The slowing economy changes debt-ceiling talks

Job seekers pick up open job fliers from potential employers at at a career fair in Los Angeles, Calif.

Kai Ryssdal: Until mid-morning today in the nation's capital, it seemed like debt reduction talks were moving right along. Whispers were that a deal to cut two trillion dollars from the budget over 10 years in exchange for an increase in the debt limit was close at hand. But then House Republicans changed their minds. That effectively kicks things upstairs and leaves Speaker John Boehner, President Obama and Senate Majority Leader Harry Reid to pick up up the pieces.

Our Washington bureau chief John Dimsdale reports.


John Dimsdale: The economy has hit a soft patch just as Washington is trying to get its spending under control. Many Democrats say reining in the government is fine in the long term.

Heather Boushey: But cutting spending right now is not gonna be good for our economy.

Heather Boushey is senior economist with the left-leaning Center for American Progress. She says the economy is struggling to pull itself out of recession and a government pullback right now will only make things worse.

Boushey: The conversation that we should be having is what's going to create jobs over the next six months to a year or two years.

A group of Senate Democrats is trying to steer the debt ceiling negotiations in that direction. They're holding out for some job stimulating spending in the deal. Their ideas include money for retraining workers, highway and construction projects, and a tax cut for employers who hire new workers.

But Andy Laperriere at ISI Group doubts any Republicans will go along with more government stimulus right now.

Andy Laperriere: Just because when you're sitting down and trying to cut $2 trillion from the deficit over the next 10 years, you start including measures that cost a couple hundred or even several hundred billion dollars in terms of increasing the deficit, it makes it a lot harder to reach your target.

But should the economy still be struggling come fall, Laperriere expects those deficit-reduction targets will be put on hold while the government tries once again to prime the pump.

In Washington, I'm John Dimsdale for Marketplace.

About the author

As head of Marketplace’s Washington, D.C. bureau, John Dimsdale provides insightful commentary on the intersection of government and money for the entire Marketplace portfolio.

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