Commentary | Budget, Taxes, and Public Investment

Republican proposal to ‘right our fiscal ship’ throws more workers overboard

Update: Since this piece was posted last week, the magnitude of discretionary funding cuts for the duration of this fiscal year proposed by House Republican leadership has grown substantially, especially considering the short time frame for implementation. After the House Appropriations Committee detailed $74 billion in cuts last Wednesday, a number of conservative members demanded $26 billion in additional cuts to make good on the “Pledge to America,” bringing the total level of cuts relative to President Obama’s FY 2011 budget request to $100 billion.  A full $100 billion cut to discretionary spending would likely result in job losses on the order of 994,000, using OMB’s GDP projections (CBO’s projections are based on current law) and assuming a fiscal multiplier of 1.5.

The new GOP budget proposes cutting non-security discretionary spending by $81 billion relative to the president’s $478 billion request for 2011. Non-security discretionary cuts of this magnitude would likely result in job losses of just over 800,000. (2/15/2011)


Today the Republican-led House Appropriations Committee released a list of 70 proposed funding cuts to government operations for the rest of fiscal year 2011. The cuts included in the committee’s proposal are extensive in both their depth and reach. In total, House Republicans propose funding the government at a level $74 billion below President Obama’s FY 2011 budget request. Of that cut, $58 billion (over three-quarters) would apply to non-security discretionary spending.

Included on the chopping block are a $224 million cut to Amtrak, a $256 million cut in assistance to state and local law enforcement, an $889 million cut for energy efficiency and renewable energy programs, a $1 billion cut to the National Institute for Health, a $1.3 billion cut to community health centers, and a $1.6 billion cut to the Environmental Protection Agency. All cuts can be seen proportionally, below:

Cuts of this magnitude will undermine gross domestic product performance at a time when the economy is seeing anemic post-recession growth. Cuts in the range of $74 billion will lead to the loss of roughly 700,000 jobs. The domestic discretionary reduction of $58 billion will result in the loss of around 590,000 jobs, as we demonstrate in this briefing paper.

Like Paul Ryan’s budget outline, as we stress in this related piece, the proposal suggests Americans take on unnecessary pain with no long-term gain.  While $58 billion represents a 12% reduction to the nonsecurity discretionary budget, it only represents 4% of the total 2011 deficit, and less than 2% of total spending as projected by the Congressional Budget Office. In other words, changes to the short-term budget picture would be inconsequential at best, and there would be practically no benefit at all regarding the longer-term budget trajectory.  Meanwhile, associated job losses would certainly magnify the ongoing labor market crisis, which has now experienced 21 straight months of unemployment over 9%.

Appropriations Committee chairman Hal Rogers has stated that he has a unique opportunity to “right our fiscal ship.”  In reality, the nonsecurity discretionary budget is not adding to our long-term debt instability. If anything, the GOP efforts to extend tax cuts for the wealthiest 2% of Americans and water down the estate tax have made our fiscal ship a leakier vessel (according to the Center on Budget and Policy Priorities, these tax policies will have a two-year deficit impact of $139 billion). The proposed program cuts not only fail to offset that lost tax revenue, but they also target programs that exist to promote innovation, global competitiveness, and community and safety-net services. This is an effort to cut helpful and innovative programs and services traditionally opposed by conservatives, disguised as an effort to promote fiscal responsibility. It would reduce jobs, it would hurt millions of people, and it would barely dent our long-term budget picture.    

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