WASHINGTON, March 5 (Reuters) - Deep U.S. government spending cuts threaten the fragile economic recovery and will do little to address the nation’s long-term fiscal challenges, a top White House economic adviser said on Tuesday.
About $85 billion in automatic federal budget cuts, known as the “sequester,” started taking hold on March 1, amid warnings of job losses and harm to an economy that barely grew in the final three months of 2012.
“These indiscriminate, across-the-board spending cuts pose a threat to the ongoing economic recovery,” Alan Krueger, chairman of the White House Council of Economic Advisers, told the National Association of Business Economics.
“You can’t take $85 billion out of the federal budget in the remaining seven months of the fiscal year without hurting the economy and job growth.”
According to the Congressional Budget Office, the sequester could cost about 750,000 jobs by the end of the year, most of them in the private sector.
The International Monetary Fund warned last week that the cuts, if fully implemented, could shave more than half a percentage point from growth this year.
“We can cut the near-term deficit in a dumb way that short-changes the future without addressing our long-term budget problems. The sequester was not designed as a means to address our budgetary challenges,” said Krueger.
“And what do we, as a nation, get in return for this self-inflicted wound? The sequester is the antithesis of smart, balanced fiscal policy. It jeopardizes the current recovery at a time when policymakers should be focused on growing the economy and investing in our nation’s future.”