Policymakers Needn't Fear Spending Cuts

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A recent study by economists Alberto Alesina, Dorian Carloni, and Giampaolo Leece looked at 19 OECD countries from 1975 to 2008 and found no evidence that “governments which quickly reduce budget deficits are systematically voted out office.” Therefore, the authors conclude that governments can “decisively” reduce deficits and be returned to office by voters.

A particularly interesting finding is that only 20 percent of the governments that reduced deficits by cutting spending were subsequently voted out of office. In contrast, 56 percent of governments that reduced deficits by increased taxes were given the boot.

The findings are good news for the large group of incoming members of Congress who promised to cut spending during the campaign.

The authors ask, “If it is the case that certain types of fiscal adjustments are not necessarily costly in terms of lost output or lost votes, why are they often delayed and politicians reluctant to implement them?”

One possible reason they suggest makes the most sense:

Certain constituencies may be able to block adjustments to continue receiving rents from government spending because they have enough political energy (time, organization, money). This is sometimes referred to as an issue of diffuse benefits and concentrated costs. For example, in some cases strikes of public-sector employees may create serious disruptions. Pensioners lobbies may be able to persuade politicians not to touch their pension systems even when future generations will suffer the costs of delayed reforms. Lobbyists for certain protected sectors use campaign contributions for continued protection.

Policymakers in Washington are surrounded by doting staffers, political operatives, and persistent lobbyists representing countless special interests. The result is an endless stream of feedback telling policymakers to SPEND! Or, as is currently more likely the case, DON’T CUT! Many politicians learn to enjoy the warm feelings (and campaign support) that come with delivering the taxpayer goods to particular interests, while those who would actually like to cut spending don’t make any friends.

The media often doesn’t help matters.

Consider how many journalists tend to portray the subject of spending cuts. They describe proposed cuts as “draconian” and modest trims as “slashing” spending. Instead of considering the cost to taxpayers of a program or the possible alternatives to government programs, journalists just think of cuts as “painful.”

One way to puncture a hole in the Beltway spending echo-chamber would be for congressional committees to spend more time listening to witnesses who don’t want more government spending. In a Cato Policy Analysis, former Yale professor James Payne surveyed 14 congressional committee hearings. He found that “in those 14 hearings, 1,014 witnesses appeared to argue in favor of programs and only 7 spoke against them, an imbalance of 145 to 1.”

There’s a lot of talk coming from House Republicans about “changing the culture” in the appropriations committee and elsewhere. A good start would be for the committees to start hearing more from the “diffuse” taxpayers footing the bill, and less from the concentrated beneficiaries. Perhaps then more policymakers will come to realize that pushing spending cuts isn’t so scary after all.