With enormous struggle, the sluggish economy managed to create 2.2 million jobs last year. But beginning at the end of this month, at least half that amount — more than a million jobs — will start to disappear because of a mindless government austerity program that no one in Washington seems able to stop.
From the armed forces to the Federal Bureau of Investigation, every program except for most safety-net benefits is about to be cut by an arbitrary process known as the sequester, instigated by the 2011 Republican rampage against government. Over the next seven months alone, the cuts will reduce defense spending by $55 billion and nondefense discretionary spending by $27 billion.
The Bipartisan Policy Center, a respected independent group, said at least a million jobs will be lost this year and next because of the slowdown caused by withdrawing so much money from the economy. The Congressional Budget Office says up to 1.4 million jobs are at stake.
This isn't fortune telling; the effect of the coming sequester was already evident in last week's announcement that the economy actually contracted during the final quarter of 2012. Much of the decline was directly due to the 22 percent reduction in spending by the Pentagon and military contractors in anticipation of the sequester's effects.
With the economy teetering on a knife edge, it is clear that this is the worst moment to initiate an indiscriminate budget cut. Government spending at this time can spell the difference between growth and shrinkage. But Republicans are willfully blind to this reality. Senator John Cornyn of Texas, the second-ranking Republican, called it a "Keynesian pipe dream" last week, saying that only spending cuts will help the economy.
Congressional Republicans seem perfectly serene about allowing the sequester to take effect in a few weeks, so eager to prove they are budget cutters that they are willing to ignore the coming economic storm. "I think sequester's going to happen," said Senator Tom Coburn, Republican of Oklahoma. "I think people want it to happen."
But it was never supposed to happen. The sequester was designed to be so dire that both parties would want to find a better way to reach a budget deal. The incentive for Republicans was the huge cut to defense spending, but an ideologically rigid generation of deficit hawks has shouted down the defense hawks, leaving Democrats with no negotiating partner. Republicans have repeatedly voted to replace the defense cuts with more domestic cuts, but the overall impact on the economy would be the same.
Congress should be thinking about ways to accelerate the economy, instead of remaining preoccupied with a short-term deficit. Nonetheless, the coming job losses could be sharply reduced if half or more of the spending cuts were replaced by revenue increases, as President Obama and Congressional Democrats have demanded. That would lower the amount of spending pulled out of the economy to bring down the deficit, replacing the cuts with taxes from the rich or companies with high cash reserves that are less likely to spend it.
The money could be raised by eliminating tax loopholes for energy companies, hedge fund managers and other high-end recipients of federal largess, but Republicans won't even consider the idea. "The tax issue is finished, over, completed," Mitch McConnell, the Senate Republican leader, said recently.
In other words, bring on the unemployment. The first jobs to go will be in the defense sector, but the losses will soon spread as contracts to states and cities are cut, education and police grants are cut, and payments to Medicare providers are cut. Even the aid just approved for victims of Hurricane Sandy will fall under the sequester's ax. Americans are about to find out what happens when an entire political party demands deficit reduction at all costs, because those costs will be enormous.
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