House Republicans have been successful at forcing significant cuts to the federal budget over the last nine months, but it hasn’t translated into the economic expansion they promised. “Cut and grow” they called it, but so far there’s been a lot of “cut” and not much “grow.”
Here’s House Majority Leader Eric Cantor (R-VA), echoing the vast majority of Republicans, in February: “[W]e must cut government spending to bring down the deficit and the debt because if you look at the current levels of debt, added what’s required to fund future deficits, you’re going to have a crowding out of private capital. If you do, businesses will not grow, and you will overall retard that economic growth. You will bring on inflation, erode the value of the dollar and create an economic environment where you are going to reduce consumer spending power and ultimately the standard of living in America.”
We’ve seen pretty much the opposite since then. Business confidence has eroded further, interest rates are at near-record lows, there’s no inflation, and the biggest impediment to growth is a lack of demand — because regular people don’t have much money to spend, particularly the tens of thousands of public employees who’ve been laid off.
So what does he take away from these results? Here’s what he told reporters at his weekly Capitol briefing Wednesday.
“If you look at our agenda for the next three or four months, there’s a lot that we can do right now to provide relief — roll back these proposed regulations — that will allow for small business and others to grow,” Cantor said. “We also are going to be putting out there, along with the discussion of comprehensive tax reform, some of the things we can do right now…we have a small business tax cut that will go right to the bottom line to help employers with 500 employees or less achieve a better outcome if they hire more people, if they grow….You can’t achieve the result of managing down the debt and deficit if you don’t have any growth. So these are intertwined.”
That last part is true. But it lies crosswise to the prevailing GOP theory earlier this year — that cutting federal spending will produce private sector growth, which will further reduce deficits in a positive feedback loop of economic expansion. It didn’t work out that way, but the hunger for cutting hasn’t really subsided.
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