While critics of Obama’s economic policies say a fourth-quarter
decline in GDP is another sign that the U.S. economic recovery has stalled, the White House shrugged off the report as a budgetary spasm.
In any case, the Commerce Department reports U.S. economic growth fell from a 3.1 percent gain during the summer to a 0.1 percent contraction in the fourth quarter. Under that last quarter of Mr. Obama’s first term
, defense spending plunged by over 22 percent just as exports slipped by 5.7 percent – double trouble for an already weakened U.S. economy.
Meanwhile some economists say Hurricane Sandy, that struck the northeast region in October, bore some of the blame.
Despite deep cuts in defense appropriations, deficit spending
continues to flourish under the Obama administration and there is no end in sight for trillions of dollars in federal deficit spending.
Nevertheless, instead of acknowledging any responsibility for the state of the economy, the White House is warning Congress not to implement another round of across-the-board cuts of 9 percent in defense and domestic spending this spring.
Republicans argue that spending cuts are necessary to slow unsustainable deficit spending implemented by the administration. During the Obama administration, the U.S. deficit has soared beyond any past precedent, increasing by more than $5 trillion.
But some economists were quick to put a positive spin on the nation’s negative economic report.
“This report is nowhere near as bad as it looks on the surface,” said Nigel Gault
, chief U.S. economist at IHS Global Insight. “The drop should be viewed as payback for a strong third quarter.”
Mr. Krueger said the economic contraction was a result of disruptions by Sandy and a “precipitous decline” in defense spending likely caused by uncertainty about the across-the-board spending cuts, or sequesters, that were looming at the end of the year. Those cuts never happened, having been put off until March 1 under a New Year’s Day deal between President Obama and Congress. Many in Congress are considering letting the sequesters take effect this time.
Mr. Gault said it was a stretch to blame the quarterly contraction on fears about the “fiscal cliff,” including the looming sequester.
The results of the first quarter will be watched closely because another negative report would mean the country is cruising back into the throws of recession while a positive report could signal the negative quarter was a fluke.
The U.S. economic contraction means that a shaky economy continues to be a central legacy of Mr. Obama's administration