Political paralysis in Washington won't stall an economic recovery that's revving up across the rest of the country.
That's the consensus of economists surveyed by USA TODAY, who predict the recovery will accelerate late this year even without a deal by Congress and the White House to lessen the impact of automatic federal budget cuts.
The across-the-board spending cuts will cause growth to slow in the middle of 2013. But the negative effects will ease by the fourth quarter as the private sector gathers strength, according to the 43 leading economists surveyed May 6-9.
This year, the budget cuts are expected to pare federal spending by $65 billion and shave half a percentage point off economic growth, according to the Congressional Budget Office (CBO) and Moody's Analytics.
The economy expanded at a 2.5% annual rate in the first quarter. Economists' median estimates project growth is likely to slow to 1.8% in the current quarter and 2.2% in the third quarter.
Monthly job growth, which averaged 206,000 in the first quarter, will average 165,000 in the second quarter and 172,000 in the third quarter, the economists predict.
Many top economists, including Federal Reserve Chairman Ben Bernanke, have urged policymakers to put off much of the belt-tightening until the economy is on more solid footing. But with the Obama administration and a divided Congress making little progress in sporadic talks, more than two-thirds of the economists surveyed say it's unlikely even the fiscal 2014 budget cutbacks will be tempered.
An additional $40 billion in planned cuts next year will reduce 2014 economic growth by 0.3 percentage points, the CBO and Moody's say. Even so, the economists expect growth to pick up to 2.7% in the fourth quarter and approach 3% by early next year as job gains ratchet up to a 200,000 average monthly pace.
Since the labor market hit bottom in early 2010, the economy has grown about 2% annually and monthly job growth has averaged 162,000.
"There are some powerful positive forces to offset" the budget cuts, says Jim O'Sullivan, chief U.S. economist of High Frequency Economics.
The Federal Reserve's massive bond-buying initiative, he says, has held down long-term interest rates, juicing housing and driving up stock markets. Housing starts likely will total 990,000 this year and about 1.2 million in 2014, according to Standard & Poor's, up from 780,000 in 2012.
O'Sullivan says higher home and stock prices are making consumers feel wealthier so they'll spend more, adding 0.7 percentage points a year to economic growth. Continued job gains, he says, will further bolster spending. And the share of income that Americans are using to pay off debt has fallen to a historic low.
Meanwhile, 81% of the economists surveyed say the European economic slowdown will pose a lesser or unchanged risk to the economy this year vs. 2012.
Obstacles to a faster recovery remain. The economists say the new health care law will trim monthly job additions by 5,000 this year and 10,000 in 2014, as employers hire fewer full-time workers to avoid paying health insurance.
And Wells Fargo economist Mark Vitner says the stock market rally has mostly benefited the wealthy while wage gains for average Americans have languished.
"We're getting a recovery," he says. "It's just a slow recovery."