What’s changed in Boehner 2.0
Boehner 2.0 got scored by the Congressional Budget Office today, and the results (pdf) aren’t as different from Boehner 1.0 as you might think. The spending cuts jumped from $850 billion to $915 billion. Bigger, but not that much bigger. The real change is in the timing: the original bill had only $5 billion in spending cuts next year. Like Reid’s bill, this version has more than $20 billion.
Remember that these spending cuts aren’t alone. Unless future legislation changes this, they’re alongside the expiration of the $160 billion payroll tax cut and the $60 billion in expanded unemployment insurance that the administration negotiated in the 2010 tax deal. So that means the economy — which is very weak right now — is losing something in the neighborhood of $250 billion in federal support.
Earlier today, Suzy Khimm quoted the International Monetary Fund saying “a fiscal consolidation equal to 1 percent of GDP typically reduces GDP by about 0.5 percent within two years and raises the unemployment rate by about 0.3 percentage point.” There’s reason to believe that in a weak global economy, the effect will actually be worse than that. But let’s say it isn’t. Projected GDP in 2012 is about $15.8 trillion. So a $250 billion cut is about 1.5 percent of 2012’s projected GDP. So whether we pass Reid or Boehner’s plan, we’re looking at a drag on growth of more than 0.5 percent of GDP and a drag on employment of more than 0.3 percent.
This is not good for the recovery.