Bipartisan Policy Center Rejects Bipartisan Budget Control Act

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The Bipartisan Policy Center (BPC) has come out against bipartisan spending restraint. The BPC has issued a report highly critical of the sequestration spending cuts that were agreed to in the bipartisan Budget Control Act of 2011.

The BPC is a center-left thinktank in Washington that houses some very good policy scholars. The goal of the group is to celebrate “times in American political history when two sides have come together in the interest of the country and the people.”

Surely that describes the Budget Control Act. The Act made some modest progress at trimming the giant federal budget deficit, which is an important concern of BPC scholars. The Budget Control Act passed the House 269 to 161 with 174 Republicans and 95 Democrats in favor. It passed the Senate 74 to 26. President Obama signed it. What could be more bipartisan than that?

However, the BPC complains that the sequester will cause “immense pain, disruption, and uncertainty,” and it could “cost the economy more than one million jobs” from the supposedly negative “multiplier effects.” But that’s not what happened the last time we had bipartisan spending restraint in Washington, which was in the 1990s. Federal spending fell from 22 percent of GDP to 18 percent during that decade, and the economy boomed.

Government shrinkage creates a positive multiplier, not a negative one, because the government releases resources—such as skilled workers from the defense industry in the 1990s—that are put to more productive uses in the private sector. You take an engineer from the Department of Defense or Energy and put her in the private sector producing goods for the market, and GDP will go up not down.

I don’t want to pick on BPC in particular, and their new report has lots of useful data and analysis. But how is America going to avoid a Greek-style fiscal disaster if even the supposed deficit-hawk groups start chickening out of spending restraint after just the first small reform steps?

Rather than reversing course, we should be build on the BCA with the reforms at www.DownsizingGovernment.org.