Eliminating automatic cuts to federal spending for the next two years would boost economic growth and lead to an increase of 800,000 jobs, according to new estimates by the Congressional Budget Office.
But those estimates also said the added spending and accrued debt would slow growth in later years.
The budget office, a non-partisan agency tasked with providing budget and economic projections for Congress, said Tuesday that removing the spending caps and sequestration imposed in the wake of the 2011 debt ceiling negotiations would accelerate economic growth by boosting aggregate demand, or stimulating the economy by employing unused resources.
Eliminating the statutory spending caps would entail $90 billion more in appropriated spending in fiscal year 2016, and $91 billion 2017.
That added spending would translate to gross domestic product being 0.4 percent greater in 2016, and 0.2 percent in 2017, according to the budget office’s estimates. Employment in those years would grow by as much as 1.4 million in the best-case scenario.
The analysis was published Tuesday in response to Sen. Bernie Sanders, I-Vt., the ranking member on the Budget Committee. Sanders, also a candidate for president in the Democratic Party, is a self-described socialist and frequent critic of the spending cuts included in recent budget deals.
“These arbitrary sequestration caps have never made any sense, and now we see even more clearly the implications for our workers,” Sanders said in a statement.
“We must end sequestration now ahead of the end of the fiscal year and prevent a budget showdown that will help nobody,” Sanders added. “It makes no sense to head towards a crisis when we have a clear path towards a better solution.”
The deal struck by President Obama and congressional Republicans to raise the debt ceiling in 2011 called for an agreement to reduce deficits, and the sequestration cuts were a fallback option. For fiscal year 2016, the caps would limit discretionary spending on defense to $523 billion, and discretionary spending on non-defense items to $493.
President Obama proposed raising defense spending by $38 billion, and non-defense spending by $37 billion.
Congressional Republicans have advanced funding bills boosting defense spending through a war account not subject to the caps, but those measures have faced opposition from Democrats and a veto threat from the president, who has said he wants a deal to raise the all caps by equal amounts.
