I testified to the Senate Finance Committee today regarding federal spending and debt.
Here are some of the points I made:
- Last night, President Obama called for a “balanced solution” to our fiscal problems, including tax increases and spending cuts. However, CBO projections do not indicate that we face a “balanced” problem. Instead, projections show that the deficit problem is caused all on the spending side of the budget.
- The United States has sadly become a big‐government country. Until recently, government spending in this country was about 10 percentage points less than the average of OECD countries. That smaller‐government advantage has now shrunken to just 4 percentage points.
- In recent years, policymakers have given us the largest deficit‐spending “stimulus” since World War II, yet we are suffering from the slowest economic recovery since World War II.
- Rising government spending suppresses GDP because the government’s “leaky bucket” gets leakier and leakier as spending increases.
- Leaders in Congress are talking about cutting spending by $3 trillion over 10 years, or roughly $300 billion per year. The result would be that spending would rise from $3.6 trillion this year to $5.4 trillion in 2021, rather than the currently projected $5.7 trillion. That would be only a 5 percent cut. Interest savings would reduce spending a little more — but, come on Congress, you can do better than that!