Ryan’s budget cuts would cost jobs

All budget proposals should be evaluated first and foremost by how they address the most important problems facing the nation. Today that problem is joblessness. Unemployment is still elevated at 8.3 percent, the highest in a generation, while the average duration of unemployment is still at peak levels (about 40 weeks). Poverty rates for young children (under the age of 6) are at their highest recorded levels, while the number of households in extreme poverty (earning incomes of less than $2 per day) has doubled since the mid-1990s. Although the economy has added 735,000 jobs in the last three months, even at this rate it would still take five years before the labor market fully recovered. In short, any policy that fails to address job creation—or at least fails to extend the economic provisions that we’ve already put in place—should be rejected.

Paul Ryan’s latest budget doesn’t just fail to address job creation, it aggressively slows job growth. Against a current policy baseline, the budget cuts discretionary programs by about $120 billion over the next two years and mandatory programs by $284 billion, sucking demand out of the economy when it most needs it and leading to job loss. Using a standard macroeconomic model that is consistent with that used by private- and public-sector forecasters, the shock to aggregate demand from near-term spending cuts would result in roughly 1.3 million jobs lost in 2013 and 2.8 million jobs lost in 2014, or 4.1 million jobs through 2014.*

Of course, this leaves out taxes. Ryan’s proposal involves cutting taxes on corporations, eliminating the Alternative Minimum Tax, maintaining the Bush tax cuts and preferential rates on capital gains and dividends, and consolidating the rate structure into two brackets, 10 percent and 25 percent. He says he’ll pay for these tax cuts (excluding the Bush tax cuts, which are already currently in effect) by eliminating tax expenditures, so it won’t result in revenue loss.

Now, temporary tax cuts can create jobs because they pump more money into the economy and boost consumer and business spending. The payroll tax holiday is one such example. But the fact that Ryan’s tax proposal won’t change net revenue levels in the near-term means that its economic effects will be minimal – and it will certainly not materially offset the job declines stemming from spending cuts. Worse, the composition of Ryan’s tax-shift means that it will likely result in a small job loss because it shifts the tax burden from high-earners to middle-class households. Low-income households will also face higher taxes because Ryan would allow certain tax credits like the Earned Income Tax Credit, Child Tax Credit, and the American Opportunity Tax Credit to fall from their current levels. Redistributing money away from people who spend more of each marginal dollar of disposable income (low- and moderate-income households) to those with much higher savings rates (high-income households) is broadly recognized as leading to a decline in aggregate demand.

*2-year figure in job-years


  • Thomas W

    Hi Ethan, thanks for your clear & concise analysis!

    Of course, ‘unfunded tax cuts’ have been tried before. Look at a graph of the US deficit — our current deficit dates entirely to Republican policies since 1981, when Reagan first introduced ‘supply-side economics’;  ie. unfunded tax cuts.

    Graph then continues steeply upward thru G.H. Bush and, later, G.W. Bush.. with only two terms of Clinton returning the budget to suplus & bringing the deficit down.

    So, Ryan’s budgetary approach reliably proven to be *entirely* false & imaginary.

    • Bigjack 1979

      Define “unfunded tax cuts”.  

      • Dawn Rainbow

        Unfunded = losing a revenue source not offset by an equal $ amount cut or offset by another form of revenue source, so this adds to the deficit. Get it?

  • Janie

    Did you know… The day the democrats took over was not January 22nd 2009, it was actually January 3, 2007… the day the Democrats took over the House of Representatives and the Senate, at the very start of the 110th Congress.and… January 3rd, 2007 at the time:The DOW Jones closed at 12,621.77The GDP for the previous quarter was 3.5%The Unemployment rate was 4.6%George Bush’s Economic policies SET A RECORD of 52 STRAIGHT MONTHS of JOB GROWTH 

    • Joenslarry

       You’re suppose to add “sarcastic” at the end.

    • my1voteforpresident

       Janie,

      Your facts about George Bush’s record of job growth are without ANY knowledge!

