{"id":1275,"date":"2011-08-03T13:56:07","date_gmt":"2011-08-03T17:56:07","guid":{"rendered":"http:\/\/www.multiplier-effect.org\/?p=1275"},"modified":"2011-08-23T13:57:55","modified_gmt":"2011-08-23T13:57:55","slug":"self-flagellation-revisited","status":"publish","type":"post","link":"https:\/\/blogs.bard.edu\/multiplier-effect\/self-flagellation-revisited\/","title":{"rendered":"Self-Flagellation, Revisited"},"content":{"rendered":"<p>Following up on a <a href=\"http:\/\/www.multiplier-effect.org\/?p=1226\">previous item<\/a>, Macroeconomic Advisers have <a href=\"http:\/\/macroadvisers.blogspot.com\/2011\/08\/debt-ceiling-deal-little-fiscal-drag-in.html\">updated<\/a> their analysis in response to the most recent debt ceiling deal.\u00a0 The results:\u00a0 no good news, and some serious uncertainty in the probable effects on growth (though not the sort of \u201cuncertainty\u201d the conventional wisdom is persistently telling us we should care about).<\/p>\n<p>In 2012, they estimate that the fiscal drag resulting from budget cuts is likely to hover around 0.1 percentage points.\u00a0 If that strikes you as a minor blip, note that they have not included multiplier effects in their estimates.\u00a0 The Economic Policy Institute, using standard multipliers, <a href=\"http:\/\/www.epi.org\/analysis_and_opinion\/entry\/whats_missing_from_the_debt_ceiling_debate_jobs\/\">estimate<\/a> that the ultimate damage in 2012 would amount to a reduction of 0.3 percentage points in GDP, or, if that still doesn\u2019t get your attention, around 323,000 fewer jobs.<\/p>\n<p>When adding in the effects of the expiration of the unemployment insurance extensions (528,000 fewer jobs) and the payroll tax cuts (972,000 jobs), EPI suggest that we should expect the economy to shed somewhere on the order of 1.8 million jobs as a result of these policy choices.<\/p>\n<p>While the administration, via Tim Geithner op-ed, <a href=\"http:\/\/www.washingtonpost.com\/opinions\/compromise-achieved-reforms-the-next-chapter\/2011\/08\/02\/gIQAXQBMqI_story.html\">signaled today<\/a> that it would like to extend both the unemployment insurance and payroll tax cut measures, as well as to initiate new infrastructure investments, it takes a certain amount of imagination to see how any of these measures\u2014<a href=\"http:\/\/politicalticker.blogs.cnn.com\/2011\/06\/15\/gop-lawmakers-say-no-to-a-payroll-tax-cut-extension\/\">even the extension of tax cuts<\/a>\u2014could get through Congress in the current climate.<\/p>\n<p>If that<em> <\/em>still doesn\u2019t faze you, consider that in 2013, as a result of the debt ceiling deal, things really start to get dicey.<!--more continue reading...--><\/p>\n<p>The reason has to do with the design of the debt ceiling agreement.\u00a0 If the \u201csuper committee\u201d created by the deal is unable to come to agreement on $1.5 trillion in additional deficit reduction (and it is an open question whether that resulting agreement would be front- or back-loaded), then automatic cuts of $1.2 trillion will be triggered.\u00a0 In this scenario, however, the triggered cuts are largely front-loaded.\u00a0 This would mean a loss of 0.8 points to 2013\u2019s GDP (again, before multipliers)\u2014a \u201cmajor fiscal shock,\u201d as Macroadvisers put it.<\/p>\n<p>At this point, we are running out of ways to express how damaging austerity of this magnitude will be\u2014and how futile.\u00a0 For the futility of it all, see Levy Institute Senior Scholar James Galbraith\u2019s <a href=\"http:\/\/www.levyinstitute.org\/publications\/?docid=1379\">Policy Note<\/a> on the question of the \u201csustainability\u201d of rising debt levels, as well as Senior Scholar Randall Wray\u2019s responses to the <a href=\"http:\/\/www.levyinstitute.org\/publications\/?docid=1258\">hysteria<\/a> over <a href=\"http:\/\/www.multiplier-effect.org\/?p=1252\">rising debt-to-GDP ratios<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Following up on a previous item, Macroeconomic Advisers have updated their analysis in response to the most recent debt ceiling deal.\u00a0 The results:\u00a0 no good news, and some serious uncertainty in the probable effects on growth (though not the sort of \u201cuncertainty\u201d the conventional wisdom is persistently telling us we should care about). In 2012, [&hellip;]<\/p>\n","protected":false},"author":202,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4,3,49,25],"tags":[],"class_list":["post-1275","post","type-post","status-publish","format-standard","hentry","category-economic-policy","category-employment","category-fiscal-policy","category-levy-institute"],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/posts\/1275","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/users\/202"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/comments?post=1275"}],"version-history":[{"count":11,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/posts\/1275\/revisions"}],"predecessor-version":[{"id":1456,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/posts\/1275\/revisions\/1456"}],"wp:attachment":[{"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/media?parent=1275"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/categories?post=1275"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/tags?post=1275"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}