The sequester (probably) won't last that long. How long the cuts stay in place remains a big question, but Baumohl doesn't expect the sequester to last through the remainder of the year. The more probable outcome is that cuts will remain for a month or so until some agreement is reached on spending and tax revenues in late March or early April.
Cuts for a period of three or four weeks would have "no measurable impact" on GDP growth, Baumohl says, but were the cuts to stay in place through the end of the year, the economy would grow 0.5 percent less, with GDP advancing 2.7 percent instead of 3.2 percent.
The more pressing concern for the economy is rising gas prices. The average retail price of gasoline surged to the highest level ever for this time of the year, to around $3.77 a gallon, bringing the nation closer to the "tipping point"—around $5 a gallon, according to Baumohl—when consumer spending will be hindered causing serious damage to the economy.
"Each dollar spent on gasoline reduces what's available for shopping and traveling," he says. "We're not [at $5 a gallon] yet but if prices continue to rise through winter and into spring, there is some concern."
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