GOP spending cuts would hit economy hard
By Jeanne Sahadi, senior writerFebruary 23, 2011: 6:38 PM ET
NEW YORK (CNNMoney) — The more federal spending Congress slashes this year, the greater the potential drag on economic growth, according to a new analysis from Goldman Sachs.
In a research note, economists at the Wall Street bank estimate that the House GOP’s spending bill — which would cut $61 billion between March and Sept. 30 — could reduce economic growth by 1.5 percentage points to 2 percentage points in the second and third quarters.
Last week, the Federal Reserve forecast the economy would grow between 3.4% and 3.9% this year.
The drag would be less if lawmakers decide to cut only $25 billion, which Goldman believes is more likely.