The deficit reduction plan put forward by House Speaker Kevin McCarthy as the price for lifting the debt ceiling would notably slow economic growth and increase unemployment next year if enacted, according to an analysis by Moody’s Analytics released Monday.
(Bloomberg) — The deficit reduction plan put forward by House Speaker Kevin McCarthy as the price for lifting the debt ceiling would notably slow economic growth and increase unemployment next year if enacted, according to an analysis by Moody’s Analytics released Monday.
The research outfit headed by Mark Zandi forecast that gross domestic product would expand 1.6% in 2024 on a fourth-quarter over fourth-quarter basis and unemployment would end the year at 4.6% if the proposal became law. That compares with a forecast of 2.25% growth and a 4.2% jobless rate if the debt ceiling was increased without conditions, as President Joe Biden has called for.
“By year-end 2024, employment is 780,000 jobs lower,” Zandi and fellow economist Bernard Yaros wrote in a report.
McCarthy’s proposal would increase the nation’s debt ceiling by $1.5 trillion, in order to stave off a US payments default until March 31, 2024, at the latest. It aims to trim $4.5 trillion in spending over a decade, in part by cutting discretionary spending by $130 billion next year and capping its growth at 1%.
The California Republican has said the House will pass the plan this week.
Moody’s said the program would slow the growth of the federal government’s debt: Publicly traded debt as a percentage of GDP would be 106.5% at the end of 2033, compared to 116.5% otherwise
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.