Over the last year — and particularly since November’s election — a kind of consensus has grown up around the idea that the time has come to downshift America’s public sector fast.
States from New York to California are slashing government jobs, stripping billions of dollars out of their budgets. The Republican Party wants to downsize Federal spending by $61 billion dollars over the next half-year.
There are literally 14.1 trillion reasons to shrink the government. In the next year, our national debt will likely grow to equal one full year of GDP. That’s scary.
Fiscal conservatives argue that the brick wall is an inch from our faces. We hit the brakes now, hard, or we smash up.
A growing number of thinkers on the right are describing this as a moral choice. Here’s columnist Ryan Streeter.
Moral challenges always will be harder to confront than purely economic ones. If America’s fiscal condition were purely about economics, it would be easier to fix.
But it is also inherently a moral issue that will require more from all of us than most of our elected leaders have been willing to admit.
It sounds sort of satisfying. We’ve been profligate and wasteful, and now we have to sacrifice. We have to pay the piper. No pain, no gain.
The problem is that big societies, and big economies, aren’t as tidy as the morals in a fable.
There’s a growing school of thought that by cutting budgets too soon and too fast, we could actually deflate the fragile economic recovery.
Worst case scenario? We could plunge ourselves into a second deep recession, costing so many jobs, building so much demand for government services, and losing so much tax revenue that we’re right back where we started.
The latest salvo in this argument comes from economists who think the GOP’s austerity plan will cost 700,000 jobs over the next two years. This from the Washington Post.
[Mark] Zandi, an architect of the 2009 stimulus package who has advised both political parties, predicts that the GOP package would reduce economic growth by 0.5 percentage points this year, and by 0.2 percentage points in 2012, resulting in 700,000 fewer jobs by the end of next year.
His report comes on the heels of a similar analysis last week by the investment bank Goldman Sachs, which predicted that the Republican spending cuts would cause even greater damage to the economy, slowing growth by as much as 2 percentage points in the second and third quarters of this year.
These cautionary voices are being overwhelmed by the political momentum in Washington, but columnists like David Leonhardt are pointing out that austerity measures in Britain and Germany appear to have stalled their economic recoveries.
“By all means,” Leonhardt wrote in the New York Times, “don’t follow the path of the Germans and the British just because it feels morally satisfying.”
Concerns about Federal spending cuts are compounded by growing evidence that cuts at the state level are already slowing the recovery in some parts of the US. This from the Associated Press.
The clearest sign to date was a report Friday on U.S. gross domestic product for the final three months of 2010. The government lowered its growth estimate, pointing to larger-than-expected cuts by state and local governments.
The report suggested that worsening state-budget problems could hold back the recovery by putting more people out of work and reducing consumer spending.
Conservatives will point out that it’s easy to keep putting off the inevitable cuts that will have to be made to begin chipping away at deficits. They’re right. Both of our political parties have a terrible track record here.
So what do you think? Is it time to take the plunge, go cold turkey? Or should we give the economy a little more time to find its legs?