Will cutting federal spending really reduce jobs?

It looks like we have a deal on the debt ceiling. While avoiding the possibility of a government default is a good thing, the actual spending cuts are not actual “cuts,” but only relative to estimates of the growth of federal spending over the next decade.

Needless to say, I’m not sold on the proposal, but it is probably the best that could be achieved given the political limitations (I like this plan much better). However, it is depressing to see the same Keynsian claptrap being spewed by those who the media cites as mainstream economists.

According to the article:

“Unemployment will be higher than it would otherwise have been,” Mohamed El-Erian, the CEO of Pimco, the world’s largest bond investment firm, said yesterday on ABC News. “Growth will be lower than it would be otherwise. And inequality will be worse than it would be otherwise.”

The article goes on to say:

And the consensus is that job losses are likely to outweigh the positive impact of increased business confidence. “When you look at the history of these things, the finding is that we shouldn’t be kidding ourselves,” Paolo Mauro of the International Monetary Fund and an expert on the impact of spending cuts, told the New York Times. “When you do fiscal adjustment in the near term, it does have an adverse impact on economic growth.”

Weren’t these the same people who sold us the “stimulus” as a sure-fire way to turn the US economy around?

Me, I think that cutting back federal spending and providing some indication that Washington is serious about cutting spending are the keys to spurring economic growth.