    • Dawn Rainbow

      You’re lying just look at the job creation table here compared to Obama and your lies are clear.
      http://data.bls.gov/timeseries/CES0000000001?output_view=net_1mth
      Bush torpedoed the economy. Unlike Obama’s obstruction congress, Dem congress worked with Bush not obstructed so try another lie. Bush had 8 years to destroy the economy but you expect BO to bring prosperity back in 3 years, especially with an obstructionist congress, give us a break.
      The only thing still saving this economy are boosts from the small 500 billion dollar stimulus (The other $280 billion as tax cuts), & BO saving the suto industry and aid to mortgage industry, otherwise we’d really be in the crappy like Greece at 12% unemployment. That’s what Romney/Ryan offer.

      • Chris Manthei

        so sick of ignorant “bush killed economy” one-liners.  Bush had nothing to do with the economic crash.

        • mcsween

          You’re right; It wasn’t just Bush. It was the republican congress that took control in the late 90s. Clinton is partly to blame too as he signed the revocation of the most important part of Glass-Steagall. Bush just continued with policies that spurred temporary economic prosperity (aka the housing bubble).

    • mcsween

      That job growth was due to the creation of the housing bubble and was not sustainable. The right wing conservatives keep proposing the same old ideas that take us through BOOM then BUST. The economy booms shortly after the policies that create bubbles are put into place then as the bust sets in the Dems seem to get control back. In turn the Dems preside over a tanking economy and get all the blame. If Americans did their research and understood economics even a little we wouldn’t have to have this discussion over and over.

  • Joenslarry

    Giving more money to the rich didn’t work, so let’s give more money to the rick.
    Teapublican logic.

  • Marcstecker

    History speaks for itself.  Obama had 3 1/2 years to get this economy working.  Let’s just pretend for one brief moment that Keynesian economics was the right way to go.  Since Keynesian is what we have had for the last 3 1/2 years and our economy is still failing, the only conclusion I can come to come to is that we have the wrong man in charge!  We need to fire Obama and hire someone who knows how to produce an economy that works! 

    • hedgefundguy

      its not a one man show, its congress, the house, the demos, the reps, its all of them and if you dont change them all you wont get change. 

      • mcsween

        I’m glad someone finally pointed this out! People realize that the POTUS doesn’t create laws, right? He only has the power to veto legislation he doesn’t like, and that can still be overridden. It’s congress’ job to write laws, and since it now takes 60 votes to get anything through the Senate nothing will change or move forward until we change the way we do business.

    • Pangloss0

      Seriously?  Don’t pretend the current economy is Obama’s doing.  This economy was created over decades of growing wealth disparity, and growing debt that only served the money-lenders, making them wealthy and impoverishing the rest.  The GOP House has served their usurious masters well by blocking every Obama initiative for two years.  This economy is a creation of GOP policies, and now they want to complete the transformation of America from a land of promise, back to the plutocracy it used to be before the New Deal.  All the GOP is offering is a Raw Deal.

    • PSEM

      Msrctecker, we have NOT had nearly enough of Keynesian economics. The banks were bailed out and rightly so, but we had way too little in the way of stimulus so the recovery was tepid. FDR used Keynesian economics to get out of the Depression but just as soon as the economy started to recover the Republicans began to holler about the deficit–then just like they today. The current economy will recover, but it could take 15-20 years without some help from government, which conservatives love to malign.

    • Ptjoel

      It appears like many on the right that history is not something that is important. But despite your best efforts to remain clueless understand that facts are not opinions and talking points are not facts.
      Deficit spending is what got us into this mess which was made worse by deregulation and the theory of trickle down economics. If we look just at the unfunded wars in Iraq and Afghanistan, unfunded drug plan, and unfunded tax cuts we see almost 85% of our problem. Then couple it with the financial collapse and 8 years of steady job losses all leading into the Obama era, we have a mess the size of what no one could fathom.
      Please review the history and then speak to me about where this problem really is.

      • KansasLRG

        You’ve hit the nail squarely on the head!!  Good job of focusing on the nature of our current difficulties.

