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GOP Budget Bill: Job Creator, Economy Killer?

STEVE INSKEEP, Host:

Here's NPR's David Welna.

DAVID WELNA: It began last week, with an internal report done by Goldman Sachs. That study predicted that if the spending cuts the House approved last month, for the rest of this fiscal year, are carried out, economic growth could be stunted by as much as two percentage points; this week, another warning about the impact of such cuts.

MARK ZANDI: It will mean that there will be less jobs by yearend 2011 than there would be otherwise.

WELNA: That's Mark Zandi, chief economist at the financial forecasting firm Moody's Analytics. Zandi, who was a top economic advisor for Senator John McCain's last presidential bid, predicts in a report, that the spending cuts House Republicans propose could eliminate 700,000 jobs. Spending cuts, says Zandi, will eventually be needed.

ZANDI: I just wouldn't begin them in 2011. The economy is not creating enough jobs to bring down unemployment, and until that day, I think it would be premature to go through these kinds of very significant budget cuts.

WELNA: House Speaker John Boehner yesterday rejected Zandi's warnings and called him the pet economist of House minority leader Nancy Pelosi.

JOHN BOEHNER: The American people understand that cutting spending creates a better environment because it reduces the uncertainty facing small businesses all over our country.

WELNA: What's more, Boehner said, Stanford economist John Taylor and 46 other economists also disagree with Zandi and Goldman Sachs. Taylor, who was a treasury under-secretary in the most recent Bush administration, insists the package of spending cuts House Republicans propose would actually have a positive impact on jobs.

JOHN TAYLOR: It shows just about the right amount of action. It's not draconian. When you think about that the budget authority they vote on, brings about changes in outlays gradually, it's just about perfect in terms of taking a start, taking a first step.

WELNA: But that's not a view shared by the more than 300 U.S. economists who signed a letter yesterday, calling the proposed spending cuts short- sided and threatening to economic recovery. Other economists take a somewhat more nuanced view. One of them is Maya MacGuineas, president of the nonpartisan Committee for a Responsible Budget.

MAYA MACGUINEAS: Right now it's earlier than we probably need to be having aggressive spending cuts, but it's useful that we're actually talking about spending cuts, but we're focusing on the smallest part of the budget and we really need to expand that discussion to include all parts of the budget.

WELNA: At the White House yesterday, spokesman Jay Carney said President Obama was clearly against the kind of cuts House Republicans have approved for the rest of this fiscal year. Carney added that, while the president is committed to making tough choices on spending...

JAY CARNEY: He's equally committed to not going down a road, in terms of spending cuts, that does harm to the economy, potentially does harm to our national security, and doesn't address the kinds of investments that we need to make.

WELNA: What kind of investments by the federal government, or increased spending as some would call it? The question was answered yesterday by Fed Chairman Ben Bernanke who had this to say to the Senate Banking Committee.

BEN BERNANKE: Attention should be paid to important areas like research and development, education, infrastructure, and other things that help the economy grow and provide a framework through, you know, that allows the private sector to bring the economy forward.

WELNA: David Welna, NPR News, that Capitol. Transcript provided by NPR, Copyright NPR.

David Welna is NPR's national security correspondent.