Is Goldman Sachs Providing Pitchforks to the Democrats?

My post this morning, Goldman Sachs Goes Totally Keynesian, brought in several emails and one phone call. The phone call came from a three decade Washington D.C. insider.

He tells me that the Goldman Sachs report that I highlighted was unlikely to be released at this time by accident. Specifically, the report, written by Goldman Sachs economist Alec Phillips, says that the minuscule spending cuts of $61 billion in 2011, which were just approved by Republican controlled House, could reduce US economic growth by 1.5 to 2 percentage points in the second and third quarters of the year.

Naturally, I called such an idea preposterous.

My D.C source called Goldman, "the master of the inside game." He said they are "savvy, shrewd and cynical." The report was likely timed, my source says, to provide Democrats with pitchforks to battle even the minuscule cuts the budget proposal calls for. As my source said, "it's like 61 grains of sand on the California coastline. It's absurd to think it is going to have any meaningful impact on the economy."

He pointed me to an FT story that quotes New York Democratic Senator Chuck Schumer:

Chuck Schumer, the Democratic senator from New York, said: “This nonpartisan study proves that the House Republicans’ proposal is a recipe for a double-dip recession. Just as the economy is beginning to pick up a little steam, the Republican budget would snuff out any chance of recovery. This analysis puts a dagger through the heart of their ‘cut-and-grow’ fantasy”.

According to my source, it is unlikely that Senate Majority leader Harry Reid could stop the bill, but with Schumer taking a role, as this quote suggests, it could be blocked. Translation: The A Team has decided to stop this early stage budget battle. Says my source, Goldman people are as nefarious as they can get. They like things just the way they are: a high spending government and if necessary crazed Keynesian theories to back it up.