Tags: Boskin | spending | cuts | sequester

Former Bush Adviser Boskin: We Need More Spending Cuts

By    |   Tuesday, 05 March 2013 12:29 PM

While many experts are worried that the sequester is too onerous for the economy, Michael Boskin, former chairman of President George H.W. Bush’s Council of Economic Advisers, thinks they don’t go far enough.

“Will more spending today stimulate the economy?” Boskin asks. “Standard Keynesian models that claim a quick boost from higher government spending show the effect quickly turns negative. So the spending needs to be repeated over and over, like a drug, to keep this hypothetical positive effect going.

“The United States is heading in this wrong direction,” he writes in The Wall Street Journal.

Editor's Note: The Final Turning Predicted for America. See Proof.

“Even if the $110 billion in annual sequestration cuts are allowed to take place, the Congressional Budget Office projects that annual federal spending will increase by $2.4 trillion to $5.9 trillion in a decade.”

That rising debt “will eventually crowd out investment, as holdings of government debt replace capital in private portfolios,” says Boskin, now an economics professor at Stanford University. “Lower tangible capital formation means lower real wages in the future.”

Since World War II, Organization for Economic Co-operation and Development countries that have curbed their budget deficits without recession averaged $5 to $6 of spending cuts for each dollar of higher taxes, Boskin explains.

But the fiscal cliff deal amounts to $40 of tax increases for every $1 of spending cuts, he writes.

“Those who are attempting to gradually slow the growth of federal spending while minimizing tax hikes have sound economics on their side.”

As for the public, polls show that Americans approve of spending cuts in theory, but not when the cuts impact them.

“The American people want the federal government to reduce spending without touching actual programs,” William Galston a senior fellow in governance studies at the Brookings Institution, writes in a blog.

“Is it any wonder that long-term budget cuts have stalled and that even short-term fiscal issues tie Congress up in knots?”

Editor's Note: The Final Turning Predicted for America. See Proof.

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Economy
While many experts are worried that the sequester is too onerous for the economy, Michael Boskin, former chairman of President George H.W. Bush’s Council of Economic Advisers, thinks they don’t go far enough.
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2013-29-05
Tuesday, 05 March 2013 12:29 PM
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