June 17, 2013, Fairfax, VA—Americans for Limited Government President Nathan Mehrens today issued the following statement in response to a call from International Monetary Fund (IMF) Director Christine Lagarde for Congress to “repeal the sequester” because she says “the effect of the sequester and deficit reduction more generally are already affecting the economy… [by] shav[ing] 1.25 to 1.75 percentage points of growth”:
“Lagarde’s complaint that spending cuts lower GDP is simultaneously accurate and misleading, as government spending is proportionately included in the measure of the GDP. This is a bias of the first order in favor of government spending, because when government grows faster than the private sector, it appears to boost GDP and when spending is reduced, GDP appears to slow down. This is an illusion.
“The Bureau of Economic Analysis reports real growth annualized in the first quarter was 2.4 percent, but if government spending is excluded from the measure, the private sector grew by more like 4 percent. By that measure, the private sector is doing just fine even with sequestration.
“Moreover, it is only because of sequestration that S&P has been able to upgrade its outlook on the $16.7 trillion U.S. national debt from negative to stable. It is particularly insulting to taxpayers for the IMF to demand the sequester be repealed at the same time the Obama Administration has also asked for a $65 billion increase in the U.S. quota to the IMF. If anything, this is just one more reason the U.S. should defund the IMF in full.”
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