For Immediate Release: Monday, June 13, 2011
Contact: Phoebe Silag or Karen Conner, news@epi.org 202-775-8810

Radical Republican plan could cause double-dip recession

Last week, the Republican Study Committee sent House Majority Leader Eric Cantor a letter in support of halving next year’s budget deficit, capping government spending at 18% of GDP and enacting a constitutional balanced budget amendment.  In a new Commentary, EPI Federal Budget Policy Andrew Fieldhouse explains why economic experts have argued that halving next year’s budget deficit will all but guarantee a double-dip recession.

“Imposing austerity has very little scope to reduce long-term interest rates, which are at historically low levels thanks to the Federal Reserve and a depressed economy, but it can destroy consumer spending, which accounts for about 70% of the economy,” says Fieldhouse.

Fieldhouse also explains that expansionary fiscal policy remains the most effective policy lever for growing the economy and creating jobs.