I have to chuckle at the lipstick that the Senate Appropriations Committee put on their pig of a budget deal for 2011. In particular, the release touts spending levels above HR 1, the Republican budget, that are actually cuts from the 2010 levels. And what people aren’t talking about is that this budget establishes a new baseline. Any “continuing resolutions” moving forward will use these 2011 budget levels as the base, and Appropriations Committees in Congress use them as well. When the President put together his discretionary budget freeze, he rightly said that it would cut $400 billion over 10 years. So too for this budget cut, which rounds out to over half a trillion.
Nevertheless, there are spinmeisters trying to carry water for the deal:
The meat of the spending deal struck between the two parties late Friday night was revealed in a legislative omnibus released early Tuesday morning. The specifics show that finding nearly $40 billion in cuts during the 2011 fiscal year required clever accounting and, for the White House, a willingness to concede on rhetoric to find gains on substance.
For example, the final cuts in the deal are advertised as $38.5 billion less than was appropriated in 2010, but after removing rescissions, cuts to reserve funds, and reductions in mandatory spending programs, discretionary spending will be reduced only by $14.7 billion.
Yes, limiting discretionary cuts helps the baseline for future years. But reductions in mandatory spending programs are still reductions that will have a real effect in this fiscal year. And the $1.6 billion in EPA cuts, or the billion in safe drinking water cuts, or the $300 million in low-income heating assistance or the $1.5 billion in high speed rail funding or the $600 million in community health centers or the hundreds of millions to the COPS program and the NIH and low-income housing are very real. They cannot be waved away. What’s more, the increase of $5 billion to defense forced more cuts to mandatory and discretionary spending.
As Pat Garofalo says, “nothing in this deal with help lower the country’s unemployment rate or do anything to boost economic growth. It will simply result in fewer services for people still grappling with the effects of the Great Recession.” That means slower growth and higher unemployment. That’s just a math equation. Analysts are making the calculations: [cont’d.]
The impact of those problems, combined with growing cuts in spending by federal, state and local governments, has led some experts who had forecast that the economy would expand by more than 4 percent in 2011 to retreat toward a 3 percent growth rate. And it raises the question of how many more small cuts the president can afford.
Diane Swonk, chief economist at Mesirow Financial, a Chicago investment firm, said she had cut her forecast for 2011 to 3.3 percent, from 4.2 percent. And if growth falls below 3 percent, she said, “You’re just running on a treadmill. You’re not getting anywhere.”
The IMF pegs growth right there, at 2.8% for 2011 and 2.9% for 2012. Somebody got to Mark Zandi, however. Despite the fact that he said 700,000 jobs would be lost from the Republican budget, he came out today and called these cuts, at 2/3 the level of that budget, “perfectly digestible in the context of the current expansion.”
I don’t think he’s saying that this will help matters, of course. And it calls into question his earlier analysis. He claims that recent job growth changed his viewpoints. We’ll see if it continues. Given the very serious risk from $4 a gallon gas to the broader economy, there was simply no good reason to cut budgets from an economic standpoint.
Obviously, Democrats would say they were dealing with a political and not an economic reality. That reality was clear way back in December, when they new the Republicans would control the House, yet had big majorities and something Republicans wanted – the extension of the Bush tax cuts. When the history books are written they will view the failure to pass a budget in December 2010 as a fatal error, not just to Democratic political fortunes, but to the economy, and to millions of people suffering needlessly. And this has implications well into the future.
While the Democratic Party very well “win” from time to time and the party will play its role in the kabuki dance — that of “protector” of an ever dwindling handful of ever smaller signature programs to keep the desperate progressive faction on board — liberalism itself has suffered a terrible and perhaps mortal blow. To have a Democratic president of the United States adopt austerity and extol it as an historic victory the midst of ongoing high unemployment and a moribund economy means that the argument is basically over. This is not Franklin Roosevelt’s puny GOP opposition and the Democratic Party does not have the middle class loyalty it had in 1937 to withstand making this kind of monumental error. Neither are we likely to be rescued by a war machine — it’s already cranked. No, the Democratic Party is formally relinquishing its historic claim to represent the economic interests of working families. The best we can hope for is that they “protect” us from a full blown Theocracy or a return to Jim Crow. (After all, they need to get elected somehow or they won’t get a share of the spoils.)
I would also remind Democrats that objective economic results have much more of an influence on electoral outcomes than their spin.
UPDATE: More evidence from Catherine Rampell…
When 2011 began, Macroeconomic Advisers, a forecasting company, expected that America’s economic output would shape up to rise at a 4.1 percent annual rate in the first quarter, the highest pace in over a year […]
Today, after an especially weak report on February’s trade deficit, the group’s economists lowered their first quarter G.D.P. estimate to a sorry 1.5 percent annualized. If borne out, that rate would be slower than each of the last two quarters, at a time when the economy desperately needs to be rocketing forward so that companies will hasten their hiring.
Here are some additional downgrades. The first estimate of Q1 growth will come out on April 28.