Economic experts agree that spending cuts in a weak economy hurt the creation of jobs and economic growth. Though Republicans in Congress spent much of 2011 demanding spending cuts, the media are amplifying their attacks on President Obama's economic record.
Experts: Spending Cuts In A Weak Economy Damage Growth ...
IMF: “Fiscal Consolidation Typically Reduces Output And Raises Unemployment In The Short Term.” From the IMF's 2010 World Economic Outlook:
Based on a historical analysis of fiscal consolidation in advanced economies, and on simulations of the IMF's Global Integrated Monetary and Fiscal Model (GIMF), it finds that fiscal consolidation typically reduces output and raises unemployment in the short term. [IMF, World Economic Outlook, 10/10]
Economist Menzie Chinn: “A Front Loaded Fiscal Contraction, Heavy On Spending Cuts” Would Make The “Current US Recovery Worse Than That Of The Great Depression.” Comparing the U.S. economy to that of the United Kingdom, University of Wisconsin economist Menzie Chinn writes on the blog Econbrowser:
[W]e too can make the current US recovery worse than that of the Great Depression; just implement a front loaded fiscal contraction, heavy on spending cuts. Furthermore, in order to maximize the contractionary impact, harass the monetary authorities to tighten policy by inciting fears of high inflation (à la Rep. Paul Ryan), when year-on-year inflation as measured by the personal consumption expenditure deflator is 2.1%. [Econbrowser, 5/3/12]
Wash. Post: IMF Paper Shows “Austerity Does Ugly, Ugly Things To A Country's Economy In The Short Term.” From Brad Plumer writing at The Washington Post's Wonkblog:
In a new paper for the International Monetary Fund, Laurence Ball, Daniel Leigh and Prakash Loungani look at 173 episodes of fiscal austerity over the past 30 years -- with the average deficit cut amounting to 1 percent of GDP. Their verdict? Austerity “lowers incomes in the short term, with wage-earners taking more of a hit than others; it also raises unemployment, particularly long-term unemployment.”
Now, this doesn't mean fiscal consolidation is never worth pursuing. Some countries do run up against unmanageable debt levels. And the IMF cites a number of ancillary benefits that come from reducing deficits, such as lightening the burden from interest payments. But the historical record is clear: Austerity does ugly, ugly things to a country's economy in the short term, which is why the IMF now recommends passing deficit-reduction plans that kick in only “when the recovery is more robust.” [The Washington Post, 9/13/11]
Reich: “America's Jobs Deficit Continues To Be A Much Larger Problem Than The Budget Deficit.” In a February 3 blog post, former Labor Secretary Robert Reich wrote:
When they're not blaming Obama for a bad economy, Republicans are decrying the federal budget deficit and demanding more cuts. But America's jobs deficit continues to be a much larger problem than the budget deficit.
In fact, we can't possibly achieve the growth needed to reduce the budget deficit as a proportion of the total economy unless far more people are employed. Workers are consumers, and consumer spending is 70 percent of economic activity. And cutting the budget means fewer workers, directly (as government continues to shed workers) and indirectly (as government contractors have to lay off workers) and therefore fewer consumers.
Yet deficit hawks continue to circle. [RobertReich.org, 2/3/12]
Bernanke: Congress Must “Take Care Not To Unnecessarily Impede The Current Economic Recovery.” In a February 2 article, The Washington Post reported:
Federal Reserve Chairman Ben S. Bernanke on Thursday cautioned lawmakers against taking any steps that would hurt economic growth as they work to cut the nation's debt, and he defended the central bank's recent actions to support the economy.
In testimony before the House Budget Committee, Bernanke urged Congress to put a priority on finding a sustainable level of federal spending over coming decades.
But, he said, they also must “take care not to unnecessarily impede the current economic recovery.” Supporting growth now, he said, “will lead to lower deficits and debt in coming years.” [The Washington Post, 2/2/12]
... And Government Cutbacks Are Hurting Job Growth Today
NY Times' Norris: Jobs Report “Cries Out For Action From Washington,” But “There Are Powerful Forces Screaming To Cut Government Spending.” From Floyd Norris, writing on The New York Times' Economix blog:
The jobs report for May was worse than almost anyone expected. It cries out for action from Washington, but the political pressures point the other way. Just as Europe needs to do something to push growth, so does the United States. But there are powerful forces screaming to cut government spending on both continents.
It may be worth noting that -- in the private sector -- this recovery is going a little faster than did the one following the early 1990s downturn, and is only a little slower than the most recent ones. The big difference is in government jobs. [The New York Times, 6/1/12]
Krugman: If Not For “This Destructive Fiscal Austerity, Our Unemployment Rate Would Almost Certainly Be Lower Now” Than It Was During '80s Recovery. From New York Times columnist and economist Paul Krugman:
The economic news is looking better lately. But after previous false starts -- remember “green shoots”? -- it would be foolish to assume that all is well. And in any case, it's still a very slow economic recovery by historical standards.
