MBA 6008

MBA 6008

´╗┐Unit 5 Discussion 1
Fiscal Policy
Three reasons why the government should reduce federal spending:
Spending cuts would make sense whether or not the government was running deficits. Cuts would spur economic growth by shifting resources from lower-valued government activities to higher-valued private activities. Cuts would also expand freedom by giving people more control over their lives and reducing the regulations that come with federal programs.
In recent decades, the federal government has expanded into hundreds of areas that should be left to state and local governments, businesses, charities, and individuals. That expansion is sucking the life out of the private economy and creating a top-down bureaucratic society that is alien to American traditions. Cutting federal spending would enhance civil liberties by dispersing power from Washington.
The Congressional Budget Office (CBO) projects that federal spending will rise from 20.4 percent of GDP this year to 22.1 percent by 2025 under current law.1 Over the same period, tax revenues are expected to rise from 17.7 percent of GDP to 18.3 percent. Despite growing revenues, the government is expected to run increasingly large deficits because of the rapid growth in spending.
Policymakers should change course. They should cut spending, eliminate deficits, and reform the tax code. The plan presented here would roughly balance the budget by 2020 and generate growing surpluses after that. Spending would be reduced to 17.0 percent of GDP by 2025, almost one-quarter less than the CBO projection for that year. Spending cuts would create budget room to repeal the tax increases from the 2010 health care law and to pursue other tax reforms.
Policymakers should not think of spending cuts as a necessary evil needed to reduce deficits. Rather, the U.S. government's fiscal mess is an opportunity to make reforms that would spur growth and expand individual freedom.

There are two major reasons why less government...

Similar Essays