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Pullback in Government Spending - 11/16/15

A recently released analysis from the U.S. Commerce Department identifies a key reason for the lack of robust economic growth in America during the current business cycle – a pullback in government spending.  According to the study, if the public sector hadn’t pulled back on spending since twenty ten, the economy would have expanded at nearly three percent per year rather than at roughly two percent per year. 

Specifically, the analysis indicates that from twenty ten through the first half of twenty fifteen, year-over-year economic growth was zero point nine percentage points lower, on average, that it otherwise would have been without the government pullback.  As indicated by the Wall Street Journal, that negative for near-term growth prospects could be easing significantly thanks to a budget deal in Congress that would raise federal spending levels. 

Rising home values should also allow local governments to collect more in property taxes, and to invest more back into their respective economies.  The drag coming from the public sector was most pronounced several years ago when federal stimulus spending expired and was replaced by spending cuts in twenty thirteen. 

Anirban Basu, Chariman Chief Executive Officer of Sage Policy Group (SPG), is one of the Mid-Atlantic region's leading economic consultants. Prior to founding SPG he was Chairman and CEO of Optimal Solutions Group, a company he co-founded and which continues to operate. Anirban has also served as Director of Applied Economics and Senior Economist for RESI, where he used his extensive knowledge of the Mid-Atlantic region to support numerous clients in their strategic decision-making processes. Clients have included the Maryland Department of Transportation, St. Paul Companies, Baltimore Symphony Orchestra Players Committee and the Martin O'Malley mayoral campaign.