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Will GOP Spending Cuts Really Kill Jobs?

2:28 PM, Feb 28, 2011 • By MARK HEMINGWAY
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The Washington Post is up and running with this story on a report about GOP budget cuts, which lost me in paragraph three:

A Republican plan to sharply cut federal spending this year would destroy 700,000 jobs through 2012, according to an independent economic analysis set for release Monday.

The report, by Moody's Analytics chief economist Mark Zandi, offers fresh ammunition to Democrats seeking block the Republican plan, which would terminate dozens of programs and slash federal appropriations by $61 billion over the next seven months.

Zandi, an architect of the 2009 stimulus package who has advised both political parties, predicts that the GOP package would reduce economic growth by 0.5 percentage points this year, and by 0.2 percentage points in 2012, resulting in 700,000 fewer jobs by the end of next year.

Emphasis added. Boy, those predictions about job creation and the stimulus package sure were on the money, weren't they? I haven't read the report and maybe it will prove to have some merit, but that's a pretty good reason to be skeptical.

This Moody's report also comes on the heels of a report from Goldman Sachs last week that also speaks doom and gloom about budget cuts. But Goldman Sachs seems to live to profit off the government these days, so again, I would take this with a five pound bag of salt.

In a recent WEEKLY STANDARD newsletter, Matt Continetti observed the following:

Last year, we published a cover story by Christopher Caldwell on the German economy. Because of that country's experience with hyperinflation in the 1920s, Caldwell observed, German policymakers have been reluctant to embrace the deficit-spending, aggregate-demand-managing "stimulus" policy advocated by the Obama administration. Even so, Germany has weathered the Great Recession quite well: Its economy is growing and unemployment fell in January 2011 to the lowest rate since 1992.

Not all countries are alike. Policies that work in some places may not work in others. Let's not pretend that Germany is some sort of Elysian (Teutonic?) paradise. Germany's record-low unemployment rate of 7.4 percent is still higher than the American unemployment rate of 5.8 percent in 2008.

Still, it's worth noting that in recent years German leaders have followed macroeconomic policies vastly different from those prescribed by Paul Krugman and his various Mini-Me's. And Germany is doing fine—better than fine, in fact. Doesn't that count for something? And isn't it worth trying a different approach to fiscal policy, in the name of "bold persistent experimentation," when two years of economic stimulus have left us with 9 percent unemployment, trillion-dollar-plus deficits, and red ink for as far as the eye can see?

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