Fox News host Neil Cavuto claimed that spending cuts that lead to austerity “will never happen,” even as data show that continued cuts remain a drag on economic recovery. In fact, economists contend that if it weren't for government cuts, the unemployment rate would be lower.
Discussing the economy with Fox News contributor Dennis Kucinich on Friday, Cavuto argued for cutting spending to halt what he called the country's spending problem and lower the deficit. When Kucinich cautioned against sanctioning new austerity, Cavuto replied: “You have no reason to worry, my friend; that will never happen.” He added: “We will never cut our way into austerity. We won't cut our way out into a paper bag.”
Cavuto went on to dismiss the fact that the automatic spending cuts scheduled for March 1 would have further impact on slowing growth.
In reality, cuts in government spending in the last quarter of 2012 led the economy to shrink for the first time in more than three years. CNN Money reported that a “large cut in federal spending, primarily on defense, was one of the biggest drags on growth.” According to the Wall Street Journal, “government spending, which has been a drag on growth for more than two years, declined for the ninth time in 10 quarters.”
The New York Times quoted Ethan Harris, co-head of global economics research at Bank of America Merrill Lynch, as saying that the drop in spending “is the tip of the iceberg on fiscal austerity from Washington.” Nigel Gault, chief U.S. economist at IHS Global Insight, told the Times that “we're being more austere than we need to be.” He added: “The economy isn't growing that fast and you don't want to be taking away stimulus now.”
Since the recession ended, the public sector has shed over 700,000 jobs. In a 2012 report, the Economic Policy Institute found that “if it weren't for state and local austerity, the labor market would have 2.3 million more jobs today; half of these jobs would be in the private sector.” EPI added: “If all of these 2.3 million jobs had been filled, it is likely that the unemployment rate would now be between 6.7 percent and 7.5 percent.” The unemployment rate currently stands at 7.9 percent. Even as the private sector has steadily added jobs, government cuts have held the economy back:
Moreover, experts argue that the across-the-board government spending cuts scheduled for March 1, commonly referred to as the “sequester,” could halve U.S. economic growth and lead to one million lost jobs.