White House blames GDP decline on defense spending decreases, Hurricane Sandy

Politics,Beltway Confidential,Charlie Spiering

The White House this morning reacted to the news of the declining GDP rate by blaming defense spending decreases and Hurricane Sandy. The U.S. economy shrank by 0.1 percent in the fourth quarter, for the first time since mid-2009.

“A likely explanation for the sharp decline in Federal defense spending is uncertainty concerning the automatic spending cuts that were scheduled to take effect in January, and are currently scheduled to take effect on March 1st,” explains Alan B. Krueger, the Chairman of the Council of Economic Advisers in a statement. “The decline in government spending across all levels reduced real GDP by 1.33 percentage points in the quarter.”

Krueger also attributed the decline in to Hurricane Sandy, which struck the East Coast in December.

“Both international trade flows and inventory accumulation could have been affected by disruptions caused by Hurricane Sandy, although a precise estimate of the effect of the hurricane on GDP is not available,” he said. “Nonetheless, the BEA reported that Hurricane Sandy destroyed $44 billion worth of fixed capital, which indicates one of the storm’s significant economic effects.”

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