Austerity Policies Have Probably Cut Economic Growth in Half This Year
Without austerity, unemployment would be under 6 percent, nearly in normal territory
In the past, I've extrapolated from a variety of CBO reports to estimate the effect of austerity on the U.S. economy. Today, via Paul Krugman, I see that Macroecomic Advisors has produced a comprehensive estimate of the total effect of bad fiscal policies. Their conclusion: austerity policies since the start of 2011 have cut GDP growth by about 1 percentage point per year—and the bad news got even worse in the first two quarters of this year as the sequester kicked in. Add in additional economic contraction caused by the budget/debt ceiling crisis, and the total hit to growth in 2013 might clock in at about 1.5 percentage points.
In other words, the combined effect of past budget deals + sequester + fiscal cliff + debt ceiling crisis is probably a reduction of about half in our economic growth rate this year.
Let me repeat that: Republican austerity policies have probably cut economic growth in half this year and raised the unemployment rate by 1.4 percentage points. Heckuva job, guys.