In a letter to a leading House Budget committee member, the Congressional Budget Office outlined the long term consequences of the sequester. (Source: MGN Online)
(RNN) – Whether or not repealing sequester budget cuts will spark economic growth is the heart of a brewing debate in the House of Representatives.
Democrats are saying reversing the $109 billion in cuts forced by sequestration will create jobs and invigorate a recovering economy. Republicans don't buy it.
In a July 25 letter to House Rep. Chris Van Hollen, D-MD, the ranking member of the House budget committee, the bipartisan Congressional Budget Office explained its analysis of a potential House Democrat-driven bill that would reverse the cuts.
The letter claimed reversal will spur the economy and create nearly a million jobs, and continuing the cuts will cost jobs and slow growth.
Republicans called the report "flawed."
"We have been unable to generate such rosy results using any of the conventional modeling tools that economists routinely use," Republican Senate Budget Committee spokesman Andrew Logan told The Hill.
The CBO estimates leaving the cuts in place will cost 1.6 million jobs through the 2014 fiscal year. It said reversing the cuts will create 300,000 to 1.6 million new jobs with the most likely projection being 900,000.
The report also states that canceling the cuts by Aug. 1 will increase remaining government spending by $14 billion in fiscal year 2013 and $90 billion in fiscal year 2014.
However, the report also warned that spending more than the projected $104 billion would inhibit the government's ability to use tax and spending policies to respond to any unforeseen challenges and could increase the risk of another financial crisis. Overspending would also make it hard for the U.S. to borrow money at affordable interest rates, the CBO said.
"This [CBO report] boils down the sequester in very plain terms that everybody can understand," Van Hollen told The Hill.
Van Hollen hopes the report and subsequent legislation will bring clarity to the sequestration issue. Representatives in the House are crafting 12 annual bills that will cut overall spending level totals to $967 billion - a significantly lower amount than the proposed cut of $1.058 trillion in a bill by Senate Democrats.
"This report is particularly timely in light of President [Barack] Obama's call for Congress to focus on growing the economy for the middle class," Van Hollen said in a press release. "It's time for Congressional Republicans to put politics aside and work with us on finding a balanced approach to replace the sequester."
According to the Washington Post, the White House wants the deadline for a decision on canceling the sequestration cuts to be Sept. 30 to halt a potential government shutdown on Oct. 1, which could influence midterm elections.
Members on either side of the aisle doubt a compromise can be reached before that deadline.
Sequestration resulted from the Budget Control Act of 2011, in which congressional Republicans exchanged required scheduled budget cuts for raising the national debt ceiling.
As a result, $85 billion in federal budget cuts went into effect on March 1 – with 9 percent of non-defense spending and 13 percent of defense spending throughout the following seven months. The cuts will remain in effect until 2021.
"While we've made important economic progress in the last few years, it is indefensible that Congress would impose self-inflicted wounds on our still-recovering economy – especially while so many families are stills struggling to make ends meet," Van Hollen said.
Sunday, November 10 2013 7:00 AM EST2013-11-10 12:00:14 GMT
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