Goldman Sachs Says GOP Budget Plan Will Hurt Economy

The GOP spending cuts have been criticized again.

A Goldman Sachs economist has warned that the $60 billion package of spending cuts proposed by the Republicans to counter President Obama's proposal could slow economic growth.

And if budget wrangling between the Obama administration and the Republican-dominated House of Representatives led to a shutdown? That, according to Goldman, could cost $8 billion a week, the Financial Times reported.

Goldman's warning follows Treasury secretary Timothy Geithner's recent claims that the Republican plan would cost jobs.

In the confidential report, obtained by ABC News, among other news outlets, Goldman Sachs economic forecaster Alec Phillips said the GOP plan could slow economic growth by up to 2 percent. Even a compromise deal, with $25 billion in cuts could slow growth by 1 percent.

In its latest spending plan, the White House predicted GDP growth of 2.7 percent this year.

Goldman's analysis contradicts the GOP's "cut-and-grow' fantasy," Chuck Schumer, (D-NY) told Reuters. "This nonpartisan study proves that the House Republicans' proposal is a recipe for a double-dip recession," Schumer added.

The Republican spending measures were proposed in opposition to White House budget plans released earlier this month, spurring fears that there would be no compromise before temporary measures funding the government run out on March 4.

Without a budget solution, the U.S. government could be shut down. Based on similar government closures in 1995 and 1996, Goldman says a shutdown would cost the U.S. economy $8 billion in reduced spending.

Earlier this month, the White House presented a budget focused on reducing the deficit and spurring growth. President Obama's plan included funding cuts for a variety of programs that assist the working poor, and help the needy heat their homes.

The aggregate of the cuts, the Goldman report said, according to ABC News, could briefly slow growth:

"Federal spending cuts deserve the most attention... discretionary spending cuts of $25bn and $50bn below the CBO baseline for FY2011 and FY2012 respectively--would shave nearly one percentage point off of the annualized rate of real GDP growth in Q2, but would fade quickly with a negligible effect on growth by year-end."

In response, early on Saturday morning following an all-night session, the House of Representatives voted 235-189, to pass legislation that would slash $60 billion in government spending between now and the end of September, setting up a showdown. The President has vowed to veto the plans.

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