Military Spending Cuts Looming, Republican Rediscover Keynesianism
Senator Harry Reid's threat to slash Pentagon spending has sparked a red hot streak of Republican Keynesianism. The economic theory advocating short-term public spending in a recession followed by boom time debt reduction is heretical in modern Republican parlance, but GOP lawmakers are making an exception when defense spending is at stake.
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This week, Reid laid out the Democrats' plan to accept $600 billion in automatic defense cuts already written into law unless the GOP budges on revenue or tax increases. Last night, Republicans lashed out at that prospect citing concerns that sharp defense cuts could wreak havoc on the fragile economic recovery, an interesting sort of argument considering where it's coming from.
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“The whole point here is to try to get some economic growth, job creation, to get out of this recession,” Republican Minority Whip Jon Kyle told Politico's Scott Wong last night. “Why would we risk going backward with policy that even CBO says would be the wrong prescription right now?”
Wong says the GOP argument was bolstered this week by a new report from the nonpartisan Congressional Budget Office that "handed the GOP more ammunition: It concluded that spending cuts and tax hikes set to take effect in January would stall the economic recovery — at least in the short term."
And of course, Kyl isn't alone. On Tuesday, Sen. John Cornyn told reporters on Capitol Hill that the defense cuts, also known as sequestration, would be devastating to the economy. “Just when you thought the economic news could not get much worse with slow economic growth, with reduced wages because of higher costs, and with many people simply giving up looking for work with the lowest labor participation rate we’ve had in some time,” he said, “we have an entirely predictable and preventable jobs crisis approaching in January, where because of the sequestration, my state alone will lose 91,000 private sector jobs — and there are about a million private sector jobs at risk if the sequestration goes into effect on January 2."
The problem with this, of course, is that Republicans have tried to convince voters in the last year and a half that Keynesianism is dead. The government bailed out the banks, bailed out Detroit and it passed the stimulus and for what? A roughly 8 percent unemployment rate. That's been the rhetorical weapon to wield against Democrats seeking to increase federal spending to states, municipalities and a range of other priorities during this slow-growth period. However, some but not all, Republicans would like to put on asterisk on this argument reading "*Does not apply to military spending." It's a lot dubbed by Talking Points Memo's Brian Beutler in October as the "Defense Keynesians," which also includes Rep. Buck McKeon and Rep. Randy Forbes. With Reid wielding a knife to the Pentagon, expect this breed of Republican to be louder than ever as the clock winds down to December when sequestration is set to go into effect.
