Business Trends

Recovery Continues As Sequester Becomes Reality, by Delta Associates

File Type: Free Content, Article
Release Date: April 2013
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Economic uncertainty has been a drag on overall economic growth, leading to below average job gains and consumer spending. This has created a lack of momentum needed to drive the economy into a more robust recovery, according to a report titled National Economy First Quarter 2013 by Delta Associates, a Transwestern Company.

In comparison to the past three recessions, the current recovery remains sub-par, as consumers and businesses have had to adjust to a new economic reality of slower growth. Now, however, the sequestration spending cuts have become reality, and the Bush-era tax cuts have been extended, ending two of the principal sources of fiscal uncertainty. Consumers appear buoyed by these developments, as evidenced by recent housing  market performance, 1st quarter stock market performance and retail sales figures.

The U.S. Congress was unable to reach an agreement by January 2013 on spending cuts that would have averted the sequester – the automatic reductions in both Defense and non-defense spending. Sequestration was delayed until March 1, 2013 with the passage of the American Taxpayer Relief Act of 2012, which preserved the Bush-era income tax cuts, thus allowing the country to avoid going over the full “fiscal cliff.”

Looking ahead, the sequestration process will mean a reduction in spending totaling $1.2 trillion through the year 2021. It is still possible that sequestration will be amended as part of a “grand bargain” on the budget.

The Congressional Budget Office projects that with sequestration the federal budget deficit may fall to about $845 billion in fiscal 2013, or about 5.3 percent of the gross domestic product (GDP). This would be the first time in five years that the deficit has been less than $1 trillion.