Those decrying the adverse economic consequences of looming budget cuts are often the very same people who claim that the 2009 fiscal stimulus didn’t add jobs.
For example, Senators John McCain (R-AZ), Lindsey Graham (R-SC), and Kelly Ayotte (R-NH) have held a series of public meetings this week designed to highlight what they call “the profound negative consequences” of the defense budget cuts scheduled to take place next January. These automatic cuts will occur because the Congressional Joint Select Committee on Deficit Reduction failed to reach an agreement to reduce the deficit by an additional $1.2 trillion. The spending cuts will harm the economy and “put one million jobs at risk,” the senators say.
In contrast, Senator McCain has contended that the stimulus “didn’t work. It added to our debt and deficit, and we lost jobs.” Senator Graham claims, “The Obama stimulus has pretty much been a bust. Very few benefits or jobs created.”
Others have been equally inconsistent. But both arguments can’t be true. If cutting government spending in a time of economic slack reduces employment, then increasing government spending must increase employment. That’s why an overwhelming majority of leading economists surveyed by the University of Chicago’s Booth School of Business agreed that the stimulus reduced the unemployment rate.