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Home Publications Blogs Beat the Press Senator Nelson Proposes to Reduce GDP by $120 Billion, Eliminate 800,000 Jobs

Senator Nelson Proposes to Reduce GDP by $120 Billion, Eliminate 800,000 Jobs

Tuesday, 15 June 2010 04:19

The Washington Post reported on the opposition in Congress to spending more money to aid financially strapped state and local governments or unemployed workers. It highlighted the complaint of Nebraska Senator Ben Nelson that President Obama's request for $80 billion was in appropropriate in a situation where the government has a $12 trillion debt.

It would have been helpful to include some discussion of the economic implications of the opposition to this bill. The economy will be weaker if Congress refuses to appropriate the funds requested by the Obama administration. Assuming a multiplier of 1.5 (most of the proposed spending is generally estimated to have a relatively high mutliplier), not spending this money will reduce GDP by $120 billion.

When it outlined its stimulus plan, the Obama administration assumed that a 1 percentage point increase in GDP creates 1 million jobs. This implies that a loss of $120 billion in output would lead to a loss of 800,000 jobs. It would help readers assess the proposed spending if they understood its likely economic impact.

Comments (4)Add Comment
..., Low-rated comment [Show]
Does Ben Nelson know . . .
written by Tao Jonesing, June 15, 2010 11:46
Does Sen. Nelson understand that 16% of Nebraska's employees are employed by state and local governments?

Hilarious set of priorities
written by William, June 15, 2010 2:17
How many war appropriation bills has he voted for? So those are ok, but keeping jobs in a deep recesssion that the government allowed to happen is too far?
written by FoonTheElder, June 21, 2010 12:11
Izzatso Izzatso? The biggest free riders are the big corporations who encourage war for their financial benefit, hide income in offshore tax schemes and are prime beneficiaries in $1 trillion in annual health care waste compared to the rest of the developed world.

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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.