With the House looking more likely to pass Speaker John Boehner’s debt ceiling bill today, and with Harry Reid pushing his own plan, it’s worth asking: How would each of their plans impact the economy?
David Dayen writes that the International Monetary Fund estimates that fiscal contraction — which both plans would do — could increase unemployment.
Think about that for a second. At a time when unemployment is hovering close to ten percent, both major parties in Washington are proposing legislation that could increase joblessness instead of lessening it.
From the point of view of helping the economy recover, this is idiotic. For Republicans, of course, increased unemployment and lower GDP increase the possibility of Obama being a one term president. The reason few people are stating the obvious — that there’s something oddly masochistic about harming the economy at time when so many are unemployed — is that both sides are pushing plans that could damage the recovery. That’s because we’re trapped in a Beltway Deficit Feedback Loop, where no one’s talking about unemployment and everyone’s talking about the deficit.
It’s no surprise then, that the American public is increasingly confused about the impact of spending cuts — indeed, there’s been a big swing in favor of the idea that cuts create jobs, rather than the other way around.
With both parties competing for the mantle of austerity, they’re acting a bit like two crazed medeival doctors leeching a patient who’s already suffering from catastrophic blood loss.