BERNANKE AGREES: GOP SPENDING PLAN WOULD SLOW ECONOMY…. Congressional Republicans got awfully excited today when Federal Reserve Chairman Ben Bernanke commented on the GOP’s spending-cut plan to the Senate Banking Committee. They shouldn’t have.
Bernanke also threw some cold water on recent studies by two leading economic forecasting groups that suggested Republicans’ proposed $60 billion budget cut would be a major drain on the economy over the coming year. […]
Responding to questions from Sen. Jack Reed (D-R.I.), Bernanke said that the Fed’s analysis suggests smaller economic losses from the spending cuts, reducing GDP by several tenths’ of a percent and the number of jobs by “certainly much less than 700,000.”
Fine. Different economists have different expectations. There have been multiple, credible analyses in recent weeks, all showing fairly drastic consequences stemming from the Republican proposal, but Bernanke believes the results would be less severe.
But before the GOP celebrates Bernanke’s testimony today too much, let’s take a closer look at this.
First, the Fed Chairman specifically said he’d like to see deficit reduction “over time,” and agrees that cuts now would cause job losses. If Republicans consider that an endorsement of their existing policy, they’re not paying attention.
Second, so long as the GOP is embracing a faith-based attitude towards fiscal policy — slash now, pray it works later — I’m surprised Republicans would care either way. Imagine if Bernanke had said today that Zandi and Goldman Sachs are completely right and the GOP plan would be devastating. Would that have made any difference? Would Boehner and Cantor step up and say, “Well, I guess we better rethink this?” Of course not. And if evidence and expertise no longer matter, there’s no point in seizing on Bernanke’s testimony.
And finally, putting all of that aside, the discussion itself fails to appreciate the premise. Kevin Drum explained today:
Maybe it’s a million jobs, maybe it’s half a million jobs. Maybe it will cost a point of GDP, maybe it will cost half a point of GDP. But considering that the economy is still sluggish and unemployment is extremely high, why are we considering budget cuts that will have any negative effect on jobs and growth? Especially cuts in the only part of the budget that isn’t a long-term problem?
That’s the big news from Bernanke’s testimony: not that he thinks other estimates of job losses are too high, but the fact that he agrees the Republican budget plan will cost jobs and slow growth. That’s coming from a Republican Fed chair! How much more evidence do we need that our current budget cutting mania is insane?
Exactly. The more pessimistic projections on the Republican plan show slower economic growth and job losses. The more optimistic projections on the Republican plan also show slower economic growth and job losses.
Why are we even having this conversation?