New School Politics

Gridlock over federal budget

Ryan | 9 10 2007

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Its nice to see a battle over spending for once in Washington. Surprisingly enough its the Bush White House who is trying to check Congress’ urge to spend. Block grants are the main area over which this disagreement is occurring:

…differences over how much federal aid should be provided to cities and states is only one part of the $22-billion chasm that divides congressional Democratic leaders and the White House.

Despite the fact that $22 billion is a large amount of purchasing power, in the context of our whole economy it does not make a dent in government spending. Additionally, cutting federal aid expenditures will do little to the Federal budget on the whole. If a real initiative to reduce the size of government existed it would aim at reforming entitlement spending which account for about 2/3 of total spending.

2007 Federal Budget

Moreover Social Security and Medicare especially are growing at a rate that make them grotesque liabilities in the near future.

[According to] Congressional Budget Office that Social Security and Medicare outlays will rise from 8.5 percent of annual economic output to 10.5 percent in 2015 and 15 percent in 2030.

These costs, in turn, would force the United States to keep borrowing, pushing the ratio of publicly held federal debt from its current level of 37 percent of the economy to about 100 percent in 2030, a level reached in the past only during World War II.

A wise first step would be to curb the growth of entitlements by tying it closer to an inflation index instead of a GDP index. Second would be to cut entitlements in general. Lastly it would be most wise, although most unlikely, to move towards ending these absurdly large bureaucracies.

Nevertheless, courage and reason are in short supply among politicians and I surmise that very few would sacrifice their political lives to initiate such wise reforms.