The New Debt Deal May Cost Up To 1.8 Million Jobs!

Submitted by Lawrence Rafferty-Guest Blogger

Weren’t we told that if the Debt Ceiling was not raised that the Triple A credit rating of the United States would suffer?  I guess the credit agencies don’t care if 1.8 Million jobs are lost in the process!  “The Economic Policy Institute, a top nonpartisan think tank, estimates that the deal struck this weekend to raise the nation’s debt limit will end up costing the economy 1.8 million jobs by 2012. Today the Senate is expected to approve the package passed yesterday by the House and send it to President Obama. But while the unemployment rate remains above 9 percent, the deal does nothing to address chronic joblessness.

The agreement would reduce spending by at least $1 trillion over 10 years, but even the near-term cuts could shrink already sluggish GDP growth by 0.3% in 2012. According to EPI, the plan “not only erodes funding for public investments and safety-net spending, but also misses an important opportunity to address the lack of jobs.” In particular, the immediate spending cuts and the “failure to continue two key supports to the economy (the payroll tax holiday and emergency unemployment benefits for the long term unemployed) could lead to roughly 1.8 million fewer jobs in 2012.” Think Progress

Let me get this straight.  We allegedly saved our credit rating by agreeing to slash government spending without any increase in revenues, but we put almost 2 million jobs at risk at the same time.  That sounds like a perfect storm for Main Street.  Even the President of the bond investment firm Pimco thinks that the debt deal will weaken the economy.  “But left out of the equation thus far is what impact those sorts of cuts will have on an economy struggling to recover from the Great Recession. Mohamed El-Erian, CEO of the bond investment firm Pimco, said yesterday that the deal will weaken the already fragile economy:  The potential budget agreement “does nothing to restore household and corporate confidence. So unemployment will be higher than it would have been otherwise, growth will be lower than it would be otherwise, and inequality will be worse than it would be otherwise.” […] “We have a very weak economy, so withdrawing more spending at this stage will make it even weaker,” El-Erian said.”  Pimco

There are experts making the argument now that the special Congressional Committee established by this debt ceiling agreement must be used to include revenue enhancements and job creation measures in order to help the struggling economy. “The deal pending before Congress today just starts the process. The next steps, including who is appointed to the committee, are crucial in determining the consequences unleashed. While the committee is charged with finding a net decrease in the deficit of $1.5 trillion, there are better pathways to that result. The committee could find more revenue and spending cuts and include proposals that help foster job creation.

Indeed, job creation and boosting the economy should be an important litmus test for the work of the committee and progressives should hold the committee, its members, and the resulting product to that standard. If the committee’s proposal doesn’t accomplish this in its recommendations, then it’s hard to imagine how those recommendations will be any better than a stalemate that produces the automatic cuts to both domestic and defense spending—and potentially the expiration of all the Bush tax cuts.”  American Progress

When will Congress actually do something to help create jobs?  The Stimulus helped, but it was not enough. People need jobs increased, not increased cuts.  Can jobs be saved or is it too late?  Does Congress really care about everyday Americans or do the wealthy and corporate interests rule the day?  I am open for suggestions!

Submitted by Lawrence Rafferty-Guest Blogger


80 thoughts on “The New Debt Deal May Cost Up To 1.8 Million Jobs!

  1. pete-

    As I explained to Blouise the other day, the backward arm is highly useful when I’m fighting Bob The Ripper and his brother, Treacherous Bob attacks me from behind. I can hit The Ripper below the belt with my right hand while simultaneously throttling Treacherous Bob with my left.

  2. HenMan:

    It is really amazing,”ALEC” and it reach.Caught Senator Kerry this morning on Morning Joe which I glance at from time to time and today was the day for that glance.The Senator broke down the medias responsibility in this whole mess with the debt ceiling and the medias role in giving a 50/50 balance to a story that has the most absurd and extreme policies on one side and calls for moderation and thinking on the other.He said there is no balance and the media is being quiet about “ALEC” also.

    “ALEC” is in our statehouses folks.

  3. Case in point and how long its been going on,from HenMans link re:Wisconsin.

    “ALEC in Wisconsin

    Decades ago, ALEC targeted Wisconsin as a test case for their agenda. Tommy Thompson, who served as a state legislator from 1966-1987 and then as governor for a record 14 years, was an early ALEC member and supporter. “Myself, I always loved going to these meetings because I always found new ideas. Then I’d take them back to Wisconsin, disguise them a little bit, and declare that ‘It’s mine,'” he told an ALEC conference in 2002.

    It is now apparent that Thompson was the enthusiastic frontman for a slew of ALEC ideas and legislation — most famously “Welfare to Work” and “School Choice.” In 1990, Milwaukee’s school voucher program for low-income children was the first in the nation, the camel’s nose under the tent for a long-term agenda with the ultimate goal being the privatization of public schools.

    Wisconsin’s new governor, Scott Walker, has decided to follow in Thompson’s footsteps, pushing half dozen ALEC-inspired bills in his first weeks and months in office, yet remaining silent about the roots of these public policy “innovations.”

