"How The GOP Budget Undermines America’s Economic Recovery"
The House Republican budget released by Budget Committee Chairman Paul Ryan (R-WI) this morning has little chance of becoming law, but that doesn’t mean it isn’t a meaningful document that acts as a weathervane of the GOP’s priorities and views on how to best shape the American economy. And despite the party’s “rebranding” efforts, its budget is more of the same: it adheres almost exactly to the principles outlined by Mitt Romney, it skews heavily toward the wealthiest Americans at the direct expense of the poor, and it aims to put America on an overall economic path that would be painful in both the short- and long-terms.
Take, for instance, the budget’s overall focus on deficits and debt. Ryan and the GOP are arguing that the government has a spending problem that needs to be reined in to allow the economy to grow, and he even cites a Congressional Budget Office report that purports to support that notion:
But a balanced budget will help the economy. Smaller deficits will keep interest rates low, which will help small businesses to expand and hire. It’s no surprise, then, that the nonpartisan Congressional Budget Office believes that legislation reducing the deficit as much as our budget does would boost gross national product by 1.7% in 2023.
It’s worth noting here that Ryan’s budget only balances if his fantasy assumptions about revenue are correct, but even if it did, a balanced budget won’t help the economy in the short-term. The very CBO report Ryan cites says that an immediate focus on deficit reduction would hamper the economic recovery by knocking 0.6 percent off of growth. And as we’ve pointed out here, government spending has plateaued since President Obama took office. Despite Ryan’s assertion in the budget that “government spending is no substitute for a true recovery led by the private sector,” past recoveries don’t support that notion either. As this chart shows, fiscal policy has aided recoveries from the last two recessions, adding an average of half-a-point to economic growth. But after the stimulus initially aided this recovery, deficit reduction had a negative impact on growth over the next two years:
Ryan is right that the United States has a spending problem, but right now, the problem is that the government isn’t spending enough. European countries that have pursued austerity have slumped back into recessions. But the United States’ pursuit of stimulus put it on a path to recovery, even if a premature focus on debts and deficits has made that recovery more tepid than it should have been. Ryan’s budget would only make that worse in the short-term, to say nothing of what repeating the Republican failures of the past by cutting taxes for the rich and slashing the social safety net would do the long-term prospects of the American economy.