Tuesday, October 25, 2011

Perry’s Cut, Balance and Grow

To no one’s surprise, Rick Perry proposes another variation of the Republican dream of cutting taxes for high income individuals and still balancing the budget somehow. I’ll leave to others to have fun with his tax proposals as we focus on this:

We should start moving toward fiscal responsibility by capping federal spending at 18% of our gross domestic product, banning earmarks and future bailouts, and passing a Balanced Budget Amendment to the Constitution. My plan freezes federal civilian hiring and salaries until the budget is balanced. And to fix the regulatory excess of the Obama administration and its predecessors, my plan puts an immediate moratorium on pending federal regulations and provides a full audit of all regulations passed since 2008 to determine their need, impact and effect on job creation.

Where exactly is Perry proposing to slash Federal spending again? The Government Accountability Office shows that spending on Social Security and major health care entitlements were about than 10 percent of GDP in 2010 and will grow to 13.5 percent of GDP by 2030 even if we don’t repeal ObamaCare under the best of circumstances. If the Republicans have they way in their zest to gut Obamacare, health care entitlement spending will be even higher.

Federal purchases of goods and services were over 8.4% of GDP in 2010. Admittedly Federal spending as a share of GDP has been inflated by the recession but if we go back to 2007, Federal purchases were almost 7% of GDP of which 4.7% of GDP went to national defense. So even if we eliminated nondefense Federal government purchases somehow, the combination of defense spending, Social Security, and major health care entitlements would exceed 19% - even under the best of circumstances.

Of course – the notion of cutting government spending to get us out of a recession – or expansionary austerity - seems to be based on “some shoddy scholarship”.

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