With 13.9 million Americans out of work and a looming deficit, House republicans have proposed a plan to cut $61 billion from current spending levels. That plan could eliminate 700,000 jobs, largely concentrated in the private sector, according to a report by a Moody's economist.
The report, released Monday by Moody's Analytics' Mark Zandi -- an architect of the 2009 stimulus package who has advised both political parties -- paints a grim picture of the GOP's spending proposal. Zandi argues that while it's "laudable" for lawmakers to focus on reining in government spending, the GOP's cuts are simply too much too soon.
In a Monday press briefing with reporters, House Majority leader Eric Cantor (R - Ohio) acknowledged that the spending proposal -- known as the continuing resolution or CR -- might increase unemployment. But if the 700,000 lost jobs in Zandi's report are government jobs, Cantor remains unmoved by the report.
"What kind of jobs is he talking about? Is he talking about government jobs? If so, why is the government hiring people it can't afford to pay?" Cantor asked. "This is obviously an unsustainable solution and something we're trying to correct in our CR."
However, Zandi's report does not distinguish between private or public sector positions.
In an email to The Huffington Post, Zandi added that, by his calculation, the majority of the jobs lost as a result of the GOP plan will be from the private sector. He wrote: "It will be approximately 550,000 in the private sector and 150,000 in the public sector."
Zandi calculates that the proposal would reduce economic growth by 0.5 percent this year and by 0.2 percentage next year. All told, the plan would lead to a net job loss of 700,000 jobs by the end of 2012. Here's more from the report:
The economy is much improved and should continue to gain traction, but the coast is not clear; it won't be until businesses begin hiring aggressively enough to meaningfully lower the still-high unemployment rate. The economy is adding between 100,000 and 150,000 per month--but it must add closer to 200,000 jobs per month before we can say the economy is truly expanding again. Imposing additional government spending cuts before this has happened, as House Republicans want, would be taking an unnecessary chance with the recovery.
Zandi is not the first economist to lay out the argument against the GOP's spending cuts. Last week, a Goldman Sachs economist made the case in a confidential report obtained by ABC News that the Republican's plan would slow economic growth by up to 2 percent in the second and third quarters of this year.
If no budget solution is reached, the U.S. government could be shut down. Based on similar government closures in 1995 and 1996, Goldman says a shutdown would cost the U.S. economy $8 billion in reduced spending.
Treasury Secretary Timothy Geithner criticized the Republicans' plan in a recent press conference, claiming that the continuing opposition from the House GOP "would undermine and damage our capacity to create jobs and expand the economy."