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Sunday, February 03, 2013

Overlooking $2.3 Trillion in Debt Reduction

We have already cut around $1.5 trillion of spending from the budget. Yet Tyler Cowen says:

I would view the sequestration as a kind of referendum on whether we are ever capable of cutting or restraining spending and I fear not.  

He also says defense is untouchable becasue:

When it comes to the defense budget, “gdp fetishism” suddenly makes a comeback.


Two-fifths of the $1.5 trillion in savings from cutting and capping funding for discretionary programs comes from defense.

I'm all for more cuts to defense too, but it's only fair to note that some cuts have been made there already.

Also, why are only spending cuts mentioned when the discussion is the budget? Please don't tell me that if it's not spending cuts, i.e. if it's a tax increase, it doesn't count for budget discussions (and Keynesian economics, which is part of his discussion, does not make this distinction). Thus, note also that the American Taxpayer Relief Act (ATRA) added another half trillion in deficit reduction. Together, the $1.5 trillion in appropriations cuts, plus the $.5 trillion in tax increases in the ATRA, plus the $300 billion in interest savings amount to around a bit over $2.3 trillion in deficit reduction (see table 1 here). Once the economy can handle it, we need a bit more (though not everyone agrees) to stabilize the long-run picture, but to say we've made no progress at all is wrong and misleads about the urgency of finding further cuts. If people want more spending cuts, fine, we can debate that along with a debate over tax increases, and maybe even agree on cuts to defense and a few other areas. But in making the argument for an ideological position that government ought to be smaller, don't present the case as though nothing at all has been done to cut spending (and please don't hide the ideological call for a smaller government in a discussion about reducing debt). I was going to say that misleading people about the cuts we've made so far -- asking whether we'll ever be able to cut spending when we already have -- is no way to win an argument, but actually it is, and that's the problem.

Here's Tyler Cowen with more discussion of his column.

Here's Dean Baker with comments.

    Posted by on Sunday, February 3, 2013 at 10:06 AM in Budget Deficit, Economics, Fiscal Policy, Politics | Permalink  Comments (64)


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