Money Articles

American Prospects

There is No Spending Crisis

January 23, 2013

Most GOP rhetoric centers on the notion the United States is facing a ?spending crisis? that will ruin its fiscal solvency. Setting aside the fact that this is impossible?a country with fiat currency (held in reserve by most of the world) can?t ?run out? of money, and can?t have a ?debt crisis??it?s also true that the government just isn?t spending as much as Republicans think. Economic stimulus aside, Obama has presided over modest growth in federal outlays. Here?s Bloomberg with more:

Federal outlays over the past three years grew at their slowest pace since 1953?56, when Dwight D. Eisenhower was president. Expenditures as a share of the economy sank last year to 22.8 percent, their lowest level since 2008, according to Congressional Budget Office data. That?s down from 24.1 percent in 2011 and a 64-year high of 25.2 percent in 2009, when Obama pushed through an $831 billion stimulus package.

?If you strip out the stimulus, discretionary spending over the last few years has been quite modest and is scheduled to go to levels we haven?t experienced in modern times,? Robert Reischauer, a former director of the CBO, said in an interview. ?Obama signed on to that,? partly in response to Republican pressure.

Here?s what this looks like in chart form:

Spending has been flat for most of Obama?s term, and will almost certainly go down over the next four years, given the existing deficit reduction established by the 2011 Budget Control Act, as well as the likely cuts from sequestration. Indeed, it?s worth noting the extent to which this challenges Republican economic dogma, which views spending as a detriment to the national economy.

If Republicans are right, and spending restraint boosts the economy, then we should have seen more robust growth, beginning in 2011. As it stands, annual economic growth has balanced out at 1 to 2 percent, a far cry from the 3 to 4 percent we need to bring unemployment down to pre-recession levels in a reasonable amount of time. If anything, we need to reverse this trend and start spendingmore.

One last thing: If Republicans are still calling for spending cuts, it has little to do with necessity, and everything to do with an ideological agenda. The GOP wants to dismantle the welfare state, and the easiest place to start is with programs that benefit the poor and working class. To wit, they?ve promised to craft a plan which balances the budget in ten years without raising taxes. Given the GOP?s low appetite for entitlement cuts, and commitment to greater military spending, the only other area to reduce spending is in the social safety net.

In the next few months, look for Republicans to introduce another plan that seeks to preserve tax advantages for the wealthiest Americans by leaving the poorest to fend for themselves.

Read entire article on American Prospects
« Previous Article Next Article »

More From Money Articles

  • Permits revoked for oversized shipments through ID
  • Argentine president moves to control newsprint
  • Oil spill panel hears about Halliburton warning
  • Write a Story/Review about this topic

    Post a Comment

     

    Best of Luxury

    Finding the best in luxury can be a daunting task, which is why we've taken it on for you.
    View All Best of Luxury
    THINGS WE LIKE