The Real Economic Growth Killer - Government Spending Cuts

Barry Ritholtz of Ritholtz Wealth Management just tweeted this chart, which is from Moody's.

The chart shows the impact of government spending cuts on economic growth over the past few years.

As you can see, these cuts have created a severe drag that has slowed down the growth of the economy.

Now, you can argue that government spending is too high and, therefore, that we have to go through this painful austerity period of cuts before we can get everything ship-shape again.

And you can argue that we simply can't keep borrowing more money to fund spending we can't afford. (Many people will disagree with you on this and point out that the deficit as a percent of GDP has dropped radically this year, but you can still argue it.)

But you can't argue that government spending cuts help economic growth.

Because they don't.

As the chart above shows, government spending cuts hurt economic growth.