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Can Seven Reports Be Wrong About the Risks of Spending Cuts? GOP Says Yes

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Could two independent economic reports, a liberal think tank and four bipartisan reports on debt reduction be wrong? They all conclude that slashing federal spending this year could cause job losses and threaten the economic recovery.

The latest report, from Mark Zandi of Moody's Analytics, says 700,000 jobs could be lost by the end of 2012 if Republicans succeed in their quest to cut $60 billion from domestic programs this year. Cuts and tax increases are necessary to address the nation's long-term fiscal problems, Zandi said, but "cutting too deeply before the economy is in full expansion would add unnecessary risk." The report largely echoes earlier analyses by Alec Phillips of Goldman Sachs and the Center for American Progress.

House Speaker John Boehner famously responded, when asked about potential job losses earlier this month, "so be it." On Monday his office pointed to a new counter argument offered by Stanford economist John Taylor – that "a credible plan to reduce the deficit" will help the economy, not hurt it, and that $60 billion – the amount the other analyses assume will be cut this year – is an inaccurate, inflated figure.

Taylor is a former Bush administration official based at the conservative Hoover Institution at Stanford; last year he received an award from the conservative Bradley Foundation. Zandi, founder and chief economist at Moody's, was an adviser to Republican presidential nominee John McCain in 2008. However, he is a registered Democrat. (Update: Fed chairman Ben Bernanke, named by Republican George W. Bush and re-appointed by President Barack Obama, also disputes the Zandi and Phillips reports).

Boehner spokesman Michael Steel called Zandi "a relentless cheerleader for the failed 'stimulus,'" who "refuses to understand that ending the spending binge will help the private sector." That led the Chicago Tribune's Mike Memoli to tweet, "Today, GOP discredits Mark Zandi. Last fall, cited his analysis in arguing against tax hikes."

It is an article of faith among Republicans that 2009 stimulus package has "failed." But the Obama administration, Zandi and many others disagree with that assessment. The nonpartisan Congressional Budget Office estimates that the stimulus created or saved up to 3.5 million jobs, raised the GDP and stabilized an economy that had been in free-fall.

There is no sign the stimulus will ever be anything but a partisan flashpoint. Yet there is bipartisan consensus to be found in the reports from various deficit and debt commissions. They are unanimous in suggesting either increased stimulus or steady government spending in 2011.

"Don't disrupt the fragile recovery," the National Commission on Fiscal Responsibility and Reform warned in December. Its plan – adopted by 11 of the 18 panel members – calls for "serious belt-tightening" to begin in 2012. A report from the Bipartisan Policy Center suggested gradually phasing in steps to reduce deficits and debt "beginning in 2012, so the economy will be strong enough to absorb them." The 2009 Peterson-Pew Commission on Budget Reform put off cuts to the same year, as did a recent proposal from Brookings fellow Bill Galston and Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

MacGuineas has mixed feelings about the GOP drive to slash spending and slash it now. "It's good that we're actually talking about spending reductions" instead of putting it off, she said in an interview. "On the one hand, that's helpful. On the other hand, they are focusing on the wrong time frame -- this year instead of this decade, and focusing on the wrong part of the budget -- a very thin slice instead of the real problem areas" such as Medicare and Medicaid.

The ideal scenario in the view of MacGuineas and the bipartisan commissions would be for politicians serious about debt reduction to spend 2011 on a long-term plan to reduce domestic and defense spending, raise taxes, ensure long-term health for Social Security and solve the riddle of controlling Medicare and Medicaid costs. "The right model is to put in place this year a multiyear plan to get there," MacGuineas said, adding she has high hopes for a bipartisan group of senators led by Democrat Mark Warner of Virginia and Republican Saxby Chambliss of Georgia.

The skirmishes over spending – destined to repeat themselves constantly this year as Congress confronts potential government shutdowns and loan defaults – have provided political fodder for all sides. Democrats seized on Boehner's initial response to the prospect of job losses and now refer often to the GOP's "so be it" jobs policy. Republicans, though they only control half of Congress, are making good on promises to the tea party movement and other voters who put a premium on cutting government spending.

If Republicans can't secure Senate passage and Obama's signature for their spending cuts, they will have at least made clear to their base that they tried. If by some political miracle they win the $60 billion in cuts they are seeking, and the recovery picks up, they can take credit. If the economy dips back into crisis, or even if the jobless rate is flat, they can blame Obama and bolster their case to take back the White House.

Unless of course Obama and the Democrats, equipped with who knows how many reports by then, figure out a way to blame them first.

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Filed Under: Analysis

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16 Comments

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Michael

60 billion off a 3.69 trillion is truly a drop in the bucket. We need much deeper cuts just to return to the "failed Bush policy" levels of profligate deficit spending. We need deep cuts and structural reform of our unsustainable Federal red tape factory.

