A bit of surprising news this morning: The economy actually shrank in the fourth quarter of 2012. It was only down by an annual rate of 0.1 percent, but it had been expected to grow by 1.1 percent. And it didn't drop because of burdensome regulation or slow job growth. It dropped because of the Pentagon.
From The Washington Post:
[F]ederal defense spending fell at an astounding 22.2 percent annual rate in the quarter, which subtracted 1.28 percentage points from GDP growth. That was in part a reversal from the unusual 12.9 percent gain in the third quarter. But when the two quarters are averaged together, the defense sector was a drag on the economy in the second half of 2012 -- and that’s before a “sequester” of automatic defense cuts goes into effect this year if Congress doesn’t act to avert it.
That "sequester" is the result of a poison pill that Congress administered to itself. Last year, knowing full well that Congress couldn't be trusted to get anything done without some sort of threat hanging over its head, Congress decided to force Congress to act, passing a bill that created huge, automatic spending cuts unless Congress got its act together and figured out a budget package. Well, Congress was not smart enough to avoid Congress' trap, so now those $1.2 trillion in budget cuts are slated to go into effect.
Enter Senate Majority Leader Harry Reid (D-Nev.) with an idea. From Environment and Energy Daily: