Newspaper article St Louis Post-Dispatch (MO)

For True Budget Reform, Congress Should Cut Spending First

Newspaper article St Louis Post-Dispatch (MO)

For True Budget Reform, Congress Should Cut Spending First

Article excerpt

As House and Senate conferees gather to reconcile their budget resolutions, they should heed what has been called the First Law of Holes: When you're in a hole, stop digging.

Bad fiscal management has put the country in a huge deficit hole - a national debt now exceeding $4 trillion, three-quarters of it borrowed in the past decade and a half. Even so, the striking feature of the great budget debate this spring, audible behind all the expansive talk about balancing the budget in seven years, is the sound of more digging.

The trickery or self-deception - whatever it is - has been widely noticed. But the most trenchant discussion I've seen is in a pamphlet issued by the Committee for Economic Development, a nonprofit study and research group representing the views of major American corporations. "Cut Spending first" explains in clear terms that excess borrowing should be ended before taxes are cut.

Defenders of tax cuts claim they will "pay" for the cuts by cutting spending equivalently. But that long-range promise is made dubious by an old fiscal trick - "back-loading" the tax cuts in the budget cycle, so that the most severe revenue losses come after five years and in effect are not counted. Sugar now, diet later. This, says Committee for Economic Development, puts another "fiscal time bomb" in the budget.

These self-defeating budget plans are rooted in economic misconceptions. What has happened in the past 20 years is best described as capital underinvestment, or as economists say, "dissaving" - the transfer of national wealth from savings to consumption: "The national saving available for creating new capital has collapsed, falling from 8 percent and 9 percent of national income in the 1950s, 1960s and 1970s to about 4 percent in the 1980s and 2 percent in the 1990s."

Meanwhile, the federal government is borrowing seven of every 10 dollars of available private savings. You see this trend in the budget itself, where long-term investment in deferred infrastructure maintenance has been squeezed to finance swelling entitlement payouts.

The side effects are disturbing: "For the first time in our history, a majority of young male workers can expect to earn less than their fathers. …

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