[finnbow]

Originally Posted by whell

...according to the Federal Reserve Bank of San Francisco.

http://www.frbsf.org/publications/ec...el2013-16.html

"Surprisingly, despite all the attention federal spending cuts and sequestration have received, our calculations suggest they are not the main contributors to this projected drag. The excess fiscal drag on the horizon comes almost entirely from rising taxes. Specifically, we calculate that nine-tenths of that projected 1 percentage point excess fiscal drag comes from tax revenue rising faster than normal as a share of the economy."

"However, CBO projections and our estimate based on the countercyclical history of fiscal policy suggest that federal budget trends will weigh on growth much more severely over the next three years. The federal deficit is projected to decline faster than normal over the next three years, largely because tax revenue is projected to rise faster than usual."

So, the sequester is not impeding growth, but the increase in tax burden is. Self evident to some, but I'm glad the Fed has finally figured it out.

They're making an argument against austerity in these economic times. The second sentence in the highlighted top section says of Federal fiscal policy:

"(O)ver the past 2½ years it has become unusually contractionary as a result of several deficit reduction measures passed by Congress."

Their criticism is of the GOP's backassward fiscal policy in tough economic times.