The economy shrank from October through December for the first time since the recession ended, hurt by the biggest cut in defense spending in 40 years, fewer exports and sluggish growth in company stockpiles.
The Commerce Department said Wednesday that the economy contracted at an annual rate of 0.1 percent in the fourth quarter. That’s a sharp slowdown from the 3.1 percent growth rate in the July-September quarter.
The surprise contraction could raise fears about the economy’s ability to handle tax increases that took effect in January and looming spending cuts.
Rick Santelli made a stunning observation Wednesday about the shocking report that the economy actually shrunk in the fourth quarter last year.
“We are now Europe,” he declared on CNBC’s Squawk Box.
Santelli said, “when you act like Europe, you get growth rates like Europe, and our discussions with economists sounds like we’re in Europe. They have the same discussions constantly.”
“They’re always doing the right thing,” he continued. “They’re always thinking they know better. And this is the kind of growth. We have become Europe. We are now Europe.”
Steve Liesman pushed back, “We reduced federal spending, government spending by 15 percent. Which part of that’s not Europe don’t you get?”
“And why do we need to reduce government spending?” asked Santelli. “Because we run trillion dollar deficits for crying out loud.”
Economists forecast that unemployment stayed at the still-high rate again this month. The government releases the January jobs report Friday.
The White House allowed the temporary tax cut to expire in January, but reached a deal to keep income taxes from rising on most Americans.
The tax increase will lower take home pay this year by about 2 percent to middle class workers. That means a household earning $50,000 a year will have about $1,000 less to spend. A household with two paid workers will have up to $4,500 less.
