Republican presidential and congressional candidates continue to use a campaign slogan that goes something like this: “We need to cut federal government spending to reduce the national debt in order to improve the economy.” It sounds good, and certainly makes a nice sound bite, but it doesn’t really make any economic sense.
First of all, cutting government spending will slow down the economy and cause a recession, or maybe even worse – if it’s done too quickly or severely. Secondly, there’s no direct correlation between the size of our national debt and the current health of the economy.
The enormous size of our growing national debt, of course, is a cause for concern for our future, when interest rates will inevitably be higher, significantly increasing the cost of payments on the debt. But for now the Federal Reserve is intent on maintaining historically low rates in order to stimulate the economy. This buys us some time. The size of the national debt will grow smaller in relative terms as the economy grows. But we still need to attack the problem by reducing or eliminating our budget deficits. Fortunately, we’re already moving in that direction, as the size of federal government budget deficits have been steadily decreasing for the last several years.
Improving Government Efficiency Cannot Eliminate Budget Deficits
Still, the national debt is at an all time high, so there’s a lot of work to be done on this. But the real issue is how to accomplish it. When Republican candidates say they’d reduce government spending, but don’t provide any specific details about how they’d do it, their promises are virtually meaningless. Many, for example, say that all we need to do is cut government waste, fraud, and abuse to solve the problem. It’s certainly a good idea to minimize these things, but their claims that this would significantly reduce government expenditures are ridiculous.
Federal budget cutting needs to be done in a rational manner, using incremental measures that don’t harm the economy. And it’s obvious to professional economists and anybody who objectively assesses the situation that the problem can’t be solved with spending cuts alone. There will have to be a combination of spending cuts and tax increases. The only recent attempt by Congressional Republicans to honestly deal with deficit reduction was the Tax Reform Act of 2014, introduced by Rep. Dave Camp (R-MI), former chairman of the House Ways and Means Committee. Most Republicans, however, exhibited little enthusiasm for Mr. Camp’s fair-minded proposals, and Camp is no longer in Congress.
Identifying smart and fair proposals for federal spending cuts coupled with tax increases involves making difficult decisions – something many politicians try to avoid. Social Security, healthcare, and national defense are the nation’s biggest budget items. Cutting any of them is a difficult task. And raising taxes of any kind is always a difficult job. It will take real leaders to address the problem.
Politicians from both parties are guilty of failing to address the situation. But many Republicans are using the debt reduction issue as a pretense for pursuing their extreme ideological goals, like reducing funding for regulatory agencies, particularly those responsible for enforcing environmental laws, or cutting Social Security and Medicare. Other Republicans want to see an increased U.S. military presence around the globe, without talking about how much it would cost. They are making a difficult situation worse.
Liked this post? Follow this blog to get more.