason: the sequester, whose implementation most thought would be delayed until ...