Brian Beutler says the GOP’s obsession with the deficit has HURT the economy:
Here’s the buried lede from the Congressional Budget Office, which on Tuesday released its Budget and Economic Outlook for the coming decade: D.C.’s deficit obsession has been quite effective at cutting deficits at the expense of the still-struggling economy.
“[E]conomic activity will expand slowly this year, with real GDP growing by just 1.4 percent,” according to CBO’s projections. “That slow growth reflects a combination of ongoing improvement in underlying economic factors and fiscal tightening that has already begun or is scheduled to occur-including the expiration of a 2 percentage-point cut in the Social Security payroll tax, an increase in tax rates on income above certain thresholds, and scheduled automatic reductions in federal spending. That subdued economic growth will limit businesses’ need to hire additional workers, thereby causing the unemployment rate to stay near 8 percent this year, CBO projects.”
In other words, intentional efforts to reduce annual deficits and stabilize the debt are working. But if you retrain your gaze from the government’s balance sheet to the real economy, you’ll see the impact of that austerity is fewer people working and slower growth. According to CBO, the recovery won’t really pick up steam until next year, and the economy won’t have recovered until the end of 2017, when it will reach its output potential, and unemployment will fall to 5.5 percent.
CBO notes that the U.S. hasn’t experienced six consecutive years with unemployment exceeding 7.5 percent in over 70 years.
If you cut spending, you slow economic growth. It’s a pretty simple cause and effect. And it’s very important for the Republican Party to try and slow economic growth when a Democrat is in the Oval Office.
Greg Sargent piles on:
President Obama continues to demand a mix of spending cuts and new revenues via the closing of loopholes, and yesterday he called on Congress to agree on a short term package of cuts and tax reforms to temporarily delay the sequester cuts, since they could cripple the recovery. GOP leaders shot this down, because they continue to refuse to countenance any new revenues. As John Boehner put it today: “The American people believe that the tax question has been settled.”
Meanwhile, other Republicans are taking other steps to avoid agreeing to new revenues. Republicans on the Senate and House Armed Services Committee will unveil a plan today to avert the sequester for one year by paying for it with … a 10 percent across the board reduction in the federal workforce. (That would do wonders for the recovery.)
So, here’s a chart, created by House progressives, that perfectly captures just how absurd it is that Republicans insist only on spending cuts to replace the sequester, while refusing to entertain a penny in new revenues from the rich. It shows what happened during the last two Congressional rounds of deficit reduction:
The first circle represents the more than $1.5 trillion in spending cuts Dems agreed to, in exchange for zero in new revenues, as part of the debt ceiling deal of 2011. The second circle portrays the state of play after Republicans agreed to some $700 billion in new revenues as part of the recent fiscal cliff deal. As you can see, the ledger is still tilted lopsidedly in favor of Republicans: Some 70 percent of the deficit reduction we’ve seen thus far came in the form of spending cuts Republicans want, while only 30 percent came in the form of the new revenues Democrats want.
Here’s what this means: Even if the parties reach a deal in the third round of deficit reduction to avert the sequester with something approaching an equivalent sum of spending cuts and new revenues, the overall deficit reduction balance would still be heavily lopsided towards Republicans. Yet they continue to insist on resolving round three only through cuts, anyway.
As Steve Benen notes, we know this sequester would do severe damage to the economy, because the Congressional Budget Office has told us so, and because the recent economic contraction also confirmed this.