Are government spending cuts slowing the recovery?

The private sector is growing faster than the broader economy, and some analysts blame government budget cuts for stalling a more robust economic comeback

Rep. Paul Ryan (R-Wis.)
(Image credit: Chip Somodevilla/Getty Images)

Last week, the government reported that gross domestic product (GDP) — the broadest gauge of American economic activity — grew at a tepid pace of 2.2 percent in the first quarter. While the data seems to confirm that the recovery is trudging along, its progress is too sluggish to make a significant dent in the unemployment rate. So what's holding the economy back? The Obama administration says the private-sector economy actually grew at a rate of 3.5 percent, and argued that government budget cuts — largely in the form of reduced spending — are hampering the overall recovery. Are spending cuts to blame for weak growth?

Yes. The data makes that abundantly clear: The GDP report shows that "continuing reductions in government spending dampened overall growth," says McClatchy Newspapers. Federal spending dropped 5.6 percent; military spending fell 8.1 percent; and spending by state and local governments dipped 1.2 percent. These drops lead directly to layoffs and offset the "rays of hope" shining from the private sector. That is one reason why there is a "divide between businesses, which appear to be thriving, and workers," who continue to struggle.

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