American Families vs. Washington’s Misguided Deficit Hawks

A CBO study provides more proof that social programs help stimulate the economy, not tank it.

By Seth Freed Wessler Aug 25, 2010

The stimulus does not get much love in Washington. Some Republicans call it a sure sign of ascendant European socialism and some Democrats treat it as a necessary evil. But according to a new congressional budget analysis, the $800 billion ARRA act was responsible for producing as many as 3.3 million jobs in second quarter of this year alone. It also propelled economic growth, adding as much as 4.5% to the GDP in the same period, and contributed to staving off a second economic crash.

The numbers tell a clear story about the impact of investment in public programs and jobs: in a recession, it’s investment in people, communities and the programs that support them that will revitalize the economy.

Yet congressional conservatives continue bashing Recovery Act measures. They do so by pounding their fists and screaming about the deficit, arguing, as they have for the past 18 months, that the stimulus is driving up the deficit and that social programs need to be cut to save the country from economic catastrophe.

Republicans are turning to another Congressional Budget Office (CBO) analysis, published last week, as they call for a rollback of economic recovery programs. According to projections released on Thursday, this year’s federal deficit will be just over $1.3 trillion. The number was immediately siphoned off as fuel for the budget chopper. Sen. Judd Gregg of New Hampshire, the Senate Budget Committee’s top Republican, told the AP, "Today’s CBO outlook only underscores what we already know–the current pace of U.S. spending is unaffordable and unsustainable, and without a change in direction, this country is headed for fiscal calamity."

Despite the fact that the 2010 deficit projections are actually $71 billion below last year’s total and $27 billion less than the CBO’s last estimate in March 2010, deficit hawks are unrelenting.

And they refuse to actually look at what’s driving the deficit.  

According to an analysis by the Center for Budget and Policy Priorities based on the CBO’s last projection, the bulk of the national deficit in years to come will be a result of Bush’s Wall Street bailout, spending on the country’s two wars and the Bush-era tax cuts, not the stimulus. Indeed, the Recover Act may be the only thing holding off deeper pain.  Without it unemployment might have been almost two percentage points higher than it already is.

The USDA estimates that every dollar of food stamp aid, for example, results in $1.84 in actual dollars put back into the economy.

Yet these are the programs under attack. Before they went on vacation Congress passed a $26 billion teacher jobs bill.  They did so with budget offsets pulled from stimulus injections into the food stamp program. Though some Democrats have vowed to restore the food assistance funding, the cuts are a clear sign that the GOP’s deficit madness is pushing Democrats to cut from the worst places.

Yesterday’s CBO projections show the benefits of stimulus spending petering off later this year.  The investment is expected to add just 1 million jobs to the economy by 2012.  That’s too early for recovery programs to end.  Many economist predict that unemployment could remain at current levels for another three or four years.

When Congress returns from vacation, it’ll be faced with a set of urgent decisions about safety net and economic recovery programs. Far from the GOP’s deficit smoke and mirrors, Washington may be pushed to check its priorities and invest more, not less, in jobs and social programs. Across the country people are organizing to push for the kind of help they need.