  4. eniobob-

    The volume of the bad legislation is astounding. With ALEC doing all the work for the legislators they can do an amazing amount of harm in just 7 months. Even if the Democrats can retake the Senate, all they can do is prevent additional damage. Without control of the Assembly, Senate, and Governorship, none of this can be undone. Also, we can’t seek help from the courts because the State Supreme Court is controlled by a Republican majority. The last three justices elected were Republicans, and all three have faced ethics charges which were dropped. A sorry situation in a state that pioneered progressive legislation in the past.

    Anyway, thanks again eniobob. I look forward to reading Elaine’s post- as always, it looks like her usual excellent research.

  5. Standard & Poors has downgraded the US to AA+.

    Link to financial news story is here:

    Here is the worst part:

    The outlook on the new U.S. credit rating is negative, S&P said in a statement, a sign that another downgrade is possible in the next 12 to 18 months.

  6. Blouise, no kidding. While I was driving today, I heard a story on the news that Wal-Mart was having some problems with their bottom line. Seems the high unemployment rate and low wages were causing their customers to have trouble affording their cheap shoddy merchandise that is mostly made with sweatshop labor overseas.

    I remember reading a story years ago about the head of the UAW being given a tour of a new highly automated General Motors plant. The plant manager was explaining how many jobs were eliminated due to automation. The UAW boss (I think it was Walter Reuther) replied, “Just how may Buick automobiles will those robots buy?”

  7. OS, I saw that earlier and had to ask myself ‘what’s in it for S&P?’ They were a big part of the problem with the run up to the housing bubble. The rating houses sold their favorable ratings like street corner ho’s so I can’t t trust them having a clean opinion. I’m not happy with the down-grade but I can’t help asking ‘who are they working for this time that benefits from this?’, ‘what’s in it for them?’

    “The Credit Rating Hoax”

    “Standard & Poor’s, the self-righteous credit-rating agency, has a damn lot of nerve. It provoked scary headlines by solemnly threatening to “short” America. That is, downgrade the credit-worthiness of US Treasury bonds unless Congress and the president oblige creditors by punishing the citizenry with severe budget cuts. What a load of crap.

    News coverage on S&P’s credit warning typically failed to mention that Standard & Poor’s itself is in utter disrepute. It was an unindicted co-conspirator in the Wall Street deceitfulness that brought the nation to financial ruin. During the bubble of inflated housing prices, S&P and other rating agencies blessed the fraud-based mortgage securities issued by Wall Street banks with AAA ratings—deceiving gullible investors around the world and assuring bloated profits (and executive bonuses) for the greedy bankers. S&P provided cover for the massive scam that led to the crisis that sank the national economy.”

  8. LK, I agree with your take on the S& P. The problem is they have a profound impact on the markets and the general economic mood of the country. For that matter the whole world. That is too freaking much power in the hands of too few.

    IMHO, the rest of the credit reporting industry is suspect as well. I have looked at my own credit report from time to time and have yet to get a copy where there was not at least one mistake. I recall one showed me to have a bunch of bank loans that were not mine. They are neither omniscient nor infallible, but the markets act as if they are.

  9. OS,
    You are correct that we may not like what S&P have done, but they will have a huge impact on the country’s credit costs and therefore, our costs. Maybe now Congress will get its act together and include serious additions on the revenue side of the ledger.

  10. Interesting article Gene. Thanks for the link. If the GOP wanted the credit rating to take a hit, they may have miscalculated the political fallout. Before the S&P downgrade, they could at least argue that they were bargaining in good faith. I don’t think they have that luxury anymore. The Dems can point to the S&P language about tax revenues and shout “I told you so!” It will make the the upcoming stock market opening on Monday, very interesting.

  11. Gene H, Excellent link, thank you.

    Rafflaw, The question is WILL the Dems make an issue of it? Will the MSM present the analysis?

  12. I have been thinking about this for the past day and did a bit of reading for background. Once again, and contrary to popular belief, it may be that Obama is the smartest guy in the room. The GOP has been maneuvered into assuming almost 100% ownership of the credit rating debacle and attendant fallout.

    There was a tea party rally in Wisconsin. Tens of people showed up. LMAO!

  13. LK:

    Heard a great discussion on my new medium (radio) the other night regarding this.

    “. It was an unindicted co-conspirator in the Wall Street deceitfulness that brought the nation to financial ruin. During the bubble of inflated housing prices, S&P and other rating agencies blessed the fraud-based mortgage” etc.

    That is what they were talking about.

    Oh hot off the “laugh” wire:

    Posted on August 6, 2011 at 8:17am by Madeleine Morgenstern Print »Email »

    Michele Bachmann called for President Barack Obama to demand Treasury Secretary Timothy Geithner’s resignation in response to S&P’s downgrade of the U.S. credit rating Friday.

  14. “August 5, 2011, 9:19 PM
    S&P and the USA
    OK, so Standard and Poors has gone ahead with the threatened downgrade. It’s a strange situation.

    On one hand, there is a case to be made that the madness of the right has made America a fundamentally unsound nation. And yes, it is the madness of the right: if not for the extremism of anti-tax Republicans, we would have no trouble reaching an agreement that would ensure long-run solvency.”

  15. Lotta,
    I don’t think MSM will report the downgrade properly, but the language is very clear. The downgrade was caused by the lack of revenue in the agreement.

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