Not to deny that the House Republicans' cuts in discretionary spending will have negligible impact on the U.S.'s structural deficit, or that the near-$40 billion in cuts that it seems Democrats will inexplicably agree to won't cause unnecessary suffering and slow economic growth (Mark Zandi estimated that $61 billion in cuts would reduce employment by 700,000 through the end of 2012). All that said, a brief zoom-out:
The Federal government spent $3.46 trillion in 2010. Democratic proposals that became part of the late 2010 tax cut deal (mainly the 13-month unemployment benefit extension, the payroll tax cut, and the stepped-up writeoff for business investment) were worth $336 billion, according to Zandi. Last-minute Democratic concessions on the 2011 bill will probably take the spending cuts past the $34 billion that would make this comparison satisfyingly neat to someone with my sixth-grade math skills, but you get the idea.
The cuts will amount to a bit more than 1% of total government spending and a bit more than 10% of the tax-cut stimulus that Obama piled onto to the less efficient (but still marginally stimulative) extension of the Bush tax cuts for the wealthy through 2012.
Perhaps those cuts will proportionately hurt the economy -- and for sure, human lives -- more than the tax cuts help it. They will also establish a baseline for more of the same in 2012 -- and perhaps into perpetuity. They are not trivial by any means.
But perhaps they are part of a big-picture tradeoff that the administration essentially accepted last fall.
P.S. Watching Democrats apparently give ground yard by yard -- from accepting a reported $32-33 billion in cuts earlier this week to $37-38 billion today, not to say even getting in this range in the first place -- is so baffling that I wonder, by defensive reflex if nothing else, if there isn't more to this than meets the eye. Are some of those billions illusory, i.e. offloaded into areas Democrats don't care about or want to cut? Has the weighting changed in some way that offsets the sticker amount?
I think those last two questions are especially relevant. Remember when everyone was mad at Obama for negotiating with himself when he froze government pay for two years? In retrospect, it appears as if he took credit for what was gonna happen anyway.
ReplyDeleteBoth sides have incentives for inserting non-controversial cuts to increase the top line number just to get a deal done. We'll know soon enough.
And I love your writing and analysis. You've quickly become the fourth website I read everyday.