Deficit Under Control. Cuts Hurt Economy And Jobs. Republicans Demand More Cuts Anyway.

Dave Johnson

All of the original justifications for budget cuts have gone away. The sequester is hurting the economy and keeping unemployment high. But instead Republicans plan to double down on cuts. Apparently their real game is to force high unemployment and desperation for 99% of us to further enrich the 1%.

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The Republican justification for cutting was “soaring deficits.” But with recovery and tax increases the deficits are falling dramatically, already down by half. Even so Republicans continue to say we need cuts, even though cuts hurt the economy and cause continued high unemployment.

Deficit Down By Half And Falling

The deficit is falling dramatically. The deficit is already down by 50% as a share of GDP. From See Deficit Falling Even More Dramatically, Few Know It,

Academic Support For Cutting Was Found To Be Just Wrong

The intellectual justification for Republican demands to stop government efforts to grow the economy and cut instead came from work by Harvard economists Reinhart and Rogoff. Their work claimed that government debt hurts growth, even though the historical record showed that government spending is needed to stabilize the economy at times when businesses are nit hiring and people are not spending. Scolars examined Reinhart and Rogoff’s work and found numerous errors and apparently intentional omissions, including a spreadsheet error, and found that when those problems are fixed their conclusions were reversed. There are numerous news stories explaining the whole story.

Sequester And Other Cuts Are Hurting The Economy And Costing Jobs

As a result of the budget cuts the economy is barely moving. Jobs growth is stagnant. There were cuts from previous “deals” forced by Republican hostage-taking, but the “sequester” cuts an additional $85 billion from critical programs this year and over $100 billion more each year for the next decade.

NY Times: Budget Cuts Seen as Risk to Growth of U.S. Economy,

The cuts — a result of a policy known as sequestration — most likely would reduce growth by about one-half of a percentage point in 2013, according to a range of government and private forecasters.

That could be enough to again slow the arrival of a recovery, producing instead another year of sluggish growth and high unemployment.

[. . .] The cumulative effect of the sequester and the tax deal struck in January might slash economic growth by as much as 1.25 percentage points — from a growth rate that otherwise might have been more than 3 percent — in 2013, economists estimate.

Dylan Matthews at WaPo: Yes, the sequester is hurting growth, (click through for chart)

One of the factors appears to be that the sequester, particularly the defense spending cuts, took a bigger bite out of the economic recovery than anyone expected: …

Global Post: Government spending cuts hold US Q1 growth to 2.5%,

The “sequester” spending cuts held back the US economy in the first quarter, the Commerce Department said Friday, with GDP growth coming in at a lower-than-hoped 2.5 percent for the period.

… But federal government spending, hit by the “sequester” budget cuts, continued to drag on the economy, falling 8.4 percent, enough to diminish the impact of a rebound in private-sector activity.

According to Goldman Sachs the sequester cuts and a”consumer setback” is costing us GDP growth.

Republicans Doubling Down On Demands To Cut In Spite Of Having No Justification To Cut, And The Harm Cuts Are Doing

In spite of all the evidence that cutting government now is hurting the economy and killing job growth, Repubpican are demanding even more cuts, and are preparing to use the debt-ceiling again to try to force these cuts.

AP at Daily Herald (Chicago): House GOP gears up for debt showdown this summer,

Just as they did in 2011, Republicans are demanding spending cuts in exchange for increasing the debt limit again. Republicans say it’s the only way to get Democrats to agree to significant spending cuts, and they point to the 2011 debt showdown as proof.

… “With Washington again about to hit the debt limit, we are still faced with the same old problem — getting Washington’s spending finally under control,” said Rep. Dave Camp, R-Mich., chairmen of the Ways and Means Committee. “While Americans want Washington to start living within its means, they also know the full faith and credit of this country must never be questioned.”

Get spending “under control?” But it is under control — the deficit is down by half and falling.

What Is Real Reason For Republican Demands?

Republicans have achieved every publicly-stated goal and the deficit left behind by Bush is down by half and falling rapidly. But they continue to demand cuts anyway. Perhaps their publicly-stated justification for these terrible cuts was not their real agenda.

Very wealthy people are profiting from this austerity push. Dean Baker explains, in Deficits Are Bad and the Sun Goes Around the Earth,

…many people can profit from slow growth and high unemployment. The after-tax profit share of GDP is at its highest level more than 60 years. For those who own lots of stock and are at the top of the income ladder, times are good. These people may see efforts to lower unemployment as posing a risk. With lower unemployment workers may be able to get a larger share of productivity growth. This may be good for most of the country and mean increased economic growth, but it would mean less for the one percent.

Yes, “people can profit from slow growth and high unemployment.” And politicians are being paid to maintain the slow growth and high unemployment and other things that are driving all the income and wealth to a top few.

Repeal the sequester. Cut the deficit in good times – like Clinton did.

Click here to tell Congress: Repeal the Sequester.

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