There are several reasons for this slowness, with the most important being the overhang of household debt that is a legacy of the housing bubble. But one significant factor in our continuing economic weakness is the fact that government in America is doing exactly what both theory and history say it shouldn't: slashing spending in the face of a depressed economy.
In fact, if it weren't for this destructive fiscal austerity, our unemployment rate would almost certainly be lower now than it was at a comparable stage of the “Morning in America” recovery during the Reagan era.
Notice that I said “government in America,” not “the federal government.” The federal government has been pursuing what amount to contractionary policies as the last vestiges of the Obama stimulus fade out, but the big cuts have come at the state and local level. These state and local cuts have led to a sharp fall in both government employment and government spending on goods and services, exerting a powerful drag on the economy as a whole. [The New York Times, 3/4/12]
Meanwhile, GOP Pushed For Spending Cuts In 2011 ...
Time: “Boehner's Goal Is To Extract The Highest Amount Of Cuts.” From a story Time's Swampland blog describing the GOP's approach to the 2011 debt limit fight:
Sure, there are a hard-core group of 25-plus members who will never vote to raise the debt ceiling, but don't be fooled. Most Republicans are keenly aware of the damage a debt-ceiling lapse would do to the economy -- and to their electoral chances. This will be a tough vote they won't want to take more than once. And they aren't going to vote for it without major concessions from Democrats in the form of trillions of dollars' worth of spending cuts. House Speaker John Boehner has said he wants whatever they raise the ceiling by -- it'll take an estimated $2.5 trillion to make the hike last until after the 2012 elections -- offset by cuts. Vice President Joe Biden and his working group agreed to more than $1 trillion in cuts, but that only gets them halfway there. Boehner wants the rest of the cuts to come out of entitlements, particularly Medicare. Democrats have been bashing Republicans for their votes on Paul Ryan's budget, accusing them of wanting to turn Medicare into a voucher system. Enacting bipartisan cuts to Medicare helps inoculate the GOP against such criticisms ahead of the 2012 elections. And though they haven't ruled out revenue raisers, House Republicans are suspicious of Democratic tax proposals, particularly ones that would cap tax deductions for such things as charitable giving and mortgage payments. The last time deductions were capped was under George H.W. Bush, a move that led to accusations that he broke his pledge of “no new taxes.” Boehner's goal is to extract the highest amount of cuts, including Medicare cuts, for the least amount of revenue raisers. [Time, 6/30/11]
Business Insider: “20 Huge Spending Cuts Republicans Want To Make Right Now.” From a Business Insider post headlined “20 Huge Spending Cuts Republicans Want To Make Right Now:
Conservative House Republicans unveiled a proposal to slash federal spending by $2.5 trillion over the next 10 years, taking aim at rail transit, goat farmers and a lot of programs in between.
The keystone of the plan is the reduction of non-security, non-veteran spending to 2008 FY levels when the continuing resolution expires in March. Spending would then drop to 2006 FY levels until 2021.
To further cut spending, the Republican Study Committee targeted more than 50 programs that would get the ax. [Business Insider, 1/21/11]
National Journal: House GOP Appropriations Chair “Will Seek To Cut $100 Billion From What President Obama Had Requested For This Fiscal Year.” From National Journal:
In another victory for tea party rebels in Congress today, House Appropriations Committee Chairman Harold Rogers, R-Ky., scrapped his original plan for spending cuts and announced that he will seek to cut $100 billion from what President Obama had requested for this fiscal year.
“My committee has been working diligently to go line-by-line in every agency budget to find and cut unnecessary spending to reduce our deficit and help our economy thrive,” Rogers said in a statement. “We have determined that the [continuing resolution] can and will reach a total of $100 billion in cuts compared to the president's request immediately -- fully meeting the goal outlined in the Republican 'Pledge to America' in one fell swoop.”
Rogers didn't say what those cuts might be, a clear sign that House GOP leaders had been caught by surprise, which left appropriators scrambling to figure out how they would assuage their tea party critics on the right. [National Journal, 2/12/11]
... And Blocked Obama's Jobs Bill
Obama's Jobs Bill Introduced In The Senate. In a September 14 article in The Hill, Pete Kasperowicz outlined Senate Majority Leader Harry Reid's introduction of Obama's American Jobs Act. From The Hill:
Senate Majority Leader Harry Reid (D-Nev.) on Tuesday introduced President Obama's American Jobs Act in the Senate.
