Kudlow: No Sequester Catastrophe

President Obama may be backing away from his doomsday spending-cut predictions as the sequester goes into place. But the new party line is that while there will be no impact in the first few days, there’ll be a slow, downward slump after that.

What, are we to believe that lower spending and smaller government damage the economy? Doesn’t that run counter to virtually every reasonably objective study in recent years — including ones from a number of U.S. academics and the Organization for Economic Cooperation and Development in Europe — that describe how countries with lower government spending grow more, and how countries with higher government spending grow less?

However you calculate the sequester spending cuts, and however uneven they may be, the reality is that the sequester at least moves the ball in the right direction. I maintain that by reducing the government spending share of gross domestic product, the sequester is pro-growth.

The White House and the Congressional Budget Office are predicting a 0.5 percent to 0.7 percent decline in GDP, post-sequester, and a loss of 750,000 jobs. All this from a spending reduction of roughly 2.4 percent over the next 10 years, in which Uncle Sam’s spending growth will be $44.8 trillion rather than $46 trillion.

Fed chairman Ben Bernanke and other demand-siders have called for a slow, gradual federal-spending reduction. Well, that’s exactly what they’re going to get. The first fiscal year of sequester will see $44 billion in spending cuts, which is about one quarter of 1 percent of GDP. That’s pretty gradual.

Read More at Human Events . By Lawrence Kudlow.

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