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Home Publications Blogs Beat the Press Congressional Deficit Hawks Act to Slow Growth and Destroy Jobs

Congressional Deficit Hawks Act to Slow Growth and Destroy Jobs

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Saturday, 29 May 2010 07:23

This could have reasonably been the headline of news articles on the decision of many moderate Democrats to demand a smaller package of unemployment benefits and assistance to state and local governments. Instead, neither article noted at all the negative impact that the cuts would be expected to have on growth. The NYT piece even invented an alternative history, telling readers that the current debt and deficit levels come from a "lavish spending spree engaged in by both parties over the past decade," as opposed to being the result of an economic collapse caused by the bursting of the housing bubble.

The plans by the deficit hawks seem likely to trim $30 billion in unemployment benefits and aid to the states from the bill. Using the methodology in the Romer-Bernstein paper put out by the Obama administration to promote its stimulus package, the cuts will reduce GDP by approximately $50 billion. This will correspond to a job loss of more than 300,000 people. It is irresponsible to report on plans to reduce deficits without noting their likely impact on the economy.

The Post piece included the comment that Congressional Democrats looking to cut benefits are "saying 99 weeks of unemployment benefits may no longer be justified after four consecutive months of job growth." It would have been worth reminding readers that the rate of job growth over the last four months has only slightly outpaced the growth of the labor force. Projections from both the Congressional Budget Officie and the White House show that it will be more than 5 years before the unemployment rate returns to a more normal level.

Comments (8)Add Comment
Teabagger Requiem
written by izzatzo, May 29, 2010 11:15
Dear Fountain of Growth and Wealth
Please Deliver Us from Zero Sum Terrorism
Those Who Would Take but not Give
Tax but not Spend
Borrow but not Lend
Forever and Ever, Amen

P.S. Don't forget to exempt military spending for things the Pentagon doesn't even want.


Stupid liberals.
Pound foolish, penny foolish
written by Rachel, May 29, 2010 11:35
To be fair, there has been some serious waste over the past decade. Health spending has doubled, from 1.35 trillion in 2000 to 2.5 trillion in 2008, without any commensurate increase in quality. Government policy, excessively favorable treatment of imaging centers and the pharmaceutical industry, among other things, has certainly promoted this waste.

But as little intelligent as all this has been,
to cut back on unemployment benefits, at a time when there are five job-seekers for every job,
is even less intelligent.
...
written by Queen of Sheba, May 29, 2010 1:02
You would think these "moderate Democrats" would recognize that addressing deficit spending by cutting off needed support to citizens during a recession would amount to virtual suicide for the party's hope of keeping control of Congress. Regardless of what these Democrats call themselves, they are better classified as Republican-Lite.
...
written by diesel, May 29, 2010 2:24
Luckily the Christian churches will be able to step up and provide aid and comfort to those who will lose their benefits. Then the states won't need that Federal money. Young couples can move back in with their parents, Granny and Grandpa can provide child care while both spouses work full time and we'll see the restoration of real family values. The wealthy won't be robbed of the fruits of their hard work through taxation, but will enjoy the income tax reduction boon of deductible charitable gifts to the Church of their choice. And America will return to her roots of the Bibo and the Constution--both divinely inspired and infallible documents--and we will once again be a God fearing Nation.

Then the country will devolve into anarchy and violence in the streets, which will call forth either a repressive or benevolent Leader of Rooseveltian proportions. As to which, well that's a coin toss and by the way brother, can you spare a dime?
Deficit reduction
written by bakho, May 29, 2010 2:51
Those spending cuts probably will not reduce the deficit much if at all because revenue decreases when people are unemployed and spending on the unemployed increases.

The deficit cannot be fixed if unemployment is at 10 precent. If unemployment can be driven down, the budget will mostly take care of itself. That was the pattern under Clinton. Once unemployment dropped to 4%, and unexpected surplus of revenue appeared. We should be attacking unemployment first.
...
written by PeonInChief, May 29, 2010 3:25
What job growth? Our local paper had a story this morning on holiday travel--people are spending less money than they did last year. And the reason? Well, lack of jobs, of course.
...
written by Thomas Dooley, May 29, 2010 5:07
The deficit is the problem? What the hell happened? Did someone just delete the Great Depression from history and erased the teachings and entire life of John Maynard Keynes? He never existed? The Great Depression never happened? We have all entered the "Way-Back" machine and are in the 1920's enjoying curvy flappers and bathtub gin?
...
written by the bunny, May 29, 2010 7:08
They say two thousand one zero, party over, Oops, out of time!
So tonight we're gonna party like it's 1936!

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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