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Budget Problems Continue in Washington

April 1, 2013 in Economics

By Tad DeHaven

Tad DeHaven

The President on Tuesday signed the continuing resolution that funds the government through September and (gasp) keeps the sequester cuts intact. Now that it appears sequestration isn’t going away (and yet the earth continues to spin merrily on its axis), the focus should be on how this small step might be extended.

Unfortunately, the reaction to Paul Ryan’s relatively modest budget indicates the fight for smaller government will continue to be an uphill battle in the current political climate. The Ryan budget has brought predictable condemnation from the political left. Sen. Harry Reid called it “extreme,” and the New York Times called it “the worst of the Ryan budgets.” The plan’s sin: restraining the growth of federal spending to 3.4 percent instead of 5 percent.

Serious policymakers need to start explaining to the American people how the federal government doing less will do more to enhance their personal and economic well-being.”

While there are some of us that don’t feel the Ryan budget goes nearly far enough, it was never going to become law as is with a Democratic White House and Senate. But here’s the important question: does sequestration and Ryan’s follow-up give proponents of limited government a reason to be optimistic?

Currently, the answer is no.

Sequestration has yet to cause a public revolt and the markets have treated it with indifference throughout. Although the cuts that happened under sequestration are hardly an occasion for a victory lap, they are a small and welcome bit of evidence that government can spend less without society as we know it coming to an end.

Sequestration reduces federal spending by $44 billion this year, which is a relatively small sum considering that total spending will be around $3.5 trillion. The budget deficit alone is projected to be around $850 billion. That means to balance the budget this year, the spending cuts would have to be almost 20 times larger. However, sequestration barely scratches entitlement programs, which dominate the federal budget and are the source of our long-term fiscal problems. And because it doesn’t actually terminate any agencies or programs, spending can be restored in the future.

So in the big picture, sequestration hasn’t changed all that much. Federal spending is still on a dangerous upward trajectory. Unfortunately, while there is much talk about the need to reform the welfare state in order to make it more affordable, the underlying desirability of …read more
Source: OP-EDS

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