Why slashing federal budget might not stick

The cuts being envisioned by House Republicans - and even by the White House - would reduce the U.S. budget to the smallest share of the economy since at least the Eisenhower administration. In the current slow-growth, high-debt climate, it's conceivable that the budget hawks will have their way. But nothing in politics lasts forever. Within a few years, it's a good bet that solid growth and smaller deficits will be restored. The question is what happens then? From NYT columnist Eduardo Porter:

The numbers for civilian discretionary spending shrink so much under both the president's and the House Republicans' budget proposals that even those who wrote them seem to have a hard time believing they will come true. Rather than specify how all the required cuts would affect spending on specific programs, like housing assistance, Pell grants or the National Science Foundation, the budget writers put hundreds of billions of unspecified savings under a hazy budget line called "allowances" -- which essentially means cuts to be determined later, in the course of the decade. They are what Richard Kogan, a tax expert at the Center on Budget and Policy Priorities, calls "the magic asterisk." President Obama's budget has almost $200 billion worth of allowances. The House Republican proposal included almost $1 trillion. "In my personal opinion, the defense and nondefense spending caps won't hold until 2021," Mr. Kogan said. "At some point the deficit will look small enough and the pressure to provide services and benefits will appear large enough that Congress will find ways around them."


Today, our public finances are caught between these two appetites: our preference for lower taxes and our unwillingness to accept cuts to entitlements set up in our bygone Big Government era. The average federal income tax rate is at its lowest in more than 30 years. Still, nearly half of all Americans say their income taxes are too high. And most Americans do not want government to cut spending on Medicare or Social Security. Unwilling to confront voters with the tension between these choices, it is perhaps natural that our leaders would take the ax to discretionary spending outside of defense, the easiest part of the budget to cut. It might also explain why they are so loath to tell us what they are doing. But this reticence does not make for a fruitful debate about the role of government in our future.

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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
Mark Lacter, business writer and editor was 59
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