Draconian Spending Cuts Are In Fact Bad for the Economy

Every so often, Mitt Romney is accidentally honest about something important. One such moment happened earlier this week.  Here’s the rundown.

It’s Republican orthodoxy that the way to get our economy moving is to massively cut government spending, which they falsely claim is somehow “crowding out” private sector investments. Here’s Speaker Boehner (R-OH) wielding this theory in order to justify another manufactured crisis over the debt ceiling:

Boehner, by contrast, said cutting spending will spur the economy by giving “certainty” to the business community. “It would lift this cloud of uncertainty that’s causing employers to wonder what’s next.”

Unfortunately, the realities of economics say otherwise.  When there isn’t enough demand (i.e. people buying things) in the economy to make it grow, cutting government spending only further reduces demand and exacerbates the problem (Exhibit A: Europe).  Dealing with our debt and deficit is important and we should do so using a balanced approach including significant new revenues, but slashing spending in the short-term is just a prescription for pain.

So, suffice it to say that we were very surprised to see Mitt Romney admit the truth — that deep spending cuts are very damaging to the economy — during an interview with TIME earlier this week:

HALPERIN: You have a plan, as you said, over a number of years, to reduce spending dramatically. Why not in the first year, if you’re elected — why not in 2013, go all the way and propose the kind of budget with spending restraints, that you’d like to see after four years in office? Why not do it more quickly?

ROMNEY: Well because, if you take a trillion dollars for instance, out of the first year of the federal budget, that would shrink GDP over 5%. That is by definition throwing us into recession or depression. So I’m not going to do that, of course. What you do is you make adjustments on a basis that show, in the first year, actions that over time get you to a balanced budget.

Unfortunately, Romney’s entire economic plan is predicated on massive tax cuts for the wealthy and massive spending cuts. ThinkProgress’ Pat Garofalo explains the contradiction between Romney’s honest answer and the economic program he actually supports:

According to estimates from the Economic Policy Institute, the cuts in the House GOP budget — authored by Budget Committee Chairman Paul Ryan (R-WI) — would cost the economy 4.1 million jobs over the next two years due to the $400 billion in spending cuts for which it calls. As Esquire’s Charles Pierce, who flagged this particular exchange in the interview, wrote, “didn’t Romney, in saying that, pretty much blow up the entire rationale for over 30 years of Republican economics right there? Cutting government spending will throw us into a recession or depression?”

Europe is already struggling under the weight of austerity, with its economy contracting at the fastest pace in three years. Romney seems to understand the effect that cutting the budget indiscriminately in the short-term will have, yet he’s backing a budget that fails to acknowledge it.

IN ONE SENTENCE: It’s good that Mitt Romney recognizes that deep and swift spending cuts pose a danger to our economy; however, it’s unfortunate that that’s exactly what his economic plan calls for.

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