Austerity as a Hazard to Health: Economic and Otherwise
The House Budget Committee passed, along party lines, a fiscal year 2016 budget resolution proposed by Chairman Tom Price that would continue damaging austerity for yet another year. This draconian budget proposes to eliminate the budget deficit by 2025 without raising taxes. To achieve this goal, the budget would punish low- and middle-income people by reducing economic growth and jobs over the next 2 fiscal years, eroding the effectiveness of safety net programs, taking away health insurance coverage provided by the Affordable Care Act, and reducing public investments. If the Obamacare repeal and proposed savings from debt servicing are excluded, 95 percent of the House GOP budget cuts are targeted to just 38 percent of federal spending—the spending that includes public investments (education, infrastructure, research and development), Medicaid, unemployment benefits, and nutrition programs for needy children.
Besides the clearly significant, but hard to precisely quantify harm done to the general welfare, the House GOP budget resolution would damage economic growth in coming years in quite predictable ways. I estimate that the House GOP budget cuts would reduce GDP by 1 percent in FY2016 and decrease payrolls by 1.3 million jobs, relative to CBO’s baseline economic and budget projections. It gets even worse in FY2017—GDP would be reduced by almost 2.5 percent with payrolls decreasing by 2.9 million jobs.
It seems rather odd that the GOP would completely ignore the current state of the economy in designing their FY2016 budget. While the official unemployment rate is slowly falling and the economy is adding jobs every month, there continues to be a great deal of slack in the labor market. First, unemployment still remains high among some racial and ethnic groups. Second, the “jobs gap”—the number of jobs needed to restore the labor market to pre-Great Recession health—remains in the millions. Furthermore, there is only one job opening for every two job seekers. Finally, wages are stagnant for the majority of workers. Yet the budget appears to be designed to knock workers down and take away a hand up.
Fiscal austerity has been best described as a dangerous idea. The GOP seems bent on turning a dangerous idea into a health hazard.