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. eniobob-

    You may rest assured that the consensus seeking Democrats will not upset the friendly give and take and mutual respect that President Obama has achieved, by appointing any rude fellows like Bernie Sanders or Dennis Kucinich to the superbestfriends committee.

  2. eniobob,
    unfortunately I agree that it doesn’t look good in the near future. The supercommittee is a scam to my mine and the Right has already stated that they will not nominate anyone to the committee who will agree with increasing revenues.

  3. The big guessing game in Washington is who will serve on the 12-member bicameral “supercommittee” to work out the next round of spending cuts outlined in the debt deal reached earlier this week. It’s interesting to us insiders. And it may matter around the edges. But let’s be serious. The supercommittee is about as likely to come to an agreement as Charlie Sheen is to become a spokesman for Focus on the Family. And not only that—the chances that there will be continuing fights over the budget for fiscal year 2012, which starts Oct. 1, are still strong.

  4. Roco and Kderrhoid-

    When you find your free market utopia, let me know so I can send you a nice going-away (and never coming back) gift.

    To quote the noted philosopher, Pete, “don’t let the screen door hit ya in the ass”.

  5. Obamacare has completely trapped the Democrats on fiscal policy. In order to pay for Obamacare’s trillions of dollars in new spending, they had to raise taxes by $500 and raid Medicare by another $500 billion. As a result, all the low-hanging revenue and spending fruit are already gone. As even The Washington Post’s Ezra Klein admits, the Democrats must now argue for higher taxes, and not just on the wealthy. In order to pay for all their entitlement programs, the middle class is going to have to pay more, too. But Ezra can admit this because he doesn’t have to win elections; Democrats in public offices do. That is the reason you haven’t seen a Democratic budget since Obamacare became law and it is the reason you will not see another one till at least 2013.”

  6. James Pence over at the Hillbilly Report is very good at summing things up with great economy of words.

    A James Pence Quote:

    “Never before have so few with so much promised to take away so much from so many and then laugh their asses off as the so many with so little vote for the so few with so much.”

  7. John Michael:

    You are not alone.

    “and then I am overcome with a feeling of impotence when I realize that I am unable to do anything about this.”

    And unless I’m misunderstanding, the President seems to feel that the next round coming in November the opposition will be more reasonable.WHAT!!!

  8. puzzling,
    this is not the time that any spending should be cut. The proposed cuts could cost the economy 1.8 million jobs. When demand is down the government spending is needed to prop up the economy until the demand is sufficient to create jobs or until corporations are not given incentives to move jobs overseas.

  9. don’t let the screen door hit ya in the ass

    or you could join rush down in costa rica

  10. puzzling:

    I think it time to move to some small country which still pays lip service to free markets.

    You are right and we are done. We wont recover from this unless there is a drastict change in the ideology of Washington social welfare planners.

  11. Mahtso you asked By what percent will government spending be cut? This is the first time I’ve seen the cuts characterized as “slashing” spending.

    Spending is not being cut. The only cut is to the rate of future spending increases.

  12. Frank wrote

    I know some of you here are old enough to remember when Japan was an economic super power. When they hit a small bump in the road & there was a demand for austerity the government jumped in the boat big time. They have been in the austerity boat for 2 decades now & have slow/no growth, unemployment and no end in sight.

    That’s incorrect. Far from austerity measures, Japan spent trillions on Keynesian-style stimulus and has nothing to show for it except mountains of public debt. I wrote about it in 2010 here when I said “Japan spent $2T on infrastructure spending after their collapsed real estate bubble. They now have public debt about 180% of GDP to show for it, and an economy structured on public works spending in which interests are beholden to government in Tokyo for the next job handout.”

    In the private sector Japan produces may of the worlds highest quality, advanced goods and in that regard has it far better than the US. We have massive trade deficits, diminishing manufacturing capability, and huge empire spending on top of mounting debt. I expect additional trillions spent on politically-directed stimulus in the coming few years, none of which will “reignite” the economy. Even if we spent $10T and failed, Krugman and many politicians would simply say the stimulus was not large enough.

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