How Deficit Cuts Are About To Hurt The Economy

[cthulu2016]

[font color=green]Both spending cuts called for in current law and the expiration of the Bush tax cuts (which is what happens under existing law absent changes) are substansial parts of this overall equation. The bottom line is that we can have the better set of numbers in the chart with a few strokes of a few pens, though the deficit would be higher... but not linearly higher because the good economic numbers would mean less medicare and unemployment insurance costs, higher federal tax revenues, and more sales tax money for the states, lessening their dependency of the feds to make up their buget shortfalls.[/font color]

How Deficit Cuts Are About To Hurt The Economy

The U.S. economy will suffer over the next few years as a result of fiscal austerity measures including the recent spate of spending cuts, according to the Congressional Budget Office’s latest forecast issued Tuesday.

Economic growth and the employment rate will be reduced for many years to come as a result of the August debt limit law’s steep $2.4 trillion in spending cuts and expiration of expiring tax provisions including the Bush-era tax cuts.

To illustrate this point, CBO made separate projections pegged to two baselines — current law, in which the spending cuts and tax increases go into effect, and an alternative fiscal scenario in which these fiscal policy changes are voided.

Without the austerity measures, deficits are higher, but real GDP growth is projected to be as much as 0.8 percent higher this year and up to 2.9 percent higher next year, when the debt limit law’s sequestration cuts kick in and the Bush-era tax breaks expire. The baselines even out after a decade but the near term hit to the economy is salient.



http://tpmdc.talkingpointsmemo.com/2012/01/deficit-cuts-are-about-to-hurt-the-economy-report-suggests.php?ref=fpblg

[badtoworse]

1. Interesting, but moot. The cuts aren't going to be reversed.

[cthulu2016]

2. Some of the deficit cuts are sure to be reversed

The expiration of the Bush tax cuts. Hard to imagine that they will expire in their entirety as scheduled which will make this chart a slight bit rosier.

But the spending cuts? Yes, agreed. They are not likely to be reversed.

[badtoworse]

3. I don't see them being retained for people making under $250k and expiring for higher earners.

What's to stop a repeat of 2010?

[cthulu2016]

5. I agree

That's what I was saying -- I doubt they'll be allowed to expire as scheduled. As to whether that's all or in part, I don't know but I agree that it's hard to imagine why it would be any different than '10.

[gratuitous]

4. And not just federal budget cuts, but state budget cuts, too

Laura Clawson has the low-down over at Daily Kos:

http://www.dailykos.com/story/2012/01/30/1059914/-Nonexistent-out-of-control-government-spending-dragging-down-the-economy-and-hurting-Obama?detail=hide&via=blog_1