Recently, a slew of economic analysts have put forward estimates regarding the number of jobs that would be lost if the spending cuts approved by House Republicans were actually implemented. Economists at Goldman Sachs estimated that the GOP’s proposed cuts would lower GDP growth by two percentage points, while Moody’s Analytics estimated that the cuts would cause the loss of 700,000 jobs. The Economic Policy Institute pegged the job loss at closer to one million.
Federal Reserve Chairman Ben Bernanke testified before Congress today and was asked about these analyses. He said that, in his opinion, the effect of the cuts would not cause quite as much job loss as Moody’s or Goldman estimated. House Republicans are crowing triumphantly that this vindicates their proposed cuts. “Senate Democrats should find new talking points if they’re going to continue to stand in the way of House Republican efforts to eliminate barriers to job creation through much needed spending reductions,” said House Majority Whip Kevin McCarthy (R-CA).
But the GOP is neglecting to mention that Bernanke actually agreed with the analyses showing that the House GOP plan would cause job loss. He just quibbled over how much:
BERNANKE: Obviously [the cuts] would be contractionary to some extent, but our analysis doesn’t give a number that high. […]
SEN. JACK REED (D-RI): What is your impact?
BERNANKE: Several tenths, on GDP. […]
SEN. CHUCK SCHUMER (D-NY): Those cuts would create job loss. I don’t mean overall job loss, macro, but those cuts could. Do you agree with that?
BERNANKE: The cuts would presumably lower overall demand in the economy and would have some effect on growth and employment.
SCHUMER: Good, so the answer is yes?
So what we’re talking about here is not whether the GOP’s cuts will cause job loss, but how much job loss they will cause. Bernanke, Goldman Sachs, Moody’s, and EPI are all united in saying that loss will occur; they just differ on the final number. As Mother Jones’ Kevin Drum put it, “Maybe it’s a million jobs, maybe it’s half a million jobs. Maybe it will cost a point of GDP, maybe it will cost half a point of GDP. But considering that the economy is still sluggish and unemployment is extremely high, why are we considering budget cuts that will have any negative effect on jobs and growth?”
The House GOP actually cheering when yet another economist says that their cuts will increase unemployment continues the very cavalier attitude Republicans have had regarding this point. Speaker John Boehner (R-OH) replied “so be it” to those pointing out that his party will increase unemployment, while Gov. Mitch Daniels (R-IN) said that GOP lawmakers at all levels of government should carry out spending cuts “even if they end up seriously costing a lot of jobs right now.”
The Center for American Progress Action Fund and the Economic Policy Institute released a letter today — signed by 320 economists — which stated that “responsible governance demands that we neither damage the recovery today nor forsake America’s economic future by cutting critical investments.”