Cutting Spending, Slashing Recovery, and Burning the Middle Class

Andrew Fieldhouse – Federal Budget Policy Analyst, Economic Policy Institute Posted: 04/ 6/11 06:50 PM ET

Yesterday, House Budget Committee Chairman Paul Ryan (R.-Wisc.) released a budget resolution for next fiscal year that would slash federal spending by roughly $5.8 trillion over the next decade, while simultaneously cutting taxes by $4.2 trillion, relative to current law. Roughly $1.4 trillion would be stripped from Medicaid and the Children’s Health Insurance Program to finance regressive tax cuts. This proposed House Republican 2012 budget mirrors much of Ryan’s previously floated Roadmap for America’s Future, a plan to gradually eviscerate Social Security, Medicare, and Medicaid, while eliminating all investment and corporate income taxes. A conservative agenda of redistributing wealth from the poorest to the privileged has been unveiled for all to see.

In recent months, conservative legislators have paved the way for the Ryan budget with a litany of misguided proposals — all of which would place the entire burden of deficit reduction on spending cuts, with no thought given to the revenue side of the equation. As detailed in a new Economic Policy Institute briefing paper, Washington is adrift with economically misguided proposals to slash nondefense spending, slow job creation, and in some cases guarantee a double-dip recession.

When passed in February, the House Republican leadership budget would have cut $61.5 billion over the remaining months of this fiscal year; this reduction in government investment, transfers to states, and programmatic spending would cost roughly 600,000 jobs relative to the Congressional Budget Office January baseline, and roughly 800,000 jobs relative to the higher spending level requested in the president’s budget. These estimates are consistent with a variety of other estimates, including those from Moody’s Analytics and Goldman Sachs. But the February budget was just the opening salvo. Several even more draconian plans have since emerged.

First among these is the budget produced by the Republican Study Committee (RSC) that calls for even deeper spending cuts for the second half of this fiscal year and a rescission of stimulus funds that could cost upwards of 1.4 million jobs over the next year or two. The budget would then roll back the non-defense discretionary budget to its 2006 level (explicitly chosen because it’s the last appropriations cycle enacted by Republicans, despite having no economic bearing). It would then freeze the budget at that level for a decade, ignoring the current economic context of high unemployment, a growing population, and future inflation.

Next is Representative Michele Bachmann’s (R.-Minn.) plan, which would cut upwards of $430 billion over the next few years. Health care reform and financial regulatory reform would be repealed even though such actions would increase deficits, with repeal of health reform costing literally trillions in extra debt in coming decades. While it is diffi