The Plum Line: Did Bernanke undercut key Dem talking point about GOP budget cuts?
It's being widely reported right now that in testimony before a Senate committee today, Federal Reserve chairman Ben Bernanke undercut the key Dem talking point that GOP budget cuts risk hampering the recovery.
As you know, Dems have been pointing to two new reports from Goldman Sachs and Mark Zandi, both of which found that the GOP's plan for $61 billion in budget cuts could slow economic growth. This has emerged as a major flashpoint in the debate, with Dems trying to frame the GOP cuts as not just draconian, but also a potential job killer.
During his testimony today, Bernanke said the Goldman analysis was off the mark, arguing that the GOP-proposed cuts were not "sufficient" to create the negative impact Goldman predicts. This was a blow to the Dem argument, and right wing media and Republicans pounced on the remark, claiming that Bernanke had "put to rest the Dem talking point that GOP spending cuts will harm economic growth."
But Democrats counter that it's not quite that simple. Later in the hearing, Senator Chuck Schumer pressed Bernanke for clarification, and he did seem to agree with the general argument that too much cutting could hamper the recovery:
Schumer asked Bernanke if he agreed with this sentiment: "Too much cutting too soon would be counterproductive, and would be taking an unnecessary chance with recovery." Bernanke replied: "Yes," before adding the caveat that we also need to show progress on deficit cutting. Bernanke also agreed with Schumer's contention that too much cutting could "snuff out the nacent recovery" and could lead to "job loss."
Now, there's no quibbling with the fact that Bernanke's remarks do undercut two key sources Dems are using -- the Goldman and Zandi reports -- to bolster their case. But Bernanke did not say steep cuts don't pose any threat at all, as is being widely reported right now.
Separately, it represents a bit of progress that the argument over whether steep cuts can actually hamper the recovery, rather than simply over whether they are necessary for deficit reduction, seems to have finally entered the conversation.