Closing a $2 trillion gap with a $44 billion bill won’t work, former economist says

Jared Bernstein, the former chief economist of Vice President Joe Biden, says a non-partisan analysis shows a big cut in government spending in the Democratic-led Senate spending bill has no effect on the deficit.

The National Economic Council released a memo from its chief economist, Carl Tannenbaum, arguing that while Congress needs to cut spending by at least $2 trillion over the next 10 years, the $44 billion from the Senate spending bill could help close some of the gap.

But two economic experts say that is unlikely. They and other nonpartisan analysts say the $2 trillion in cuts over the next decade is based on outdated assumptions and does not take into account the long-term cost of higher health care costs or other government programs.

The Senate spending bill is not expected to come up for a vote this year, but it is considered a starting point for deficit reduction discussions that can proceed next year.

“It’s worth pointing out that $44 billion would simply pull the deficit down by about $0.02% of GDP — tiny sliver of the deficit that we have right now,” said Jared Bernstein, a professor at the University of Maryland. “So while it’s possible for this to be a positive step forward, we certainly can’t make a broad conclusion from that from the start.”

The Democratic Party recently hailed an analysis from the Congressional Budget Office finding that the budget bill released earlier this month would not lower the deficit.

But the study did not measure the impact of measures in the Senate spending bill. It said that spending bills for the next decade would raise the deficit by nearly $1.1 trillion. In the next decade, deficits would increase by about $900 billion.

The Economic Council memo, released Tuesday, said a different analysis had found a much bigger $2 trillion in savings from the Senate bill. The analysis assumed that the spending bill would eventually cut spending by $50 billion a year for five years and cut revenues by $25 billion a year for six years.

Tannenbaum said that if the spending bill does not pass, the Committee for a Responsible Federal Budget and other respected groups will instead release more comprehensive projections. The findings will be released in November.

“The Congressional Budget Office has said that it’s unlikely that they will give us better estimates because they’re going to have to go back to the drawing board and work with the details as they’re developed,” he said.

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