The Cost of Austerity: 3 Million Jobs

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Here is the Congressional Budget Office’s latest estimate of the economic benefit of eliminating sequestration:

Those changes would increase the level of real (inflation-adjusted) gross domestic product (GDP) by 0.7 percent and increase the level of employment by 0.9 million in the third quarter of calendar year 2014 (the end of fiscal year 2014) relative to the levels projected under current law.

Spending cuts and tax increases since 2011 have cut the deficit by about $3.9 trillion over the next ten years. The sequester accounts for $1.2 trillion of that, about a third of the total. So a rough horseback guess suggests that the total effect of our austerity binge has been a GDP reduction of 2 percent and an employment reduction of nearly 3 million.

If the economy were running at full capacity, deficit slashing wouldn’t have this effect. It would be perfectly appropriate policy. Unfortunately, Republicans don’t believe in cutting spending during good times and increasing it during bad times. They believe in cutting it during Democratic presidencies and increasing it during Republican presidencies. That might not be so great for people who wish they had jobs right now, but then, that’s never been the party’s goal in the first place.

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