      • Dawn Rainbow

        In addition, steckler’s closing his eyes to the fact that we’re not under a Keynesian economy since we’re still under the Bush era tax cuts, which GOTP congresss forced on for BO so he could get unemployment extensions to give the economy a small boost. If the unemployed hadn’t gotten that money to spend we would be 11% or 12% unemployment right now. In addition. it’s NOT Keynesian it’s still Bush’s economy since GOTP refuses to pass the rpesident’s jobs bills (just more tax cuts that got us into this collapse), and we’re losing public sector jobs. Check both Bush & Reagan during their recessions public sector jobs grew, so go tell your lying talking points to FIXED news. People with facts know you’re lying or you have a clueless imbecile without any clue of what you’re talking about.

    • DJT

      You got to be kidding!! Obama took a projected 15% slide stopped it at 11% stabilized at 9% and is now pulling the rate down even further. You do know that no president has ever made a change more than 2% in their entire 8 year term and Obama has stopped and reversed over 2%. That is phenomenal!!!   Wake up Dude!!  Obama is helping you. 

    • OCCUPYSUPPORTER

      8 YRS of Republican Ideology destroyed us. Your comments shows that you have no knowledge of how long it takes to recover from a recession let alone all of the othere republican sponsored problems we are facing. The housing crash, the Wal lstreet Fiasco and the jobs being shipped overseas to deliberatly destroy our economy. The economy had to be destroyed first, then the GOP claims that there is no other way to recover than to dismantle all social programs that help the millions of people that are now unemployed. Please google “The Dumbest Idea In The World, Maximizing Shareholder Value”. This is the business model that destroyed our economy according to Forbes magazine. Forbes is a well respected pro-business, pro-corporation company and they are very knowledgable and trustworthy. All of this happened because of Republican Ideology. After destroying their own country they set out to keep Obama from making progress from day 1 (according to their own admissionsThey are trying to turn our country into an Oliarchy and are now trying to change laws so that senators are appointed rather than elected. 3 new supreme court justices will be appointed by our next President and this will affect us for 50 yrs. Seriously, I will not reward any political party that have turned on their own people. 1 million jobs have been sitting in congress for 1 yr come September because Republicans refuse to vote on it. Re-building Infastructure would provide 1 million jobs all over the country. Republicans have obstructed our recovery for long enough AFTER they did everything that they could to destroy us. Have you seen the 72 Fema camps in this country? Haliburton equipment on site, tens of thousands of caskets, stacks and stacks and each casket holds 3 bodies. Google Jesse Ventura-Conspiracy theories and watch the one about Fema camps. They deny that they exist BUT we can see them on video. I refuse to vote for the enemy. I was a republican but I have done my homework and can see the blatant lies of the GOP. Grover Norquist , The Koch Brothers and many more of the elite are running the Republican party.Grover Norquist is anti-israel and a known supporter of Terrorist Jihadists. He has been trying to get the Muslim Brotherhood elected in Virginia for quite some time and has thus far failed. He wont stop trying.  He also fought diligently to get the mosque built at ground zero. Why would Republicans sign a pledge to a man of this character?  Especially since they say that they are Christians and accuse Obama of not supporting Israel? Republicans have hi-jacked Christianity the same way that Terrorists have hi-jacked Islam. It could not be more obvious what the GOP’S plans are. There are only a mere handful of Republicans that have not signed a pledge to Grover. They have all accepted huge amounts of money from Big Oil and the interests of “We The People” are of no interest to the GOP. Please do your homework and see what is in store if Romney/Ryan win the Whitehouse. It will be the end of America and American Values. There is nothing Christian about the GOP. NOTHING! Finally the Catholic church is speaking out about the anti-christian principals being used by the GOP (Romney and Ryan). Vote based on facts not lies. Please do your homework and don’t automatically believe anything that comes out of the mouth of any Politician.

      • Chris Manthei

        use paragraphs…my god.

        Name: OCCUPYSUPPORTER
        First Sentence: 8 YRS of Republican Ideology destroyed us

        verdict: this person has no clue what they are talking about.

