By Bernie Becker and Vicki Needham - 04/06/13 10:00 AM EDT
A disappointing March jobs report released on Friday has ramped up the debate over the sequester.
White House press secretary Jay Carney blasted what he called the GOP decision to not just allow the sequester, “but to embrace it as a political victory and a home run.”
“There's no question that anticipation of sequester would have a negative impact on job growth and economic growth,” he said Friday in reaction to the report, which found the economy added a paltry 88,000 jobs in March.
Democrats said the drag on the economy would only grow worse in the coming months as more cuts are implemented.
“Today's jobs report makes it clear: there is no time to waste to grow our economy and put people to work,” House Minority Leader Nancy Pelosi (D-Calif.) said in a statement. “Instead, Republicans prefer sequesters that undermine our economic growth and Ryan budgets that would cost jobs and threaten the economic security of seniors and working families.”
Republicans blamed the slow jobs growth on Obama, who they say is killing the economy with regulations and tax hikes. GOP officials also blame ObamaCare for adding uncertainty to the economy.
“Our economy is not creating enough jobs, and too many working men and women are still in the unemployment line,” House Majority Leader Eric Cantor (R-Va.) said. “Sadly, people are simply giving up, and losing hope.”
Economists said a variety of reasons contributed to the tumble in job growth.
Mark Zandi, the chief economist at Moody’s Analytics, said the mediocre growth reflected the continued struggles of an economy that is “still not gaining traction.”
He dismissed the idea that the sequester cuts were much of a drag on March hiring, though he predicted they would cut into job growth into the summer and even the fall.
Other analysts, pointing to a decline in retail jobs, said the expiration of the payroll tax cut at the end of last year had finally taken a bite out of the economy, just as economists had feared.
Several voices said the figures should be a wake-up call for Washington to tackle big-ticket items such as tax reform that could spur economic growth.
“Of all the propositions there are none that would command support across a wider range of economists than the idea that a broader base and a lower rate is fairer and makes the economy grow better,” Larry Summers, a former top aide to both Presidents Clinton and Obama, told Bloomberg Television.
Top officials in both parties have expressed an interest in striking tax breaks from the code while also lowering rates, especially for corporations. But while economists also believe tax reform would help the economy, Democrats and Republicans remain divided over whether wealthy individuals should contribute more taxes for deficit reduction.
Summers, speaking of tax reform said: “I wouldn't be betting on it."
Keith Hall, a former head of the Bureau of Labor Statistics now at George Mason University, said the impasse over fiscal issues was piling up more uncertainty for businesses, at a time when companies are trying to decide whether they can hire new employees.
Meanwhile, Jack Kleinhenz, the chief economist for the National Retail Federation, brushed aside the idea that losing the payroll tax cut had weighed down his industry, instead blaming the wrangling over issues like the debt ceiling, the sequester and the fiscal cliff.
"If we don't do something big, the economy will continue to drag," said Kleinhenz, who called the business cycle since the financial crisis "quirky and erratic."
Yet Democratic and Republican strategists alike expressed pessimism a deal could be found.
John Feehery, a GOP strategist who writes a column for The Hill, said the fact that the economy is stumbling along actually lessens the chances of a deal.
“Because there’s no political supremacy, there’s no real reason for either side to cut a deal,” he said.
The sequester and the fiscal cliff deal that raised taxes on wealthy households make it easy for both sides to blame the other if job growth doesn’t rebound.
Doug Thornell, a former aide to Rep. Chris Van Hollen (D-Md.), said that Friday's figures could strengthen Obama's hand on sequestration, even as he acknowledged that “both sides are going to find something in these jobs numbers to strengthen their talking points."
And Jim Manley, the former spokesman for Senate Majority Leader Harry Reid (D-Nev.), said that both sides may be forced to reconsider the spending cuts if the economy continues to wobble over the next few months, something the Republicans have shown little inclination to do thus far.
“Could be a hell of a summer,” Manley said.