Impact Of GOP's Job-Killing Budget Cuts: 700,000 Jobs Lost

Mark Zandi of Moody's Analytics today confirms what several other experts are saying about the slash-and-burn budget antics of House conservatives: The budget cuts being pushed by House Speaker John Boehner and the Tea Party-possessed House of Representatives will not put people back to work, They will put people out of work.

Zandi's report [1] says: "The House Republicans’ proposal would reduce 2011 real GDP growth by 0.5% and 2012 growth by 0.2%. This would mean some 400,000 fewer jobs created by the end of 2011 and 700,000 fewer jobs by the end of 2012."

Zandi's finding tracks a report released last week by Goldman Sachs [2] that the House budget cuts would cause a drop in economic growth of as much as 2 percentage points this year and drive unemployment back up to as high as 10 percent.

Zandi's report makes these key points:

• "The economy is adding between 100,000 and 150,000 per month—but it must add closer to 200,000 jobs per month before we can say the economy is truly expanding again. Imposing additional government spending cuts before this has happened, as House Republicans want, would be taking an unnecessary chance with the recovery."
• "Additional spending cuts would also be at cross-purposes with the government’s other economic policies," including the 2009 economic recovery actions and the Federal Reserve's efforts to add liquidity to the economy.
• Federal budget deficits are not crowding out private investment, an oft-stated rationale for cutting government spending. "Business demand for credit has recovered modestly, and households continue to lower their debt obligations. Interest rates also remain extraordinarily low," Zandi wrote. While "global investors won’t remain avid buyers of U.S. debt for long if policymakers don’t tackle the nation’s long-term fiscal problems," he went on to write, "markets today appear unconcerned about the near-term deficits."

Zandi's report was raised this afternoon at a House Democratic Caucus hearing led by House Democratic Leader Nancy Pelosi. In her opening remarks, Pelosi brought up the Zandi paper and pointed out that the House Republicans have yet to put forward a substantive jobs-producing plan. We have been in session for seven weeks, and the Republicans are erasing 100,000 jobs a week, by their own legislation," Pelosi said.

The caucus hearing Pelosi chaired examined one aspect of their jobs-producing agenda, examining the job-creating impact of shifting tax subsidies from oil companies to emerging green energy industries.

Rep. Edward J. Markey, D-Mass., said that from 2005 to 2009, a period in which ExxonMobil, BP. Chevron and ConocoPhillips earned $485 billion in profits, the oil industry actually cut more than 10,200 jobs in the United States.

One of the witnesses at the hearing, Tom Carnahan of the Wind Capital Group, said that long-term credits for the wind industry, on the other hand, would not only help stabilize that industry but would spur an increase in manufacturing jobs. Carnahan said that it is far more cost-effective to manufacture windmill components in the United States, near where they will be installed, than import them from overseas. And the cost of wind-generated power is already becoming cost-effective when compared to fossil fuels, especially when the volatility of oil prices is taken into account.

The bottom-line message: The conservative proposals to cut programs vital to stimulating the growth of the new economy while maintaining wasteful subsidies of old-energy businesses will send the economy backwards and put people out of work—and in doing so make our budget problems worse.