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    Print Back to story Republicans, Fed Clash on Impact of Party's Planned Spending Cuts on Jobs
    By Lisa Lerer - Mar 4, 2011 U.S. Representative Kevin McCarthy thought he had an ally in Federal Reserve Chairman Ben Bernanke on the impact that Republican budget cuts will have on jobs.

    McCarthy, of California, the third-ranking House Republican, said this week the spending cuts won’t cost the nation jobs, pointing to Bernanke for support. Within hours, Bernanke testified on Capitol Hill that the budget reductions may lead to the loss of 200,000 jobs.

    The Fed chief said the House Republican plan to slash $61 billion from 2011 government spending could also subtract “a couple of tenths” of a percentage point from U.S. economic growth over several years.

    “We need to address the deficit; that’s very important,” Bernanke told the House Financial Services Committee in a March 2 hearing. “But I think it would be most effective if we did that over a timeframe of five or 10 years and not try to do everything immediately.”

    Bernanke’s words will pose a danger for Republicans, who say their top priorities are jobs and cutting spending, if voters see them in conflict with the head of the central bank.

    The House approved the Republican plan last month, with all but six party members backing the proposal. Senate Republicans say they are seeking the same level of reductions in talks with Democratic leaders and the White House. The plan includes cuts of 10 percent or more in hundreds of programs.

    Don’t Believe It
    McCarthy and other Republicans say their budget cutting won’t increase the nation’s unemployment rate, which declined to 8.9 percent in February.

    “I don’t believe the $61 billion is going to be a short- term hit on jobs,” McCarthy, 46, the House majority whip, said at a Bloomberg News breakfast on March 2.

    McCarthy also dismissed analyses by Goldman Sachs Group Inc. (GS) and Mark Zandi, chief economist for Moody’s Analytics, that said the Republican budget move would shed jobs and slow economic growth. He suggested that Bernanke was more credible.

    “I think Bernanke refuted that it’s going to be a job loss,” McCarthy said. “Any time that you create private-sector jobs over the public sector, you’re in a much stronger position.”

    Bernanke, 57, later testified on Capitol Hill.

    Republicans have struggled to balance calls for steep spending cuts from newly elected members of their caucus, those aligned with a Tea Party movement urging deep reductions in government spending, with the political fallout that could come from possible job losses.

    ‘Irresponsible Cuts’

    Democrats seized on the potential losses today, releasing a state-by-state breakdown of what they say would be a decrease in jobs under the Republican budget plan.

    “This map shows exactly how House Republicans’ irresponsible cuts will hit home,” said Senator Charles Schumer of New York, who heads the Democratic Policy and Communications Committee.

    A national survey by the Wall Street Journal and NBC News found less than one-quarter of Americans support significant cuts in two of the biggest pieces of the budget, Social Security or Medicare. The poll of 1,000 adults was conducted Feb. 24-28, with a 3.1-percentage-point margin of error.

    House Speaker John Boehner came under fire last month after he appeared insensitive to losses of federal government jobs that could result from the Republican spending plan.

    ‘So Be It’
    “If some of those jobs are lost in this, so be it,” the Ohio Republican told reporters on Feb. 15. “We’re broke. It’s time for us to get serious about how we’re spending the nation’s money.”

    The Federal Reserve’s estimate of job losses is significantly lower than the study of the proposal by Zandi, who frequently analyzes the economic impact of legislation for House Democrats. Zandi also worked as an economic adviser for Republican Senator John McCain’s 2008 presidential campaign.

    Zandi said the measure would cost the country 700,000 jobs by the end of 2012 and reduce real economic growth this year by 0.5 percentage points and by 0.2 percentage points next year.

    “Significant government spending restraint is vital, but given the economy’s halting recovery it would be counterproductive for that restraint to begin until the U.S. is creating enough jobs to lower the unemployment rate,” Zandi said.

    An independent analysis released by Goldman Sachs last month found that the Republican proposal would reduce economic growth by 1.5 to 2 percentage points during the second and third quarters of this year.

    Realistic Analysis
    Bernanke attributed the lower Federal Reserve estimates to some “differences in assumptions.”