Reid's bill, S. 1549, is the text of the proposal that Obama has implored Congress to pass, but which Republicans say has no chance in the House because Obama has proposed to pay for the $447 billion jobs plan with new taxes.
Reid did not make any written statement upon introduction of Obama's bill, but the legislation is likely to be taken up in the Senate in order to pressure House Republicans to act. The bill is described as a measure to “provide tax relief for American workers and businesses, to put workers back on the job while rebuilding and modernizing America and to provide pathways back to work for Americans looking for jobs.” [The Hill, 9/14/11]
CBS News: Senate Republicans Filibuster Jobs Bill In Vote Of 50 To 48. In an October 11 CBS News article titled, “Senate Republicans block Obama's jobs package,” Stephanie Condon wrote:
Senate Republicans blocked President Obama's $447 billion jobs package on Tuesday, putting the brakes on a bill Mr. Obama has been vigorously promoting over the past month.
By around 7 p.m., the vote tally was 50 to 48, giving Republicans more than the 40 votes needed to filibuster the bill. Voting was kept open for another few hours to allow one more senator -- Democrat Jeanne Shaheen of New Hampshire -- to get back to Washington to cast a vote in favor of the legislation. With Shaheen's vote, Mr. Obama can at least claim a symbolic victory with a simple majority voting in favor of his legislation.
The final vote tally was 50 to 49, after Senate Majority Leader Harry Reid switched his vote to “no” for technical reasons -- under Senate rules, casting his vote with the majority allows Reid to revive the bill at a later date if he wants. [CBS News, 11/11/11]
UPI: “GOP Blocks Jobs Bill In The Senate.” A November 3 UPI article titled, “GOP blocks jobs bill in Senate,” detailed Republican efforts in the Senate to block the president's American Jobs Act. From the article:
U.S. Senate Republicans, joined by one Democrat and one Independent, Thursday blocked a proposal President Barack Obama said would “put Americans back to work.”
The Senate voted 51-49 in favor of a procedural motion on the bill, which would spend $60 billion on transportation and infrastructure. However, 60 votes were required to break a GOP filibuster on the bill.
It was the third time in recent weeks Republicans were able to block measures that had been components of the American Jobs Act, initially proposed by the administration as a comprehensive, $447 billion package intended to boost hiring and give money to states to hire teachers and public safety workers. [UPI, 11/3/11]
But The Media Continue To Amplify GOP's Attacks On Obama's Economic Record
Politico: “GOP Leaders Throttle Obama On Jobs Report.” From a Politico article headlined “GOP leaders throttle Obama on jobs report”:
House Speaker John Boehner and Majority Leader Eric Cantor issued scathing statements on Friday's jobs report, which showed unemployment ticked up to 8.2 percent in May while the economy added only 69,000 jobs.
“Obama's failed policies have made high unemployment and a weak economy the sad new normal for families and small businesses,” Boehner said, adding that the White House continues to block jobs bills passed by the House.
“Please Mr. President, let's stop pushing policies that don't work and join us on pro-growth policies to get more Americans back to work,” Cantor said, while asserting that Obama's threatened tax hikes and regulations have slowed the jobs market. [Politico, 6/1/12]
USA Today: “Republicans Quickly Attacked President Obama” Over Weak Jobs Report. From a USA Today post titled “Romney, GOP jump on Obama for bad jobs report”:
Republicans quickly attacked President Obama over a new report showing only 69,0o0 new jobs last month, while White House officials said economic recovery is a long-term prospect.
GOP opponent Mitt Romney, who has made jobs the centerpiece of his political indictment of President Obama, called the new Labor Department report “devastating news” for American families. [USA Today, 6/1/12]
CNN Headline: “Republicans Blame Obama For Job Numbers.” From a CNN post headlined “Republicans blame Obama for job numbers”:
Top Republicans were quick to fault the Obama administration for Friday's job numbers, which showed a lower-than-expected addition of 69,000 jobs in May and a slight bump in the unemployment rate to 8.2% from 8.1% last month.
“It is now clear to everyone that President Obama's policies have failed to achieve their goals and that the Obama economy is crushing America's middle class,” Mitt Romney said in a statement.
House Speaker John Boehner also piled on, saying the numbers represent a new “normal” for the White House.
“President Obama's failed policies have made high unemployment and a weak economy the sad new normal for families and small businesses,” Boehner said in a statement.
He argued that for the last three years, “the unemployment rate has remained far above what the administration predicted with the 'stimulus' spending binge.”
Boehner also blamed Congressional Democrats for halting legislation that Republicans argue would improve the economy, such as the production of the Keystone pipeline. [CNN.com, 6/1/12]