Can Our Economy – and Our Communities – Withstand Deep Cuts to Federal Spending?

New data released today show that the national economy is recovering too slowly from the Great Recession to boost job growth. National gross domestic product (GDP) – the total of all goods and services produced in the US – increased by just 1.3 percent during the second quarter of this year, following a meager 0.4 percent increase in the prior quarter – well below the 2.5 percent growth rate that economists say is needed just to keep unemployment where it is.

What’s more, these numbers suggest that the economy may not be able to withstand the major cuts in federal spending that some policymakers are calling for in the debate over Congressional action aimed at avoiding default. These cuts – which could include slashing Medicaid, Medicare, Social Security, and food assistance – couldn’t come at a worse time. Millions of workers are still unemployed and are struggling to make ends meet in the wake of the recession. Federal spending cuts would further weaken economic growth, and that means little to no job growth. As economist Paul Krugman recently blogged, government spending cuts – at the federal, state, and local levels – are a major factor behind stagnant economic growth.

As federal policymakers discuss a viable way to avoid default, it is critical that they provide adequate support for core social services and avoid forcing deeper cuts at the state and local levels. A truly balanced approach to fiscal policy is necessary not only to maintain critical public services and structures, but also to pave the way for a broad, sustained economic recovery that benefits all individuals and families.

—Steven Bliss and Alissa Anderson