    “We’ve tried to do a realistic analysis of what those cuts would do over a couple of years,” he said.

    Republicans say the positive effect that making a serious effort to tackle the deficit would have on long-term economic growth would outweigh any short-term job losses.

    “The deficit and debt are key issues to get our economy back on track, and that’s the intangible that has to be factored in,” said Senator Rob Portman, an Ohio Republican. “What is the real short-term hit if the market’s going to respond favorably to us getting our act together?”

    Boehner called Zandi the “pet economist” of House Democratic Leader Nancy Pelosi of California, citing his support for an economic-stimulus bill that the White House once estimated would keep unemployment below 8 percent. Boehner cited a statement signed by 150 economists sent to President Barack Obama calling for spending cuts.

    Stanford University economist John Taylor, a Treasury undersecretary under former President George W. Bush, says both Zandi and Goldman Sachs relied on a flawed methodology. He wrote that he found “no convincing evidence” that the budget-cutting bill would reduce employment or economic growth.

    To contact the reporter on this story: Lisa Lerer in Washington at or [email protected].

    To contact the editor responsible for this story: Mark Silva at [email protected]
    .
    Republicans, Fed Clash on Impact of Party's Planned Spending Cuts on Jobs - Bloomberg

    It seems to me the real issues are long term deficits not the massive deficits caused by the great recession. It's ass backwards to cut near term spending in a recession by massive amounts in ways that mostly increase suffering today while doing nothing to fix the real problem. The hit on stimulative spending by the goverment will be big today and the future savings minimal. I also don't think we should be sending a dollar in aid to any advanced economies like Israel when we are cutting nutrional support to low birth weight babies today. We talk about the need to have a well educated workforce and our plan is to further erode our educational systems and access to higher education? I guess ideology trumps all sense or responsibility to the future. We say we are mortgaging our kids future yet we do nothing to correct that and cut their education and nutrional needs today. How exactly does cutting their access to higher education, increasing their class sizes and ignoring any nutrional needs their families can't meet balance against the idea we are mortgaging their futures? It seems clear to me we are doubling down on the mortgage today and telling ourselves it's in their best interests.
    Where free unions and collective bargaining are forbidden, freedom is lost.”
    ~Ronald Reagan

  • #2
    RR:

    Bernanke is probably right that the proposed cuts will cause a loss of about 200,000 jobs and shave a tenth off the GDP, but what's missing in all the fuss is the fact that the job losses will not happen for some time and not all at once.

    Last month the BLS reported (IIRC) a gain of 200,000 jobs. While that is better than previous months, it's well below gains in normal times. So, what the dems are grousing about, I presume, amounts to saying that a slightly lower increase in the increasing rate of job gains will slow the economic recovery. That's like saying if you reduce your speed on the highway from 75 to 74, you'll get there later. It's marginal, at best. What the dems really want is to prevent cuts to the programs the GOP wants to curtail. In other words, it's business as usual.

    BTW, we don't give the Israeli's money to buy military hardware. They get credits to buy it from the US. So if you cut that, you lose jobs in the defense sector.
    To be Truly ignorant, Man requires an Education - Plato

    Comment


    • #3
      Well, if the GOP is serious when they say this is about our children's future whoose children are they talking about when the plan includes huge cuts to education, NIH, nutrional support? I am all for addressing the long term systemic problems we face but, what is happening now is going to harm our future competitiveness not help it. I understand non discretionary spending needs to be cut but in the aftermath of the worst financial crisis of the last 3 generations? Entitlements are the real villain this is a sideshow which is going to hurt our nation's future growth far more than it cuts the deficit.
      Where free unions and collective bargaining are forbidden, freedom is lost.”
      ~Ronald Reagan

      Comment


      • #4
        Originally posted by Roosveltrepub View Post
        Well, if the GOP is serious when they say this is about our children's future whoose children are they talking about when the plan includes huge cuts to education, NIH, nutrional support? I am all for addressing the long term systemic problems we face but, what is happening now is going to harm our future competitiveness not help it. I understand non discretionary spending needs to be cut but in the aftermath of the worst financial crisis of the last 3 generations? Entitlements are the real villain this is a sideshow which is going to hurt our nation's future growth far more than it cuts the deficit.
        You want to address "long term" deficits but don't want to cut anything "long term." What do you propose?

