A Republican plan to sharply cut federal spending this year would destroy 700,000 jobs through 2012, according to an independent economic analysis set for release Monday.
The report, by Moody's Analytics chief economist Mark Zandi, offers fresh ammunition to Democrats seeking block the Republican plan, which would terminate dozens of programs and slash federal appropriations by $61 billion over the next seven months.
$61 billion over 7 months = ~$100 billion annually.
Our deficit is $1,700 billion over the last calendar year.
Therefore, if we extrapolate, when we stop deficit spending we will lose 11.9 million jobs, if we are forced to cut only $1,700 billion.
But this presumes that:
- Our borrowing rate remains under 2%.
- We can maintain our tax receipts at $2 trillion.
Both of which are laughable if we keep this game up and those who we borrow from decide we're not going to pay.
"QE" - that is, monetization - doesn't change the math. If you increase the supply of money, then you decrease the value of each unit of currency. This in turn reflects immediately into things like gasoline and food prices. And that, in turn, acts exactly as if we reduced spending, because it is the amount of stuff you can buy, not the number of dollars you have.
Incidentally, I don't believe the Moody's number, nor do I believe the Goldman (similar) claims. Zandi was largely responsible for crafting the 2009 "stimulus" that didn't stimulate. He therefore has shown the lack of efficacy in his policy pronouncements.
The mathematical facts, however, don't care if you like them or not.
And those facts make clear that we cannot continue, on an indefinite basis, to keep this game going. We're three years into it and yet there has been zero evidence that we've done anything other than foment revolutions around the world.
If we keep this up, we're going to break something important - and likely sooner than later.
Once the consequences come here it's too late to change your mind. We've already built into the supply pipeline immense price increases in the form of commodity inputs, and that's going to result in either serious price inflation or margin collapse - probably the latter.
We get that collapse in margins plus destabilization of oil producers and foreign governments and we won't be cutting spending by 40% in the Federal Government - we'll be cutting it by more than half, perhaps as much as 60-70%.
And it won't be voluntary.
