[DagoIgnog]

More collateral damage forced upon us by Republicans to appease a small minority of uninformed idealogues while dragging the U.S. economy into a new recession or worse.

NY Times: http://www.nytimes.com/2011/08/13/bu...pagewanted=all

Macroeconomists and private sector forecasters warn that the direction in which the new House Republican majority had pushed the White House and Congress this year — for immediate spending cuts, no further stimulus measures and no tax increases, ever — is wrong for addressing the nation’s two main ills, a weak economy now and projections of unsustainably high federal debt in coming years.

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Among those calling for a mix of cuts and revenue are onetime standard-bearers of Republican economic philosophy like Martin Feldstein, an adviser to President Ronald Reagan, and Henry M. Paulson Jr., Treasury secretary to President George W. Bush, underscoring the deepening divide between party establishment figures and the Tea Party-inspired Republicans in Congress and running for the White House.

“I think the U.S. has every chance of having a good year next year, but the politicians are doing their damnedest to prevent it from happening — the Republicans are — and the Democrats to my eternal bafflement have not stood their ground,” Ian C. Shepherdson, chief United States economist for High Frequency Economics, a research firm, said in an interview.

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S.& P. based its downgrade and its negative outlook for America’s credit rating partly on the assumption that Bush-era tax cuts for high incomes would be extended past their 2012 expiration, “because the majority of Republicans in Congress continue to resist any measure that would raise revenues.” S.& P. said it could change its outlook to stable if the tax cuts ended.

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“At the very least,” said Mark Zandi, chief economist of Moody’s Analytics, Congress should renew for another year two measures that expire after 2011 — payroll tax relief for employees and extended unemployment compensation — as Mr. Obama has proposed. If either expired, Mr. Zandi said, that could shave roughly a half-percentage point from economic growth next year.

Republicans are resistant. And Democrats are too cowed to counter much, given polls that show many Americans believe Mr. Obama’s 2009-10 stimulus package did not work, despite studies to the contrary.
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The prospect of further reductions worries forecasters. Jerry Webman, chief economist of OppenheimerFunds, wrote in an analysis that while the cuts were not huge this year or next, “they are nonetheless contrary to what would be expected in a fragile economic environment.”
In separate interviews, Joel Prakken, chairman of Macroeconomic Advisers, a forecasting firm, and Laurence H. Meyer, its co-founder and a former Federal Reserve governor, called the reductions “job-killing spending cuts” — playing on Republicans’ mantra against “job-killing tax increases.”