        Obama couldn't find the money to fund a manned space vehicle in his $3.7 trillion budget. We will not have a transport to orbit after June when the shuttle fleet retires. How's that for "long term?"

        You want to address structural deficits, yet you support Obamacare which is about as bad as Medicare and worse than Social Security.

        What exactly are you willing to cut?
        "Only Nixon can go to China." -- Old Vulcan proverb.

        Comment


        • #5
          Originally posted by gunnut View Post
          You want to address "long term" deficits but don't want to cut anything "long term." What do you propose?

          Obama couldn't find the money to fund a manned space vehicle in his $3.7 trillion budget. We will not have a transport to orbit after June when the shuttle fleet retires. How's that for "long term?"

          You want to address structural deficits, yet you support Obamacare which is about as bad as Medicare and worse than Social Security.

          What exactly are you willing to cut?
          In your imagination Obamacare is as bad as medicare but according to the CBO because of the controls it puts on medicare and the elimination of the subsidized to compete with medicare private plans itt saves money. I am all for some level of means testing and reduced benefits for ss, medicare and the prescription drug plan. Why should our kids be paying the same amount to a well off person in ss, the same% of medical costs to those with ample means to pay and the same amount for drugs for those with multiple homes? So, they caan not pay a death tax when they pass that wealth they kept because Uncle Sam paid the whole way? I am 100 percenrt for long term fixes and think the bogus cuts proposed are largely harmful.
          Where free unions and collective bargaining are forbidden, freedom is lost.”
          ~Ronald Reagan

          Comment


          • #6
            Originally posted by Roosveltrepub View Post
            In your imagination Obamacare is as bad as medicare but according to the CBO because of the controls it puts on medicare and the elimination of the subsidized to compete with medicare private plans itt saves money.
            CBO crunches numbers only. It's garbage in, garbage out. Obamacare relies on cuts to medicare, restrictions in services, 10 years of taxes to pay for 6 years of implementation, to make the numbers come out.

            Originally posted by Roosveltrepub View Post
            I am all for some level of means testing and reduced benefits for ss, medicare and the prescription drug plan. Why should our kids be paying the same amount to a well off person in ss, the same% of medical costs to those with ample means to pay and the same amount for drugs for those with multiple homes?
            Because SS and Medicare are not welfare programs, as explained by astralis in the other thread. It's a government retirement and insurance policy that everyone was forced to participate.

            Originally posted by Roosveltrepub View Post
            So, they caan not pay a death tax when they pass that wealth they kept because Uncle Sam paid the whole way? I am 100 percenrt for long term fixes and think the bogus cuts proposed are largely harmful.
            Why should the chunk of money that has been taxed multiple times already, be taxed again, upon someone's death, no less?



            I have already proposed my solution. Index social security with age, and privatize at least part of it. Medicare will have to be cut back to essential services. No more expensive neural surgeries and hip replacements for free. That's not what a "basic" health care system should do.

            Let's hear some of your suggestions, other than raising taxes.
            Last edited by gunnut; 09 Mar 11,, 20:06.
            "Only Nixon can go to China." -- Old Vulcan proverb.

            Comment


            • #7
              Originally posted by gunnut View Post
              CBO crunches numbers only. It's garbage in, garbage out. Obamacare relies on cuts to medicare, restrictions in services, 10 years of taxes to pay for 6 years of implementation, to make the numbers come out.



              Because SS and Medicare are not welfare programs, as explained by astralis in the other thread. It's a government retirement and insurance policy that everyone was forced to participate.



              Why should the chunk of money that has been taxed multiple times already, be taxed again, upon someone's death, no less?
              Ahh so you are for reigning in entitlements as long as those that need them to survive feel the pain? If it's a retirement plan that's great news! That means you want to pay back that 2.5 trillion in bonds the social security SURPLUS contains and the system will be flush till after I am dust!
              Where free unions and collective bargaining are forbidden, freedom is lost.”
              ~Ronald Reagan

              Comment


              • #8
                Originally posted by Roosveltrepub View Post
                Ahh so you are for reigning in entitlements as long as those that need them to survive feel the pain? If it's a retirement plan that's great news! That means you want to pay back that 2.5 trillion in bonds the social security SURPLUS contains and the system will be flush till after I am dust!
                Again, what do you propose?

