Diary

Are "Artful" or "Drastic" cuts Required?

(responding to link from my friend at Heritage Action, Joseph Muniz (www.heritageaction.com)
http://www.csmonitor.com/Business/new-economy/2011/0628/Slash-that-budget-deficit-No-cut-it-artfully

The Christian Science Monitor article linked above has some thought-provoking features, but make sure you do not take EVERYTING it says at face value. In particular, the CSM leans left-of-center, and therefore their perspective skews their take on the debt problem. And therefore, the final conclusion is manipulated to their preferred solution, and falls short.

So, Ms Rogers is correct that “the definition of economically unsustainable: when an economic obligation rises faster than the means to pay for it.” and we do not necessarily have to balance the budget, just bring the growth of debt to lower than growth in the economy. But first we need to balance the budget so that we can REDUCE the debt to a level that is less of a drag on economic growth.

I take issue with 3 items:

1) Ms Rogers seems little concerned about the problem with the current deficit, because it is caused by a “temporary” recession, and are more concerned that “Even when the recession ends and those deficits are projected to come down to 6 or 7 % of GDP … [this] will still far exceed the expected 2 to 2.5 % annual growth in the economy.” She fails to recognize that the current deficit is part of what is PROLONGING the recession and preventing robust economic growth.

2) She also ignore the fact that entitlements are poised to explode in cost unless major reforms are enacted, which will make future deficits FAR, FAR larger than 6 or 7% of GDP (See Heritage Foundation charts on deficit and debt). The problem is MUCH worse than she implies.

3) Ms Rogers is also correct that we need to address both Government Spending and incentives for Economic Growth: the definition of economically unsustainable: when an economic obligation rises faster than the means to pay for it. But her liberal perspective is revealed when she asserts that spending on Healthcare or Education is essential to future growth, or that government spending only needs to get good “bang for the buck” to stimulate short-term demand.

Economic growth is promoted when the Government allows the Free Market to reward work, innovation and investment, and reduces the government’s drag on the economy through high taxes and regulation. Therefore the correct solution to BOTH sides of the Spending/Growth dilema is by REDUCING government.

And to get anywhere close to this, we must not “artfully” cut here and there – DRASTIC SLASHING OF SPENDING is REQUIRED!