Back in March when Paul Ryan was merely auditioning for the vice presidency, Ethan Pollack at the Economic Policy Institute tried to measure how big a crater the congressman’s budget proposal would dig in the labor market.
His analysis showed that implementing Ryan’s monstrosity would not only flatten very modest job creation—a monthly average in the past six months of 130,000 new jobs—it would obliterate millions of existing jobs. If nothing else changed, and Ryan’s plan was on the books, by 2014, the official unemployment rate that is now at a stubbornly high 8.3 percent would rise to 13 percent, nearly three points above the depths of the Great Recession. And we already know how much that official rate undercounts the ranks of the jobless. Pollack:
Against a current policy baseline, the budget cuts discretionary programs by about $ 120 billion over the next two years and mandatory programs by $ 284 billion, sucking demand out of the economy when it most needs it and leading to job loss. Using a standard macroeconomic model that is consistent with that used by private- and public-sector forecasters, the shock to aggregate demand from near-term spending cuts would result in roughly 1.3 million jobs lost in 2013 and 2.8 million jobs lost in 2014, or 4.1 million jobs through 2014.
Gross domestic product would drop 3.5 percent.
Add in Ryan’s proposed cuts in Medicaid and we’re talking another 862,000 lost jobs. That’s a total of almost 5 million jobs lost. In two years.
As Pollack points out, Ryan also wants to cut taxes for folks like, well, the guy whom he hopes will have the job that Ryan will be just a heart attack away from come Jan. 21. As has been noted, under the Ryan plan the first number in Mitt Romney’s tax rate would be a zero followed by a decimal point. Not just for Mitt, of course. For Ryan himself and a few score thousands of others who are so wealthy they see it as an insult when they are lumped in with the rest of the one percenters. For those earning a million a year, a $ 300,000 tax break. How many jobs do you suppose will get created as a consequence of that upward transfer of wealth?
The resulting loss of federal revenue from this budget based on austerity insanity would, Pollack says:
[...] likely result in a small job loss because it shifts the tax burden from high-earners to middle-class households. Low-income households will also face higher taxes because Ryan would allow certain tax credits like the Earned Income Tax Credit, Child Tax Credit, and the American Opportunity Tax Credit to fall from their current levels. Redistributing money away from people who spend more of each marginal dollar of disposable income (low- and moderate-income households) to those with much higher savings rates (high-income households) is broadly recognized as leading to a decline in aggregate demand.
If you prefer to avoid economic terms like “decline in aggregate demand,” just think of it as: no job, no money, no consumer expenditures, no hiring, no job, no money. Think of it as a smoking crater. Government programs to provide shovels and gloves won’t be enough to sustain a digging out from that crater because Ryan’s budget contains a prescription for amputating big chunks of such programs.
In a sane world, even in the wacky, Ronzo world of three decades ago, this kind of stuff would be laughed out of the room, off the planet even. But not now. And so they keep bringing up budget proposals like this, punctuated with flatter and flatter tax rates. One bracket for all could very well be the GOP slogan in 2016. That’s a prescription for even more lost jobs.