                Any adjustments made to government "programs" will affect "those who need them that most" because "those who need them the most" benefited dispropotionately "the most" to begin with. They felt the most impact when the programs were established and will feel the most impact when the programs are adjusted or terminated.

                You have made no suggestions other than blaming the rich. How much taxes did you pay last year? You can always pay more. There are no laws that prevent you from paying more taxes.
                "Only Nixon can go to China." -- Old Vulcan proverb.

                Comment


                • #9
                  Originally posted by gunnut View Post
                  Again, what do you propose?

                  Any adjustments made to government "programs" will affect "those who need them that most" because "those who need them the most" benefited dispropotionately "the most" to begin with. They felt the most impact when the programs were established and will feel the most impact when the programs are adjusted or terminated.

                  You have made no suggestions other than blaming the rich. How much taxes did you pay last year? You can always pay more. There are no laws that prevent you from paying more taxes.
                  I didnt blame the rich i called for means testing. Since they are insurance programs and you say we have to pay that money back someone's taxes are going up aren't they?
                  Where free unions and collective bargaining are forbidden, freedom is lost.”
                  ~Ronald Reagan

                  Comment


                  • #10
                    Originally posted by Roosveltrepub View Post
                    I didnt blame the rich i called for means testing. Since they are insurance programs and you say we have to pay that money back someone's taxes are going up aren't they?


                    I don't quite get what you mean here. Pay the money back?

                    Social Security was marketed as a retirement system and Medicare was marketed as an insurance program. Neither is a welfare program, officially.
                    "Only Nixon can go to China." -- Old Vulcan proverb.

                    Comment


                    • #11
                      Lol. The people that are saying these tiny cuts will cost 200,000 jobs are the same people who said the porkulus will keep unemployment below 8%.

                      It's a joke. Those economic models are junk. The biggest economic stimulus we could possibly get would come from government living within it's means. This business of running up debt at an uncontrollable rate has crippled us.
                      "We will go through our federal budget – page by page, line by line – eliminating those programs we don’t need, and insisting that those we do operate in a sensible cost-effective way." -President Barack Obama 11/25/2008

                      Comment


                      • #12
                        Save the Cowboy Poets!

                        We can't afford $1.4 Billion for another year of F-22
                        We can't afford $523 Million for the F136 engine.

                        But goddammit we must save the cowboy poets!

                        “The mean-spirited bill, H.R. 1 … eliminates the National Endowment of the Humanities, National Endowment of the Arts,” said Reid. “These programs create jobs. The National Endowment of the Humanities is the reason we have in northern Nevada every January a cowboy poetry festival. Had that program not been around, the tens of thousands of people who come there every year would not exist.
                        That was Harry Reid yesterday morning on the floor of the Senate.

                        They wouldn't exist? The GOP wants to exterminate cowboy poets?

                        Now I didn't even know my tax dollars were funding cowboy poets, but does anyone here think it's so important that we have to borrow money from China to spend it on a poetry festival? Is there some reason they can't just charge admission? They have tens of thousands of people showing up and they need federal funding to keep it going?
                        "We will go through our federal budget – page by page, line by line – eliminating those programs we don’t need, and insisting that those we do operate in a sensible cost-effective way." -President Barack Obama 11/25/2008

                        Comment


                        • #13
                          Originally posted by highsea View Post
                          Lol. The people that are saying these tiny cuts will cost 200,000 jobs are the same people who said the porkulus will keep unemployment below 8%.

                          It's a joke. Those economic models are junk. The biggest economic stimulus we could possibly get would come from government living within it's means. This business of running up debt at an uncontrollable rate has crippled us.
                          I agree we need to both live w/in our means and pay for the goverment we want. I don't buy into his bonafides as being more concerned with the deficit than tax cuts because of his vote against the fiscal commison and vote for the largest unfunded entitlement in history but, I do agree with what Ryan said to tea Partiers that, to paraphrase him if they thought we were going to balance the budget cutting NPR and goverment waste they were in for a rude awakening. Balancing our budget with our current revenue would require about a 33 percent across the board cut in defense, social security checks, medicare and medicaid reimbursements or coverage.

