Research Desk: What's the balance of stimulus and austerity?
parleskrughammer (great name, by the way) asks:
Should a debt deal that’s all spending-cuts go through, will the size of the austerity (including contraction of state budgets) outstrip the size of the stimulus?
The size of the austerity will, in total, far outstrip the size of the stimulus. The new deal promises $2.5 trillion in total cuts over 10 years ($1 trillion immediately, $1.5 trillion from the Joint Committee set up to recommend cuts). The Center for Budget and Policy Priorities estimates that the budget shortfall for states from 2009 to 2013 (which, due to state balanced-budget requirements, had to be made up for with tax increases and spending cuts) totaled $580 billion. Given that the austerity is meant to counteract not just the debt incurred during the recession, but due to the Bush tax cuts, the wars in Iraq and Afghanistan, Bush’s pre-crisis increase in domestic spending, and so forth, the differential makes sense.
These figures dwarf the $787 billion stimulus and the $450 billion spent in the 2010 tax deal on measures other than the Bush tax cut extension (which I’m not counting as stimulus for these purposes). However, the distribution of spending matters. Using the CBPP’s state numbers, CEA’s breakdown of stimulus package outlays and tax breaks, the CBO’s estimates of spending from the 2010 deal, and the CBO’s new score of the debt ceiling deal, here’s the balance of stimulus and austerity from 2009 and 2020. Note that the cuts to be drawn up from the Joint Committee are not included, so this underestimates the size of austerity considerably: