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Mon Dec 10, 2012, 12:33 AM

Report: Spending Cuts Will Hurt Economic Growth, Revenue Increases Won’t

Filing this one under No Shit, Sherlock.


As Congress brings the United States closer to the brink of the so-called “fiscal cliff,” the package of automatic spending cuts and tax increases that will take effect at the end of the year, yet another report has found that the spending cuts pose a major threat to economic growth, while small revenue increases won’t.

The study, from the International Monetary Fund, found that the negative impact of spending cuts during economic downturns in the United States are “statistically significant and sizeable,” while the impact of new revenues is “very small and not significantly significant.”

For each dollar of spending cuts during an economic downturn, the IMF found, the United States could lose as much as $1.80 in economic activity. A one percent rise in revenues, meanwhile, would shave just 0.1 percent of growth from the nation’s gross domestic product (the left side represents the effect of spending cuts; the right, tax increases):

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