House Speaker John Boehner is scrambling to revise his budget plan after the CBO found that it would only cut spending by $850 billion, not the $1.2 trillion promised.
I testified to the Senate Finance Committee today regarding federal spending and debt.
Here are some of the points I made:
The “Gang of Six” senators has released an outline of budget reforms that would supposedly reduce deficits by $3.7 trillion over 10 years. Revenues would rise by at least $1 trillion, while spending would be theoretically trimmed by various procedural mechanisms. The plan promises to “strengthen the safety net,” “maintain investments,” and “maintain the basic structure” of Medicare and Medicaid, which doesn’t sound very reform-minded to me.
Many of the laws covering today’s workforce were written more than seven decades ago during the New Deal. Collective bargaining and the unemployment insurance system, for example, were both established in 1935. Since then, the U.S. labor force and industrial structure have vastly changed, which creates an opportunity to update the laws to better suit the modern economy.
Senate Minority Leader Mitch McConnell has offered the president a way to raise the debt ceiling by $2.5 trillion without having to cut spending. The WaPo reports that “McConnell’s strategy makes no provision for spending cuts to be enacted.”
President Obama’s former head of the Council of Economic Advisers has taken to the pages of the New York Times to warn us against pursuing “fiscal austerity just now,” particularly not spending cuts.
The Wall Street Journal provides a page of charts today illustrating the remarkable weakness of the current U.S. economic recovery. A twin story in the paper provides comments on the recovery from two of the nation’s top macroeconomists:
Despite ongoing federal deficits of more than $1 trillion a year, many liberals are calling for more government spending to “create jobs.” At the same time, liberals are opposing budget cuts because that would supposedly hurt the economic recovery. And then there is the perennial problem of Democrats and Republicans defending spending on their particular favored programs.
As we close in on congressional votes to increase the federal debt limit, negotiators are coming up with all kinds of ideas to hike taxes. (Suspiciously, they haven’t revealed very many spending cut ideas so far).