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Cutting spending will hurt jobs

David Gura Jul 27, 2011

Cutting spending will hurt jobs

David Gura Jul 27, 2011

Kai Ryssdal: Here’s where we are debt-wise:

And, that’s Marketplace for this Wednesday, today the Dow Industrials…

…OK, no. Things did actually happen today. Not any progress in discussions that we know of, but a formal evaluation of the two debt reduction plans that’re on the table at the moment. The Congressional Budget Office has now looked over — “scored” is the inside the Beltway term — the Boehner and Reid proposals. The CBO is the official decider of how much money — how many hundreds of billions of dollars — each would save.

Perhaps not surprisingly, the CBO says both plans will save way less than advertised. But one does wonder, with 14-some-odd million Americans still out of work, whether a different grading system ought not be used.

From Washington, Marketplace’s David Gura reports.

David Gura: Economists told me it is possible to estimate how budget cuts could affect unemployment. They’ve got all sorts of models to test this sort of thing. But at this point, they don’t have a whole lot to go on.

Harry Holzer teaches public policy at Georgetown.

Harry Holzer: A lot would depend on the timing of the spending cuts, and also how they’re distributed.

And that’s up in the air. We know the Republican plan would cut things like student loan programs and Medicare spending. And the Democrats say we’ll save billions when troops leave Iraq and Afghanistan. But the really big cuts? They’d come from a bipartisan commission later. And Holzer’s not optimistic about the two plans.

Holzer: I don’t expect either one to better the employment situation. The question is: How much damage will they do?

He says government jobs are at risk, and maybe programs millions of Americans rely on, like food stamps and unemployment insurance.

Heather Boushey is a senior economist at the Center for American Progress. She said if she were scoring these plans according to how they’d affect employment, she’d worry about what big spending cuts would do to consumer demand and the economy.

Heather Boushey: In the short-term, cutting spending is not going to improve the job situation here in the United States.

Boushey said think of the economy like a family, with a mom who’s lost her job.

Boushey: They know that they’re not going to be able to get out of debt, they’re not going to be able to deal with the fact that their home may be in foreclosure, or any of the other things that they have to deal with — until that breadwinner gets back to work.

And that’s what concerns her, and Harry Holzer, and other economists I talked to. They think we’re doing this all wrong. Both the Reid plan and the Boehner plan could help the government pay down some bills, but they’re not going to do anything to help Mom land a new job.

In Washington, I’m David Gura for Marketplace.

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