Goldman Sachs sounded the alarm last week, warning that the Republican plan to slash spending by $61B this year would decrease economic growth by 1.5 to 2 percent during the second half of 2011.
That drew a strong rebuke from the right-wingers on the editorial page of the Wall Street Journal, which blistered the investment firm as a “Keynesian hot house.” Take that, Lloyd Blankfein!
The Journal prefers that old-time voodoo economics model that tax cuts are the only way to create jobs. The Financial Times, arch-competitor of Rupe Murdoch’s Journal, did give nice play to Goldman.
The reality-based world today lobbed another stink bomb at the GOP’s spending cut frenzy. The well-respected economist Mark Zandi of Moody’s Analytics took a page from the Republican playbook, framing the GOP slash and burn plan a job-killer. More precise: the reduction in federal spending would destroy 700K jobs this year.
Though GOP boosters are likely to zap Zandi, the guy is hardly a radical. He served as economic advisor to John McCain when the Arizona Republican Senator still had some principles.
Zandi believes Republican hawks like Tim Pawlenty, who thinks shutting down the government is a peachy idea, are nuts. Desperate to get any kind of traction for a presidential bid, Pawlenty panders to Tea Partiers, saying a shutdown would be one of those “line-in-the-sand moments” to “get politicians back up against the wall and have them make the tough decisions. They all talk about making the tough decisions and never do.”
Wrote Zandi: “Shutting the government down for any length of time would also be taking a big chance with the recovery, not only because of the disruption to government services, but also due to the potential hit to the fragile collective psyche.”
The U.S. has enough problems. A trip to the national shrink is the last thing we need.