Some economists say the economy, weak as it remains, could withstand the spending cuts contained in the sequester without entering recession. But they generally agree that the cuts, designed to total about $100 billion a year, would represent a substantial blow.
Jan Hatzius, Goldman’s chief economist, says that if the sequester takes effect, it would be harder for the economy to accelerate later this year, “and we would probably reduce our GDP numbers” for the year’s final three quarters to about 1.5 percent annualized growth, or a bit worse.
That would be a very disappointing growth rate, raising the prospect of continuing high unemployment. But if that forecast is correct, the US would avoid recession.
This week’s GDP surprise (economists hadn’t been expecting growth to turn negative) prompted both Republicans and Democrats to lament policy failures in Washington.