Politics

Democrats blame GOP for economy’s downturn

Photo of Neil Munro
Neil Munro
White House Correspondent

White House officials and Democrats are blaming the GOP and Hurricane Sandy for the stunning late-2012 shrinkage in the nation’s economy.

That shrinkage threatens the president’s agenda, which Republicans argue is focused on boosting the Democratic Party’s clout, not on boosting the nation’s economy and job-rolls.

If the economy shrinks again in the first three months of 2013, it will have gone into double-dip recession following four years of very slow growth. That would likely damage Obama’s standing in the polls and hurt his ability to push legislation in Washington, D.C.

The apparent contraction was announced Wednesday morning when the federal Bureau of Economic Advisers estimated the nation’s gross domestic product nudged down 0.1 in the last three months of 2012.

“Hurricane Sandy disrupted economic activity and Federal defense spending declined precipitously, likely due to uncertainty stemming from the sequester,” said a 9:30 a.m. statement by the president’s chief economic adviser, Alan Krueger.

“In addition, a decline in exports of goods and services and slower inventory investment both subtracted from real GDP growth in the fourth quarter,” he said.

“Today’s report is a reminder of the importance of the need for Congress to act to avoid self-inflicted wounds to the economy,” he said.

Brad Woodhouse, the spokesman for the Democratic National Committee, pushed a more explicitly partisan version of the same theme via twitter. “GOP holds econ hostage over debt ceiling. Deal to avert crisis includes steep spending cuts they wanted. Economy slows. Blame Obama. #unreal,” he tweeted at 9;45.

The 0.1 contraction in the initial estimate may be an anomaly.

Government spending fell in the last three months, mostly because of a 22 percent drop in Pentagon spending. Non-government activity rose slowly in the last quarter, and new late-arrival data may wipe out the apparent 0.1 percent shrinkage before the final estimate is released.

But other factors may continue or deepen the decline.

The spending drop was long predicted, partly because Obama and many Democrats are willing to cut defense spending to boost spending on various domestic spending, such as welfare.

Defense spending is slated for an additional $54 billion cut throughout 2013, and domestic programs are slated to be cut by roughly the same amount, because of the so-called “Sequester” automatic spending cuts agreed by the White House and the Hill in 2011.

Obama may try to reverse that sequester deal, but he’ll likely be forced by the GOP to pay a price.