Second study: GOP budget plan will kill 700,000 jobs

We wrote earlier about the Goldman-Sachs report that the GOP spending plan will be a “drag on GDP growth” to the tune of –1.5% to –2%:

“Under the House passed spending bill [which cut spending by $61 billion],” says the report, which was obtained by ABC News, “the drag on GDP growth from federal fiscal policy would increase by 1.5pp to 2pp in Q2 and Q3 compared with current law.”

Now from Greg Sargent at the Wash Post’s PlumLine blog we learn a second independent analysis is singing the same tune. He quotes a report by Lori Montgomery of the Post (my emphasis throughout):

A Republican plan to sharply cut federal spending this year would destroy 700,000 jobs through 2012, according to an independent economic analysis set for release Monday.

The report, by Moody’s Analytics chief economist Mark Zandi, offers fresh ammunition to Democrats seeking block the Republican plan, which would terminate dozens of programs and slash federal appropriations by $61 billion over the next seven months.

And then Sargent comments himself:

Even if you disagree with these analyses [the earlier Goldman analysis and Zandi’s], you’d think the fact that there are now two of them reaching similar conclusions would [be] newsworthy enough to break through the din of Beltway deficit-reduction fetishizing. The argument about bud[g]et cuts is too often framed solely as an argument between so-called deficit “hawks” and “doves,” as a dispute between those who say steep cuts are necessary and those who say they’re cruel and extreme. The fact that outside analysts think that budget cuts could actively hamper the recovery deserves to be part of the discussion.

That would be true. Unless the crisis is the plan for the GOP; and unless the media were egging them on. Except in those two cases, yes, that would be true.

Sargent goes on to quote the report’s conclusion:

While long-term government spending restraint is vital, and laying out a credible path toward that restraint very desirable, too much cutting too soon would be counterproductive. The economy is much improved and should continue to gain traction, but the coast is not clear; it won’t be until businesses begin hiring aggressively enough to meaningfully lower the still-high unemployment rate. 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. [emphasis added]

GP

NOTE FROM JOHN: The danger for the economy is that it’s not entirely clear that the Obama administration is willing to explain to people that budgets shouldn’t get cut in weak economies. I fear the President has already fallen for the GOP trap, endorsed spending cuts as the only priority, and thus will agree to a “compromise” that ultimately weakens the economy leading up to the 2012 elections, inadvertently (for Obama, advertently for the GOP) helping the GOP nominee.


Gaius Publius is a professional writer living on the West Coast of the United States.

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