Today, Société Générale issued a research report arguing that fiscal drag in the U.S. has been "defeated" rather than delayed.
Monetary easing and strong growth in housing are allowing the economy to power through federal tax increases and spending cuts, according to SocGen's Chief U.S. Economist Aneta Markowska.
And with sequestration in place, federal debt levels are set to stabilize as a share of the economy over the next decade—meaning investors don't have to fear another yet round of fiscal changes.
SocGen expects economic growth to accelerate in the second half of the year.
But what most interested us in the report was SocGen's roundup of furloughs in the federal workforce. It turns out, they're more limited than people expected—which is why they haven't been holding the economy back much.
Furloughs are almost entirely limited to the Department of Defense and the Internal Revenue Service. In all, SocGen expects 850,000 federal workers to be furloughed for an average of 10.5 days. That's equivalent to the loss of 35,000 full-time jobs—just a small blip on the overall economic picture.
Here's the department-by-department table showing who's getting furloughed and who isn't:
Sequestration isn't a smart policy. But it's coming late enough in the recovery, and the Federal Reserve has been active enough in offsetting it, that Washington's stupidity won't damage the economy too much.