July 12, 2012 · 0 Comments
By Dean Baker:
The NYT had a piece on the potential impact that uncertainty around the extension of tax cuts and the imposition of legislated spending reductions might be affecting the economy. At one point it tells readers that:
“Outside the military contracting industry, the fiscal cliff has not received the same amount of attention.”
Of course the reason that the impact of spending cuts on the military contracting industry has received attention is that the industry has payed lobbyists to hype its impact. They have circulated studies making outlandish claims about the jobs impact.
While cutting spending on the military in the middle of a downturn will lead to job loss, cutting spending on anything, even if the cuts were on totally pointless spending, would lead to job loss. In fact, since military spending is more capital intensive than most other sectors of the economy, cuts in this sector are likely to lead to less job loss than cuts in other areas of government spending.
As far as the general contention that uncertainty is slowing growth, this does not seem to be supported by recent data that shows a substantial uptick in new capital goods orders. If businesses are uncertain about the future, this is the most obvious place that the uncertainty would appear. If uncertainty were affecting employment we should expect a sharp rise in the ratio of new temp workers to new workers overall. We don’t see this.