Just days away from the March 1 deadline when across-the-board federal spending cuts kick in if not averted, two budget experts disagreed on Capitol Hill about what kind of impact the cuts will have on the national economy.
Even if the $1.2 trillion in budget cuts over the next decade go through, the reduction still wouldn’t get the nation’s deficit and debt load out of “the danger zone,” said Douglas Holtz-Eakin, president of the American Action Forum, told the U.S. Senate Finance Committee Tuesday. The cuts will start Friday with $85 billion in budget cuts over the next seven months unless Congress acts to change that course.
“It might stabilize debt in the hands of public but would stabilize it at a dangerously high level,” he testified. “This is a policy that leaves us with subpar growth and … which leaves us constantly on the edge of a crisis. I think that’s not a great future for the economy.”
Meanwhile, Robert Greenstein, president of the Center on Budget and Policy Priorities, testified that the nation’s debt isn't as urgent a problem as some lawmakers have indicated. He pointed to the recent Congressional Budget Office (CBO) report that said the nation’s debt as a percentage of Gross Domestic Product will fall to 73 percent in 2018. The CBO projects that percentage will climb up to 77 percent by 2023.
“[The nation's debt problem] is urgent in terms of reaching [a] deal now … but designing it so [that] it’s phased in as the economy recovers," Greenstein testified.
Much like the argument among federal lawmakers, both experts disagreed about what role spending cuts and tax increases should play in a healthy budget plan.
“I encourage both of you to think about how we can work together on this with a sense of urgency, simply because matters will simply get worse if we don’t,” responded Sen. Michael Bennet of Colorado.
Later on Tuesday, that divide was echoed by President Barack Obama and Senate Minority Leader Mitch McConnell.
Speaking at a shipyard in Newport News, Va., Obama pointed the finger at Congressional Republicans, saying “too many” of them “refuse to compromise an inch” when it comes to closing tax loopholes and deductions. Because of that, he said, the nation’s defense budget faces a 10 percent cut over the next seven months.
“There’s no smart way to do that,” Obama said. “Do I close funding for the disabled kid or the poor kid? Do I close this navy shipyard or some other one?” He later added: “We can’t just cut our way to prosperity.”
McConnell on Tuesday addressed the Senate, saying while he believes the $85 billion in automatic spending cuts (which represent 2.4 percent of the federal budget) should be more targeted, “I don’t believe the world will end” if they go through.
“Every single working American had to figure out how to make ends meet with 2 percent less in their paychecks last month when the payroll tax holiday expired,” he said. “Are you telling me Washington can’t do the same? It’s absurd.”