The Washington Post reports that spending cuts in the budget deal threaten to slow the economy. The article quotes a number of economists who seem to harbor a rather extreme Keynesian bias in their thinking.
Republicans and Democrats have come together on a “historic” budget deal that cuts federal spending by more than $2 trillion over 10 years. The Washington Post’s lead story calls the cuts “sharp” and “severe.”
However, the budget deal doesn’t cut federal spending at all.
House Speaker John Boehner has revised his budget plan in response to an unfavorable analysis by the CBO. The CBO has examined Boehner’s new plan and finds that it would cut spending by $917 billion over 10 years. Of the total, only $761 billion would be cuts to programs. The rest of the savings would be from reduced interest costs.
The USPS is proposing to close 3,700 post office locations across the country, as mail volume falls and the agency is losing billions of dollars.
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.