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Economists question ‘tea party’ push for drastic spending cuts
“Tea party” activists are exhibiting a fervor for budget cuts not seen in years, pushing to slash everything from Social Security to unemployment benefits in their drive to cut the burgeoning federal debt.
But while applauding their budget-cutting zeal, economists are divided over whether their prescription is good medicine for a weak economy. Some say it’s reminiscent of President Hoover’s drive to balance the budget during the Great Depression — and would backfire this time as well.
Tea party groups and candidates, while fractious at times, are mostly united in their demands for a smaller government that would provide less of the so-called “safety net” programs for senior citizens, the unemployed, the disabled and other groups that have become heavily dependent on government benefits.
Sharron Angle, a tea-party-inspired Republican opponent of Senate Majority Leader Harry Reid, for example, has called for the privatization of Social Security, while other candidates have questioned the constitutionality of unemployment and welfare benefits despite an unemployment rate hovering near 10 percent.
A poll by Bloomberg News has found that solid majorities of tea party activists and sympathizers favor raising the retirement age for eligibility for Social Security and Medicare. That contrasts with the fewer than half of all likely voters that support such measures, the poll found.
While this country has not seen such attempts to control spending since Republicans took control of Congress in 1994, Britain, Spain, Greece and other European nations this year have been forced by the threat of a widening debt crisis to slash their public welfare programs — often in the face of fierce public protest.
The tea party movement appears to be the only constituency for such drastic action in the U.S. While most American voters are focused on the economy and what the government can do to make things better, tea party supporters view the public debt — not the economy — as the most important issue facing the country.
Nearly two-thirds of tea party supporters would consider cutting spending on roads and bridges as well as research funding for Alzheimer’s and other diseases to narrow the $1.3 trillion budget deficit, Bloomberg found.
In placing overwhelming importance on taming the debt, the tea party agenda runs counter to conventional economic wisdom. Most economists say the economy could not endure draconian budget cuts at this time, and many favor providing further stimulus through temporary spending programs or tax cuts.
Federal Reserve Chairman Ben S. Bernanke spoke for most in his field when he advised Congress earlier this year to avoid big spending cuts now, but lay plans to gradually rein in spending on entitlement programs like Social Security and Medicare over the next five to 10 years, when he thinks the growing debt will be more of a problem for the economy.
“The tea party’s demands to balance the budget and reduce the federal deficit aren’t merely misguided, but dangerous, and would cause the worst depression in history,” said Warren Mosler, a former investment manager and monetary policy expert who describes himself as a former tea party Democrat.
“I have been, and continue to be, a strong supporter of the core tea party values of lower taxes, limited government, competitive market solutions, and a return to personal responsibility,” he said. “However, their proposals to balance the budget are the same suicidal policies that caused six horrible depressions in the U.S. over the past 200 years.”
With the economy barely recovering from the deepest recession since World War II, Mr. Mosler said, now is not the time to abruptly remove $1 trillion in government spending that has been propping up consumer spending and the overall economy.
President Obama and his Democratic allies agree, and have attacked Republican candidates with tea party backing as “extremists” who would harm the economy. Even the national Republican Party has not embraced tea party proposals to cut Social Security and unemployment benefits.
The Republican “Pledge to America” caters to the tea party by touting the goal of smaller government through spending cuts, but lists only vague cuts in “discretionary” programs and exempts defense and homeland security.
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About the Author
- Inconvenient truth: China, developing world now biggest source of greenhouse gases
- U.S. unemployment falls to five-year low of 7 percent; 203K jobs added
- Economic growth jumped to 3.6 percent in summer
- Spending on social welfare rose as economy tanked during recession
- Treasury aims to sell off GM stock by end of year
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