                          Either we have to make huge cuts in social safety nets to a degree we might end up with a return to Hoovervilles as well as steep cuts in defense, I and probably no one here wants to see or after we are firmly passed this downturn we have to make a combination of cuts and revenue enhancements as even Reagan did. It wasn't enough and the deficit continued to explode when he left office not because of huge increases in spending but because we had exploded the portion of the budget spent on debt service because our revenue and obligations were out of whack. If you look at our longest period of strong economic growth it was the result of gradually reigning in non discretionary spending, big defense cuts a fair reform of welfare and farm subsidies(whoops that didnt last long) and two tax increases that gave us the strongest balance sheet in the western world by 2000 and with the exception of Bush 1 falling on his sword and raising taxes it was bipartisan and led to vigorous economic growth. As much as they snarled Clinton and Gingrich worked together found common ground eventually.

                          There is no way the budget returns to manageable deficit levels without a combination of cuts and revenue



                          Highsea when has cutting goverment spending during a recession worked to stimulate the economy? I am for actual changes that do help us in the long term what's been proposed is going to cost jobs and increase suffering when the economy is still weak and damage the capacity of first responders and the educational system.

                          I am all for starting to modify entitlement formulas through some combination of reduced benefits for those of ample means and raising the age the poor slob who has to live on SS can collect the full amount. I am all for the medicare oversight panel doing statistical research on outcomes for various treatments so we can spend medicare dollars smart. I don't think it's heartless to tell a 71 year old with stage 4 cancer we wont pay the equivalent of a teacher's salary in WI on a new treatment that only extends life 6 weeks. Is that a death panel,,,then so be it. If people want more than the basics let them get private supplemental insurance. it's also going to take increased revenue beyond what a return to positive growth is going to give us. Folks like Gunut who are open about having np ending things like medicare or SS and are against tax increases are at least intellectually honest. The vast seething masses in this country are living in a fantasy world where we can drill all our own oil and balance the budget by cutting welfare, unemployment, NPR and waste. I know you are more realistic than that but, with a 1.5 trillion dollar defict and the constant drumbeat of it's all Obama's fault I see here a lot I have to wonder if it's just a kneejerk response because the real drivers of the deficit this year had nothing to do with any policy Obama adopted beyond maybe the taxcuts this year and next.

                          We partied like it was 1999 for 6 years this century and when we started to address the deficit we suffered the worst recession in 75 years. Bush was right to do the bailout, Obama was right to do the stimulus. One prevented a full banking collapse and the other allowed states and municipalities to stay layoffs till the worst was over as well as 300 billion in tax cuts. http://www.cbo.gov/ftpdocs/119xx/doc...11-24-ARRA.pdf
                          Where free unions and collective bargaining are forbidden, freedom is lost.”
                          ~Ronald Reagan

                          Comment


                          • #14
                            Rosie, the first 6 years of Bush 43, I wasn't pleased with the deficits we were running. 100-150 Billion a year. But I figured, 9/11, get us out of recession, wars- okay, I'll hold my nose and live with it.

                            It was declining each year though. Slowly, but it was going in the right direction. Then your guys took over and in 2007, they tacked a $411 Billion Omnibus onto the Defense bill, and the deficit jumped to $450 Billion. The next year the banks burned the house down and Bush and the criminal Hank Paulson put that damn Tarp in place and gave $350 Billion to Wall Street.

                            It went from bad to worse. Then Obama comes in and the spending went completely off the charts. Another $350 Billion into Tarp. $860 Billion in the porkus. It hasn't slowed. Last month we ran a ~$230 Billion deficit- that's ONE month alone.

                            We didn't go from $100 Billion deficits to $1.6 Trillion deficits in one or two years because of Medicare. And now we can't even reel back $60 Billion from a $1.1 Trillion, half-year budget? Cowboy poets? Good Lord.

