Friday, absent Congressional and Presidential action, the Budget Control Act’s Sequester kicks in, forcing across-the-board spending cuts of $1.1 trillion spread out over nine years, with $85 billion cuts coming in 2013.  Without question, this reduction in federal spending will impact the economy, particularly as we measure it.  Government spending is a component of aggregate demand, and reduced demand in the economy will have its consequences.  Also, government spending is a component of Gross Domestic Product (about 23% of it), and since recessions are indicated (in part) by declining GDP, a cut in federal spending increases the probability of an Continue Reading »