    • Rich

      That is VOODOO logic!  Blaming President Obama for the economy is like blaming the rooster for the sunrise.

  • Dave

    Very informative piece. Well done.

  • Don Kreamer

    Everyone here has blamed both parties and they are right!  Both parties have a !% running for office.  Just think if the money given to the large corps was given back to the people ( it wasn’t the government’s money to give away) people could have paid their mortgages and 4 million families would not have lost their homes!  The government must have a balanced budget, just like people in this country!  I know I can not be in the red long so no form of government should be.  When will Americans wake up?  I have and that is why my vote will go foe Jill Reed, a non 1% person, who will do more for everyone with the Prime Law as her platform ( the Prime Law makes everyone important even the homeless, EVERYONE!)

    • Alexandra Keriakedes

       Only I undetstood the Green Party’s candidate to be “Stein” ….not “Reed”  ??    In any event………..definitely neither Romney nor Obama, OK ?!

      ~AX K. in Nebraska~

  • Davenport

    It will come down to violence within the next decade. 

  • THEGAMETWO

    In MHO, we live in a one party political system and there are two reactionary wings in that one political party. There is the Right Reactionary Wing and the Left Reactionary Wing making up the party. The RRW is composed of moderate conservatives, radical TParty wing nuts, and Libertarians. The LRW is composed of centrist liberals, way to the left liberals, and Progressives. Both wings of our one national party are represented by members of approximately the top 10% of families of wealth in our country.

    What is called a “Third Party” {The Greens, The Justice Party, etc.} is in reality only a potential second party. We are in need of another MAJOR political party. Neither the Greens, The Justice Party~which is my personal choice~ or any other “new kid on the block” have any national political clout. They don’t even have a significant voice on a state level… not even in one state.

    This is not the time in American history to vote for an insignificant leader of an insignificant political party. Look at what Ralph Nader and his ego did in the 2000 election in Florida… He cost Al Gore the election and gave us 8 years of The Idiot Bush Administration.

    This is the time in American history to make sure that our federal government is not placed under the control of the moderate conservative, ultra TParty wing nut conservative, Libertarian wing of our one national political party. This is the time to protect ourselves from radical right wing extremism. This must be done for the benefit of the entire planet and everyone/everything living on it.

    Obviously this must be accomplished by enthusiastically voting for President Obama and every democratic candidate who is up for election. We must stop this radical conservative republican wing from having any important positions of power in the year 2013 and beyond.

    After this most important election in our history, there will be plenty of time to organize a viable, powerful, well recognized new political party that stands a real chance of winning a national presidential election in 2016.

    When one objectively views President Obama’s accomplishments during his brief 
    3 1/2 years in office, with a republican controlled House opposing almost all of his positive and progressive positions, he has done incredibly well.

    If President Obama is given 4 more years to heal part of the long term wounds left by The Idiot Bush Administration, he, President Obama, could well go down in history as being an incredibly fine President of the United States.

    Give him a chance. Vote OBAMA IN 2012.

  • Wmeadows3

    We must stop the insanity of old desperate white guys from hijacking our well- being to feed the rich and strange the poor and middle class.

  • Daniel Revas

    I love how you left-wing loons like to forget Dodd-Frank which fueled the housing bust that was the catalyst for this whole mess. Spending us into oblivion is not going to fix the problems we have,no matter how much lazy, do-nothing occupiers want to believe it.

    Forget 8.3%, the actual unemployment rate is over 16% and NOT GETTING BETTER!

    Clint Eastwood did a comercial during the Super Bowl that suggested that we were at “halftime” and should stay the course, now he says that “we have to try something different.”

    He’s right.

  • M Alemian

    Besides that; You’ll have another war…!

  • http://profile.yahoo.com/63YUNFTT4FEBYKCZTIEXCBQ6RM virginia

    Occupysupporter:  you hit the nail on the head.  If only the people could, would realize who started this mess in the first place.  And yes, the republicans have been out to GET Obama from the get go.  They will not support any of his job bills.  Get your
    head out of the mud.