                            This morning the repubs tried to kill one program. It's a housing assistance program that dates back to 1976. It's never been funded, not one dime. It's never helped one single person. But this administration discovered it existed, and slipped a billion dollars into it. It's one of about 75 or 76 Federal housing programs on the books.

                            Repubs said kill it before it takes root, rescind the billion dollars and return it to the treasury.

                            Dems flipped out. Those evil uncaring republicans, damn every one of them.

                            Where does it end? We have a debt service of ~$250 Billion a year. That's $250 Billion that doesn't educate kids, doesn't build infrastructure, doesn't put cops on the street, etc.

                            By the end of this decade it will be a Trillion- that's IF interest rates don't jump on us because our lenders don't think we're serious about getting our fiscal house in order, and IF we grow at 5-6% for the next couple years, and IF Obamacare really DOES cut the deficit (which it won't if you are at all realistic).

                            It's no joke, Rosie. Talking points and demagoguery aren't gonna cut it.
                            "We will go through our federal budget – page by page, line by line – eliminating those programs we don’t need, and insisting that those we do operate in a sensible cost-effective way." -President Barack Obama 11/25/2008

                            Comment


                            • #15
                              Originally posted by highsea View Post
                              Rosie, the first 6 years of Bush 43, I wasn't pleased with the deficits we were running. 100-150 Billion a year. But I figured, 9/11, get us out of recession, wars- okay, I'll hold my nose and live with it.

                              It was declining each year though. Slowly, but it was going in the right direction. Then your guys took over and in 2007, they tacked a $411 Billion Omnibus onto the Defense bill, and the deficit jumped to $450 Billion. The next year the banks burned the house down and Bush and the criminal Hank Paulson put that damn Tarp in place and gave $350 Billion to Wall Street.

                              It went from bad to worse. Then Obama comes in and the spending went completely off the charts. Another $350 Billion into Tarp. $860 Billion in the porkus. It hasn't slowed. Last month we ran a ~$230 Billion deficit- that's ONE month alone.

                              We didn't go from $100 Billion deficits to $1.6 Trillion deficits in one or two years because of Medicare. And now we can't even reel back $60 Billion from a $1.1 Trillion, half-year budget? Cowboy poets? Good Lord.

                              This morning the repubs tried to kill one program. It's a housing assistance program that dates back to 1976. It's never been funded, not one dime. It's never helped one single person. But this administration discovered it existed, and slipped a billion dollars into it. It's one of about 75 or 76 Federal housing programs on the books.

                              Repubs said kill it before it takes root, rescind the billion dollars and return it to the treasury.

                              Dems flipped out. Those evil uncaring republicans, damn every one of them.

                              Where does it end? We have a debt service of ~$250 Billion a year. That's $250 Billion that doesn't educate kids, doesn't build infrastructure, doesn't put cops on the street, etc.

                              By the end of this decade it will be a Trillion- that's IF interest rates don't jump on us because our lenders don't think we're serious about getting our fiscal house in order, and IF we grow at 5-6% for the next couple years, and IF Obamacare really DOES cut the deficit (which it won't if you are at all realistic).

                              It's no joke, Rosie. Talking points and demagoguery aren't gonna cut it.
                              No, I agree but what it will take is a recognition by both sides that signifigant portions of the country dont agree with their vision and they need to stop playing all my way or the hiway and reach compromises that the extremes on both sides will probably hate. Thye fiscal commison did and it was widely panned from both sides of the fence and the no votes imo were exercises in pickheadedness and cowardess. Even Tip O'neil could work with reagan, Gingrich with Clinton. If the demonization by both sides continues the country will continue to be poorly governed by both sides.

                              Now, you were not including the war costs in those deficits you sight were you? The deficits didnt come overnight and they arent because of tarp or porkulus today. Look at the budget pie highsea. Defense, mandatory spending and debt service are 81 percent of it. How much of what we spend other than ss is paid for by taxes other than ss taxes? How's less than 60 percent when you substracct porkulus sound? There is a non SS revenue problem that SS taxes are covering less and less every year. huge instant cuts in discretionary spending isnt a fix nor is it a balanced response.
                              Where free unions and collective bargaining are forbidden, freedom is lost.”
                              ~Ronald Reagan

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