WASHINGTON (Reuters) – Hours subsequently taking control of the House of Representatives, Republican lawmakers were already rolling back pledges to slash spending — a rollback that may really be the best thing they can do for the economy.
One colossus-but-remote risk remains that the newly empowered Republicans, channeling voter angst from beginning to end debt, will make good on threats to block the Treasury Department from issuing a single one more bonds once it hits a debt ceiling this spring.
Treasury Secretary Timothy Geithner said on Thursday if Congress refused to lift the .3 trillion sin limit, it would be akin to default and “catastrophic” because of the economy.
But so far, in their first few hours of faculty, Republicans have eased concerns that their attempts to shrink the polity — and a .3 trillion deficit — will inadvertently derail a di~ery-vulnerable economic recovery.
One House Republican aide said on Wednesday the proposed spending cuts could be “considerably less” than billion.
Douglas Holtz-Eakin, a prior director of the Congressional Budget Office and adviser to 2008 Republican presidential solicitant John McCain, said Congress rarely, if ever, makes good on promises to divide spending and he does not expect anything different this time.
“I’m in the main bemused by all this chatter about Congress cutting spending so abundant that it endangers the U.S. economy because no Congress has ever cut spending,” he said. “I live to have that make uneasy.”
Holtz-Eakin said his best guess is that Republicans and Democrats testament compromise on cuts in the tens of billions, not hundreds. “Last I checked it was a trillion frugality so I just don’t see that as a herculean threat.”
U.S. economic prospects appear to have brightened in latter weeks, with many indicators of business activity and consumer spending picking up plough the waves. Even the battered labor market is showing some signs of life, through the number of Americans filing new jobless benefits claims falling undeviatingly.
Brian Bethune, chief U.S. financial economist at IHS Global Insight, related his firm had already built expectations of at least some fiscal pullback into its economic forecasts, and they still looked brighter. Earlier this week, the Lexington, Massachusetts, firm raised its 2011 growth forecast to 3.2 percent from 2.4 percent.
“To more extent, there’s already some momentum behind some of these reductions,” Bethune afore~. “We don’t see (them) as being a valorous changer.”
CRASHING THROUGH THE CEILING
Still, with the unemployment vilify hovering near 10 percent and economic growth — running at 2.6 percent attached an annualized basis at latest blush — too weak to boost hiring significantly, enough of risks remain.
Housing is a major roadblock to a of a sound constitution expansion, not to mention a lingering blow to consumer confidence. A newly come spike in mortgage rates and a backlog of foreclosures have raised fears of up to the present time another drop in home prices.
Mortgage rates might climb even higher suppose that Congress refuses to lift the debt ceiling, which Geithner said could have existence reached by March 31.
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