Experts: GOP economics will hurt the economy, increase unemployment

Posted by AzBlueMeanie:

This week will mark the end of two full months since Republicans assumed control of Congress. They have spent their time trying to repeal — but not replace — the Affordable Care Act, and waging a culture war against women and women's reproductive health. They have been proposing cuts in federal spending to federal programs they have been ideologically opposed to for years (like NPR and PBS). But they have not proposed a single bill to create any jobs in this country.

"Mr. Boehner, where are the jobs?"

The simple answer is, Republicans have no interest in creating jobs. It is becoming increasingly clear that Republicans are intent upon destroying what is left of the American economy and to turn this country into a Banana Republic controlled by a corporatocracy "of the über-rich plutocrats, by the über-rich plutocrats, and for the über-rich plutocrats." This is the danger of an aristocracy of great wealth that our Founding Fathers warned us would be a threat to the survival of our democratic Republic.

Experts agree. Report: GOP budget cuts would hit U.S. economy – Los Angeles Times:

The spending cuts approved by House Republicans would act as a drag on the economy, according to a Wall Street analysis that added new pressure to a raging political debate in Washington.

The report by the investment company Goldman Sachs said the cuts would reduce the growth in gross domestic product by up to 2 percentage points this year, essentially cutting in half the nation's projected economic growth for 2011.

The report, prepared for the company's clients, represents the first independent economic assessment of a congressional budget fight that could lead to a government shutdown as early as [this] week.

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Democrats quickly seized on the report as a validation of their arguments against the Republican cuts.

"Just as the economy is beginning to pick up a little steam, the Republican budget would snuff out any chance of recovery," said Sen. Charles Schumer, D-N.Y.

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The Goldman Sachs analysis said the cuts would reduce the country's economic growth by 1.5 to 2 percentage points for the year.

A smaller budget reduction of $25 billion, if approved as a compromise, would have a lesser effect, reducing GDP by 1 percentage point. The effects would fade over time, the report said.

"Fiscal drag is quickly emerging as a focus," the Goldman report said. The report said the spending cuts are "the most important near-term risk."

* * *

While politicians reacted quickly to the findings, the view among economists was mixed.

"It would be a meaningful hit to GDP this spring and summer," said Mark Zandi, chief economist at Moody's Analytics, who has advised Republicans and Democrats.

Zandi said he would prefer spending cuts next year, as the economy shows further improvement. "I just wouldn't do anything that would forestall that kind of job creation that we need," he said.

But Douglas Holtz-Eakin, a former director of the nonpartisan Congressional Budget Office who has advised Republicans, said the projections were excessive.

"It's way too high," he said. He estimated the drag on economic growth from the House-approved cuts at no more than 0.2 percentage point.

It's not just at the Congressional level, there are a slew of ideological Republican governors and Republican statehouses after November's election that are intent upon destroying the American economy at the state level as well. Arizona is but one example.

More fiscally responsible governors are asking the federal government not to short-circuit the fragile recovery. Govs to feds: Don't short-circuit recovery (Warning: AP analysis by Liz "Sprinkles" Sidoti):

Their states on the brink of financial catastrophe, governors pleaded Saturday for the divided federal government to avoid doing anything that would hamper the tenuous economic recovery back home.

Their message to Washington: prevent a government shutdown, abstain from spending cuts that dramatically will affect states and end even preliminary discussions about allowing states to declare bankruptcy. [Some congressional Republicans, conservative groups, and potential GOP presidential candidates such as former House Speaker Newt Gingrich and former Minnesota Gov. Tim Pawlenty have floated the idea.]

Ah, there it is. The Republican plan to use default and bankruptcy to liquidate public employee pension plans and to end any further pension obligations into the future. Republicans want to steal your retirement so that they do not have to raise taxes on the über-rich plutocrats. Liz "Sprinkles" Sidoti just gives this a passing mention.

"Anything that Congress does that will undermine our recovery is quite troublesome to us," said Washington Gov. Christine Gregoire, head of the National Governors Association, as she opened the bipartisan group's winter meeting. "We're asking for cooperation."

"We don't need a hiccup now in our recovery," she added. "We are fragile."

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Over the next 2 1/2 years, states face an estimated $175 billion more in budget gaps that they have no choice but to fill. The hole is caused partly because an initial infusion of cash from President Obama's economic stimulus law, as well as extensions of that money, will dry up in June. States received $103 billion in Medicaid money and $48 billion in education dollars to soften the recession's blow.

Federal stimulus funding, i.e., federal aid to the states, is drying up because Republicans are ideologically opposed to helping governments. They foam at the mouth and go barking mad at the mere mention of the word "stimulus" (which all credible economists say worked, by the way) — because they want to defund government so their lord and master Grover Norquist can "drown it in the bathtub."

The answer, of course, is for the states to raise tax revenue. But Republicans are ideologically opposed to ever raising taxes at any time for any reason (with the exception of transferring the tax burden to the middle class and poor to benefit the über-rich plutocrats, as they have done here in Arizona). Once again, Republicans want to defund government so their lord and master Grover Norquist can "drown it in the bathtub."

Gregoire, a Democrat, and the NGA's vice chairman, Gov. Dave Heineman, R-Neb., recently met with House and Senate leaders as well as Health and Human Services Secretary Kathleen Sebelius, and asked them to be mindful of how the loss of the money, as well as further spending cuts, could hurt states.

The warnings come just as the Commerce Department reported that state and local responses to the fiscal crisis were undercutting the national recovery, slowing economic growth. [Public employees are being laid off in numbers that offset any gains in private sector employment, hence the high unemployment rate.] Governors said the report only proved their point.

"For two years, governors have said when we cut we impact the recovery," said Gregoire. "We know we have to make the cuts, but we can ill afford to have Congress on top of that cutting us more because the result will slow the recovery in our home states and in the nation."

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The governors met in Washington as Republicans who control the House and Democrats who run the Senate are in a high-stakes debate over the federal budget and trillion-dollar deficits.

GOP leaders have faced pressure from a contingent of newly elected tea party-supported lawmakers to cut spending even deeper than originally planned, setting up a clash with the White House and Senate Democrats over legislation necessary to keep the government running past this coming Friday's deadline.

There have been signs in recent days that the two sides are moving toward a compromise on spending cuts that would prevent a shutdown, at least for now.

But the progress did little to mollify governors, who sounded the alarm about a shutdown.

"It will definitely impact every state," said Beebe. Most states, he said, don't have the money needed to offset the loss of federal dollars targeted to the work force and children.

The "compromise" would extend the federal debt ceiling limit vote by two weeks in exchange for Democrats agreeing to a package of additional budget cuts. This is a tactic commonly known as "death by a thousand (budget) cuts." Republicans do not want to have a recorded vote in favor of raising the federal debt ceiling, as they have always done in the past, after so many Tea Party members got elected saying they would not vote to raise the federal debt ceiling. GOP leadership wants to slow-walk this process with a series of two-week extensions in which they test the resolve of Democrats by holding them hostage every couple of weeks for additional budget cuts to avoid a government shutdown. Democrats should just force a vote on the federal debt ceiling limit now, quit behaving like hostages.

If Republicans really want to defaut on the federal debt, causing yet another worldwide fiscal and economic calamity, let them do it. Maybe this is what it takes to finally wake up the American people to what is really happening here.