Spending Cuts Could Trigger Deeper Slowdown: Kiplinger Economic Forecasts
There is a risk the debt limit could be hit as soon as June


Our highly experienced Kiplinger Letter team assesses the state of the U.S. economy and the events affecting it, producing regular forecasts on the outlook for the economy, to help you make better financial decisions.
Our experienced Kiplinger Letter team will update you on all the important developments (Get a free issue of The Kiplinger Letter or subscribe). You will always get updates first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…
If spending cuts are required to resolve the looming debt limit crisis, they will likely be moderate and/or spread out over time, so as not to ding current GDP growth too much. However, any cuts that take place at a time when the economy is slowing will likely make that slowdown a little worse.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
There is precedent for this sort of outcome. The 2011 debt limit fight between President Barack Obama and House Republicans resulted in $917 billion in cuts spread over 10 years, which reduced the immediate impact on the economy.
Lack of resolution to the debt crisis
But note that the White House is determined to avoid compromise, hoping instead that fissures in the GOP eventually drive moderates to its side. With no resolution, Uncle Sam can spend only the revenue coming in from taxes and other sources, triggering even more painful automatic spending cuts.
The timing of a potential crisis depends on June 15 quarterly tax payments. These could delay the moment of truth until late July or early August if they’re good. Otherwise, the debt limit would be hit in June, per recent Treasury Department warnings.
Troubles with manufacturing
Manufacturing’s April expansion doesn’t mean the sector is out of the woods, despite a benchmark survey showing improvement in orders, production, hiring and exports.
Other parts of the survey indicate a future slowdown: Businesses think customer inventories are too high, which happens only when a downturn is coming. Manufacturer inventories and order backlogs are also contracting.
Still, it’s likely that any slowdown will be gradual, a source of frustration for the Federal Reserve, which had hoped for faster relief of price pressures.
Manufacturers face a dilemma with their suppliers. Facing parts shortages in 2021 and 2022, many had expanded the number of suppliers they worked with to hedge against supply chain risk. With demand waning, they’ll face a tough choice between the hard-won diversification of their supplier bases and preserving cash.
This forecast first appeared in The Kiplinger Letter. Since 1923, the Letter has helped millions of business executives and investors profit by providing reliable forecasts on business and the economy, as well as what to expect from Washington. Get a free issue of The Kiplinger Letter or subscribe.
Read more
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

David is both staff economist and reporter for The Kiplinger Letter, overseeing Kiplinger forecasts for the U.S. and world economies. Previously, he was senior principal economist in the Center for Forecasting and Modeling at IHS/GlobalInsight, and an economist in the Chief Economist's Office of the U.S. Department of Commerce. David has co-written weekly reports on economic conditions since 1992, and has forecasted GDP and its components since 1995, beating the Blue Chip Indicators forecasts two-thirds of the time. David is a Certified Business Economist as recognized by the National Association for Business Economics. He has two master's degrees and is ABD in economics from the University of North Carolina at Chapel Hill.
-
4 Career Moves to Make Now if You're Worried About a Recession
Worried about a recession? These steps to protect your job prospects will help you professionally whether a downturn develops or not.
-
How StoryCorps Works and How You Can Tell Your Story
StoryCorps has recorded conversations between thousands of people, and anyone can participate. National facilitator Alan Jinich explains how to share your story.
-
What is AI Worth to the Economy?
The Letter Spending on AI is already boosting GDP, but will the massive outlays being poured into the technology deliver faster economic growth in the long run?
-
More Shutdown Struggles Ahead for Divided Congress
The Kiplinger Letter Failure to pass a government funding bill by September 30 would trigger a shutdown of many federal services.
-
Kiplinger Special Report: Business Costs for 2026
Economic Forecasts Fresh forecasts for 2026, to help you plan ahead and prepare a budget on a range of business costs, from Kiplinger's Letters team.
-
Trump-Era Regulations Will Broaden Access to Crypto
The Kiplinger Letter The president wants to make the U.S. the leader in digital assets.
-
How to Adopt AI and Keep Employees Happy
The Kiplinger Letter As business adoption of AI picks up, employee morale could take a hit. But there are ways to avoid an AI backlash.
-
The Rise of AI: A Kiplinger Special Report
The Kiplinger Letter Our special report looks at the opportunities and challenges of generative AI and how its rapid move into the mainstream is impacting every aspect of our lives.
-
Big Changes Are Ahead for Higher Ed
The Kiplinger Letter A major reform of higher ed is underway. Colleges are bracing for abrupt change, financial headwinds and uncertainty.
-
AI-Powered Smart Glasses Set to Make a Bigger Splash
The Kiplinger Letter Meta leads the way with its sleek, fashionable smart glasses, but Apple reportedly plans to join the fray by late 2026. Improved AI will lure more customers.