Spending cuts in the real world

Budget cuts at the sub-national level led to hundreds of thousands of lost jobs in the state

By Jared Bernstein
Published January 25, 2013 3:23AM (UTC)
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This originally appeared on Jared Bernstein's blog, On the Economy.

The factoid I think I’ve been touting the most in cable TV arguments lately is that when it comes to spending cuts, we’ve already cut government spending by $1.5 trillion over ten years ($1.7 with interest savings) by lowering discretionary spending caps.

Yet, Republicans—and too many moderators—deny that these cuts occurred.  Just yesterday, Ezra quotesPaul Ryan as saying the cuts don’t count because they came out of “the last session” of Congress, though as Ez points out, so did the tax increases.  So if they really want to start at zero…


Obviously, this is all more posturing and understandable, I guess, in a negotiating framework where you signal intransigence to your opponent.  But the cuts are real and they’re showing up in the economy, as per this AM’s WaPo re the defense contractor General Dynamics:

One of the nation’s largest federal contractors reported a $2 billion loss Wednesday and blamed it on defense cuts, a sign that the government spending that provided the rocket fuel for the metro area’s decade-long economic expansion is now dissipating.

The figure below shows that the loss was came out of their IT production.

Information technology appears to be one of the first segments of the private sector to sustain tangible damage from federal budget cuts — because it’s easier for the government to stop rewiring offices than it is to stop building a ship or a tank.

Let me be clear: I’m not criticizing the cuts, though I would have backloaded them, in terms of the timing, so as not to hurt the recovery.   Nor am I saying that this one example is indicative of a broader pattern, though I suspect it is.  In fact, we already know that budget cuts at the sub-national level led to hundreds of thousands of lost jobs in the state and local governments.


My point here is that members of Congress who claim that no spending cuts have occurred need to talk to the people and firms who are dealing with them, be they defense contractors or families whose kids can’t find a Head Start slot.

Jared Bernstein

Jared Bernstein joined the Center on Budget and Policy Priorities in May 2011 as a Senior Fellow. From 2009 to 2011, Bernstein was the Chief Economist and Economic Adviser to Vice President Joe Biden. Follow his work via Twitter at @econjared and @centeronbudget.

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