Ex-CBO Head Says House Spending Bill Will Not Cost 700K Jobs

By Mario Trujillo

While some economists have found the House spending bill would cost as much as 700,000 jobs, Douglas Holtz-Eakin, former CBO director from 2003 to 2005, said Thursday that this analysis has been overblown.

Federal Reserve Chairman Ben Bernanke has said that the $61 billion in discretionary spending cuts could cost 200,000 jobs. Mark Zandi of Economy.com and analysts from Goldman Sachs said it could cost as many as 700,000.  

Those “static” analyses ignore the potential benefits of private sector growth that come from the cuts, said Holtz-Eakin, president of the conservative American Action Forum. Holtz-Eakin said the cuts could improve the willingness of business to invest and others’ analyses forget the human element.

“The analyses are devoid of any capacity to change the outlook of individuals in the economy,” Holtz-Eakin said. “They rule out anything that has to do with sentiment or optimism, and they thus rule out the very reason you are doing this.”

He also noted that the other models assume that the $61 billion in cuts will happen instantly. Holtz-Eakin noted that not all reductions are actual cuts, citing removal of allocated funds that have not been spent yet. According to the CBO, actual outlay reduction would only be $9 billion in 2011. The Senate rejected the House proposal 56-44 Wednesday.

“This is peanuts, it will do nothing,” Holtz-Eakin said.