published Sunday, February 10th, 2013

Look out below: GOP hard-liners may cause economy to fall off a cliff

The Labor Department's latest job report showed that U.S. employers added 157,000 jobs in January. More importantly, it also found in its annual revision that employment gains over the past two years were much better than previously reported.

Those numbers showed employers added an average of about 180,000 jobs per month in 2011 and 2012, well above the 150,000 average previously reported. Even better, hiring averaged 200,000 jobs in the last quarter of 2012, while construction jobs -- a significant milestone of recovery from the depths of the Great Recession -- contributed 28,000 jobs in January, and nearly 100,000 over the past four months.

But don't look for any more job growth, or heartening economic diagnoses. Republicans are about to drop the hammer on the economy as they take the country over the long-dreaded "fiscal cliff" on Mar 1.

If they hold course, as they seem unflinchingly prepared to do, we can forget job growth and the revitalizing social benefits of increased consumer spending that flow from it: A self-reinforcing upward spiral of strengthening economic activity, increased tax revenue, and thus lower federal deficits; and the flip side of growth seen in declining expenditures for jobless benefits, foreclosed mortgages, lapsed health insurance and increased indigent-care costs, and declining numbers of people on food stamps and the homeless burden.

All these benefits are about to crash and go in reverse, because Republicans' smirking deficit hawks are out to show nation that they are bound and determined to attempt to cut federal deficits by reinstating recession and its revenue drag. Never mind that the Great Recession we're just now digging out of -- and its corresponding plunge in federal tax revenue from the norm of 18.5 percent of GDP to less than 16 percent of GDP -- mainly spurred the deficits of the past few years.

That lesson is lost on hidebound Republicans. They apparently won't bother to consider the economic wreckage of the last four years' misguided "austerity budgets" in Great Britain and a range of European countries. If they did, they would understand the deep economic costs and loss of jobs that they are about to impose by going over the fiscal cliff.

The nonpartisan Congressional Budget Office estimates that up to 1.4 million jobs may be lost under the sequester-mandated budget cuts over the next two years. The Bipartisan Policy Center, an independent group, believes 1 million jobs will be lost this year alone under the burden of the budget sequesters that Republicans intend to impose in the next 20 days.

In just the next seven months, those budget sequesters will cause $55 billion in reduced defense spending on military contracts and $27 billion in discretionary spending in a wide range of federal nondefense departments. Except for Social Security, virtually every agency and department will be cut, no matter how important they are to airline security, federal law enforcement, border defense, agriculture, food inspection, and the public safety net. Much of the economic damage will result from canceled defense contracts and layoffs.

These sequesters, already deferred once, were never intended to take effect. They were put in place by Congress in the deficit ceiling-battle in the fall of 2011 as a hammer to drive a bipartisan initiative toward deep deficit reduction measures. The irony is that President Obama had already initiated $1.4 trillion in spending cuts over the next 10 years, and has been attempting to negotiate deeper deficit reduction through a balanced mix of spending cuts and sensible revenue increases to avoid the unfair slashing of social safety net programs like Social Security, Medicare and Medicaid.

Republican leaders want to use the threat of indiscriminate across-the-board sequester cuts as a stick to force deeper safety-net cuts without bothering to close the corporate loopholes, hedge-fund rip-offs and off-shore tax-haven accounts that enrich their campaign paymasters. The question is whether they're now willing to kill economic and job growth for the mass of America's middle-class just to protect the privileged few.

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AndrewLohr said...

The sequester was President Obamas's idea.

February 10, 2013 at 12:22 a.m.
nucanuck said...

The real question is whether continued government spending stimulus is building a recovery or deluding ourselves that we are building sustainable growth.

That the sequester will collapse the economy, there should be little doubt, but is that preferable to an even bigger collapse farther down the road? The cracks in the western economic model are turning into fissures. We just read that the Fed pumped $267 billion into foreign banks in the last month alone. Those were US dollars going mostly into European banks to try to float an insolvent system with liquidity. This is madness...trying to save all of Europe and Japan in order to save ourselves.

The Republicans may be right for all the wrong reasons.

February 10, 2013 at 2:25 a.m.
Livn4life said...

How funny, if the left side of the paper was not serious. Even suggesting it is GOP hardliners CAUSING the cliff fall we are really already in, is ludicrous. But then, as we will see if people respond to this post, many many only see one side as the guilty party. Why is that? Oh that is only because for some reason the national media sees through one lens. Both parties are guilty but how do we hold them both accountable? I hear the breaks screeching as the cliff looms nearby(YEAH RIGHT). Onward and downward seems to be the approach in Washington. But it is not only the GOP Hardliners.

February 10, 2013 at 8:48 a.m.
BigRidgePatriot said...

You cannot spend yourself to prosperity. The feds have created a monetary and financial system bubble, on top of the lingering real estate bubble that was not allowed to correct due to fed meddling.

We are going to have to live through a correction. It will not be fun, but it will be bearable if we do not allow the feds to continue to pump up the bubbles and set up a truly catastrophic collapse.

February 11, 2013 at 9:52 a.m.
NirvanaFallacy said...

"These sequesters, already deferred once, were never intended to take effect."

Intent or not, the sequester was Obama's idea. So if the automatic cuts go into effect, Obama will be the one to blame. Obama tried to bluff the GOP and it seems the GOP may just call him on that bluff.

February 11, 2013 at 1:09 p.m.
timbo said...

Another stupid Harry Austin editorial that hardly mentions the most menacing problem in our history, the almost 17 trillion dollar debt.

Harry when do we pay up? Why don't you answer that?

February 11, 2013 at 1:16 p.m.
Leaf said...

The TEA party Republicans don't know how to govern. They reject reality in favor of belief.

February 11, 2013 at 2:43 p.m.
BigRidgePatriot said...

Leaf said... "The TEA party Republicans don't know how to govern. They reject reality in favor of belief."

I think that only holds true if the tea party republicans think they can balance the budget without dealing with the scope of the federal government that has been expanded by progressives in both parties. If they are willing to deal with the scope problem then their aspirations to govern are just fine.

It might be that you think the scope is set and that the budget outcomes have to naturally follow.

February 11, 2013 at 7:58 p.m.
timbo said...

Leaf...nobody in the history of ostriches has ever been so irresponsible and ignorant than the current administration and you liberal apologists. How you could mention the Tea Party in this is absolutely bizarre. Obama is the worst president in the history of all presidents. He is worse than a PTA president..he is worse than the president of the "He-man Woman Haters Club." He is so dumb about how things actually work, it is scary.

Conservative fiscal responsibility versus liberal give-aways,vote buying and "free stuff."

You must be a total idiot.

February 12, 2013 at 3:14 p.m.
nucanuck said...

timbo,

Obama is following the economic course followed by both parties for four decades. Nobel prize winners in economics support his policies. Obama has presided with an even hand on a broad array of issues.

The only conservative fiscal responsibility has come from whichever party was out of power.

The debt party will not end because of political course reversal, it will end because Humpty Dumpty fell off the wall.

You make yourself look like a lightweight when you make shrill pronouncements like your post @3:14 pm.

February 12, 2013 at 6:24 p.m.
BigRidgePatriot said...

nucanuck said... "The only conservative fiscal responsibility has come from whichever party was out of power."

The republicans earned that comment for sure. They spent like drunken sailors when they had total control. It is very hard to take them seriously (with a few exceptions) now that they are in the business of criticising a democrat president and Senate.

February 12, 2013 at 7:24 p.m.
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