While Republicans Demand Spending Cuts, Their Real Economic Harm Is Being Ignored

Those spending cuts Republicans love – and are willing to hold the country hostage to extort more of – are actually harming the economy. Graphic @ IngredientNews

Those spending cuts Republicans love – and are willing to hold the country hostage to extort more of – are actually harming the economy. Graphic @ IngredientNews

While Republicans would love to have us all thinking that the only thing wrong with the economy is that government is too big and is killing it by overspending, an article in the New York Times reveals that quite the opposite is true. Those spending cuts Republicans love – and are willing to hold the country hostage to extort more of – are actually harming the economy. Yes, harming it. And it’s not just the “liberal” New York Times that says so but economists, Wall Street and the IMF do so, as well.

In an article called, “U.S. Cuts Take Increasing Toll on Job Growth,” the Times reports:

Corporate and academic economists say that Washington’s fiscal fights have produced budget policies that amount to a self-inflicted drag on the economy’s recovery.

Joseph J. Minarik, director of research at the corporate-supported Committee for Economic Development and a former government economist, said he could not remember in postwar times when fiscal policy was so at odds with the needs of the economy.

Although Minarik is a former Clintonista, he’s hardly a raging, big-government liberal. The Committee for Economic Development where he works, describes itself as “a nonprofit, nonpartisan, business-led public-policy organization” that is allied with the bi-partisan, conservative-leaning, Fix The Debt campaign.

Noting that private sector employment has also been negatively affected by the sequester because contracts are being canceled or delayed, the Times also quotes Justin Wolfers, an economist with a Ph.D. from Harvard, a senior fellow at the Brookings Instituion and professor of public policy at the Gerald R. Ford School of Public Policy at the University of Michigan.

“At a time of mass unemployment, it’s clear, the economics textbooks tell us, that this is not the right time for fiscal retrenchment.”

Given that rough consensus in an otherwise quarrelsome profession, he added, “To watch it be ignored like this is exasperating, horrifying, disheartening.”

And it’s not just professors and policy wonks:

“Over all, fiscal drag has likely reduced growth this year at least 1.5 percentage points, and isn’t over yet,” Bank of America Merrill Lynch wrote to clients on Friday. “The last thing the economy needs is a repeat performance. A key part of our optimistic forecast for next year is that there is not a sustained shutdown this fall; the latest bickering leaves us a little more concerned.”

The IMF agrees. Think Progress reported in June:

The fund’s analysts say that “an excessively rapid pace of fiscal deficit reduction” will cost the country between 1.25 and 1.75 percent points of GDP growth this year… Without sequestration, economic growth could have surpassed 3 percent for the year.

So why on earth do Republicans love spending cuts so much? I’ll hypothesize that it’s because they hate government and government services. Ironically, while the right screams that Obama’s a socialist, it’s the private sector that has been doing all the heavy economic lifting since he took office. But what’s most puzzling, at least to me, is why Democrats aren’t pushing back with all the same fervor and more against the harmful lies about spending cuts?