The Budget Fight Continues

In defense of their bill to slash federal spending by $61 billion over the next seven months, House Republicans claim they are trying to make the economy grow and create jobs. In truth, such deep and sudden cuts could derail the recovery, without ever addressing the real sources of budget deficits — mainly explosive health care costs and incessant high-end tax cuts.
The question is whether the Obama administration and the Senate can prevail against the false rhetoric. Facts, analysis and the moral high ground all favor opponents of the measure. The aim is not to avoid difficult budget decisions, but to block the Republicans’ heedless effort while starting a reasoned budget debate.
In a recent report, economists at Goldman Sachs estimated that the House cuts would reduce economic growth by 1.5 percentage points to 2 percentage points in the second and third quarters of 2011. That would devastate employment. As a rule of thumb, each percentage point drop in growth means a loss of 1.2 million jobs.
The cuts also would be off point. All of them come from discretionary spending, a sliver of the budget that excludes the government’s biggest and fastest-growing outlays, chiefly Medicare and Medicaid. Over the past decade, Pentagon spending has accounted for almost all of the increase in discretionary outlays, with much of the rest going to homeland security, veterans benefits and the No Child Left Behind education initiative. Aside from defense, there is not a lot to cut prudently.
Which leads to the strongest argument of all against the House Republican bill — most of the cuts would be counterproductive. Annual spending on education through high school is cut by 12 percent, or nearly $6 billion (since the cuts would be squeezed into the rest of the current budget year, they are even deeper on an annualized basis).
Those cuts include reductions to Head Start that would remove 218,000 children from the program and cuts to elementary education that would hit 2,400 schools and nearly one million students. Pell Grants for college would also be cut by nearly $6 billion. Transportation investments would be cut by 9 percent, or $8.1 billion, including $2.7 billion from rail, $1 billion from highway spending and $675 million from public transit. Americorps and other community-service programs would be eliminated, although their benefit to society surely exceeds their $1.2 billion cost. Since national service programs are matched by $800 million from foundations and other sources, that would be lost, too.
The list goes on. Small businesses would be hit by a 9 percent cut, or $84 million, to the Small Business Administration. Homeowners facing foreclosure and other Americans with legal problems would be hurt by a $70 million cut to legal aid. Financial regulators would endure deep cuts that would cripple their ability to carry out the Dodd-Frank financial reform law. That’s asking for another financial crisis.
Given the need to placate House Republicans, some cuts are inevitable. Senators can turn to President Obama’s budget for 2012 as a template for cutting while preserving priorities. It’s time for leadership.

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In coming days, at the bottom of this page, we will further explore individual penny-and-pound-foolish cuts the House Republicans want to impose, their lack of impact on the deficit and their real-world impact, often on the most vulnerable Americans.