Monday, April 18, 2005

Biting the Spending Cut Bullet

Democrats and many Republicans in Congress are calling for the rejection of President Bush’s spending “cuts.” These cuts are, in most cases, reductions in growth and do not go far enough in my estimation, and even if enacted will still result in a budget deficit above 4% of GDP.

The expansion in the size and scope of government under a Republican President, Republican House and Republican Senate have undermined the ability of the economy to grow at its full potential. To sustain the current level of growth in federal government spending, either long-term interest rates will rise or tax rates will increase above levels absent the raucous spending. Both outcomes subdue economic growth.

Where can the federal government cut spending with little harm? Two departments are ripe for significant cuts, or even abolition.

The Veterans Administration is a Department with little purpose other than serving the interest of those working for the Department. As a Vietnam Era veteran I can attest to the impotence of the organization. Other than supporting a network of hospitals, I can identify few real useful services. Furthermore, I recommend that Veteran hospitals be closed and each veteran be given vouchers so that he/she can get equivalent or superior service at a private hospital.

The President and Congress should also take an ax to the budget of Jimmy Carter’s beast, the Education Department. As an educator, I see little benefit from a Department that was created to serve educators and the educated. It neglects the interests of both groups. “No child left behind” should be re-titled, “No bureaucrat left behind.”

The President and Congress must reduce spending so that the budget deficit as a percent of GDP drops below 3% for fiscal 2006 and below 1% for 2007. I am not optimistic.

Ernie Goss

1 comment:

Anonymous said...

Some years back, the VA wouldn't even give me my home loan benefit. But, going after the VA in favor of a voucher program, while this may make sense from an economist's point of view, would probably aamount to political suicide. As usual, most people can't distinguish between the financing of a good and its provision (i.e., govt can finance education, but it doesn't follow that it is an effcient provider of educational services) .