March 02 2011 at 10:47 PM Report abuse +2 rate up rate down Reply
rmhbiz4u

This guy must think money grows on trees. We are up acreek and with out a paddle. We are broke. The UN, China,And Russia want to replace the US dollar as The international currancy. If this happens you will see devistation as never seen before. The dollar will inflate to the point it will make the the depression look like nothing. People will

March 02 2011 at 8:51 PM Report abuse -1 rate up rate down Reply
k6cxv

corpshillsgop....I will attempt to answer your response to my post by accusing me of making up numbers but unlike the economic illiterates on the left I know how to add, subtract, multiply and divide. I invite you to do the same: Take the "stimulus" package [ their numbers ] and divide by 700,000 [ their numbers] plus the number of jobs saved [their numbers] then go back and apologize for your accusatory remarks.. Incidentally I am not a repubican.

March 02 2011 at 8:43 PM Report abuse rate up rate down Reply
BULLMAN

Do the people that write these things know where the money is.? How long can it last. Sooner or later there is no place else to borrow-tax-beg-whatever. There just wont be any place to get money. Americans have had it all and gave it away for more-more-more. If we dont stop buying foreign we are done. The us gov is the biggest spender on foreign products. STOP NOW!

March 02 2011 at 5:18 PM Report abuse +2 rate up rate down Reply
Supermom/dad

It's called "Selective attention" the GOP refuses to pay attention to anyone that distracts them from their agenda of advancing only the interests of billiionaires.

March 02 2011 at 1:54 PM Report abuse +1 rate up rate down Reply
1 reply to Supermom/dad's comment
scott7841

It wasnt the republicans that passed a HC bill that is being ruled unconstitutional.........ONE THEY DIDNT EVEN KNOW WHAT WAS IN IT (as per Pelosie). Wasnt a republican that shoved a law down the throats of america and then granted over 200 execptions to special interest groups that contribute to their campaign. It wasnt a republican that is being held in contempt of court for the drilling moratorium and not issueing permits. And it wasnt a republican that said "dont worry about Fannie and Freddie......they are doing great" which was instrumental to the housing meltdown. It wasnt a republican that testified under oath he did not have sex with that woman. It wasnt a republican that passed NAFTA which started our job leaving the country. TALK ABOUT SELECTIVE MEMORY.

March 02 2011 at 4:01 PM Report abuse +1 rate up rate down Reply
AL

I agree with Boehner's "so be it" , those 700000 jobs projected by Taylor and Zandi are the ones that came at a whopping $220,000 each with the failed stimulis of which they are a proud supporter. Many of those 700,000 jobs are government jobs that produce nothing but misery for the average citizen causing, to a large extent the rules and regulations which create no wealth, but stifle the efforts of those who do. Wealth is created by the private sector NOT GOVERNMENT.

March 02 2011 at 1:20 PM Report abuse +1 rate up rate down Reply
tnickerson08

Are the liberals really still trying to blame Bush two years after obama took office? Look at the facts Bush's 2008 budget 850 billion; obama's 2011 budget 1.6 trillion that's almost double. If the Republicans "drove us into the ditch" as the democrats claim, then instead of using a tow truck they brought in a backhoe.

March 01 2011 at 4:36 PM Report abuse -1 rate up rate down Reply
Chris

There's always some report saying how bad cutting expenses are - if we keep listening to them we'll never get anywhere. It's cure the country time - like in the 1980's Margaret Thatcher and the UK - sick man of Europe. There'll be short term pain but once it's over the country will be in a much better place. Much better than the enormous suffering that will happen if we don't stop spending money we don't have! Unless you want to spend $500 on a McD's quarter pounder with cheese meal.

March 01 2011 at 12:05 PM Report abuse +3 rate up rate down Reply
ettu

A new report on waste in government is imminent. It identifies 26 (I believe that is the number) agencies that do the very same thing.......spending our money in order to help teachers do a better job. We have been throwing money down a black hole for decades, trying to improve our public education, and the results are a steady downhill movement. There are probably many, many, more of this same scenario eating up taxpayer money with no discernible positive results. Time to get out the machete and slash the heck out of spending in DC. It has gone beyond absurd.

March 01 2011 at 10:34 AM Report abuse +4 rate up rate down Reply
personus

It's a shame when politics trumps policy and ideology trumps expertise. There are certain truisms about the economy that are widely accepted. These reports are largely consistent with generally accepted wisdom and are being dismissed in the interest of politics and ideology.

March 01 2011 at 10:05 AM Report abuse +3 rate up rate down Reply

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