Archive for the ‘2014’ Category

HOW THE HOUSE BUDGET WOULD BOOST THE ECONOMY

Wednesday, March 20th, 2013

 

The Wall Street Journal

  • March 19, 2013

How the House Budget Would Boost the

Economy

Slowing federal spending will alleviate fears of higher future taxes, spurring more investment and consumption.

By JOHN F. COGAN AND JOHN B. TAYLOR

Messrs. Cogan and Taylor are professors at Stanford and senior fellows at the Hoover Institution. The macroeconomic model used in their research was published last month in the Journal of Economic Dynamics and Control, with updated results at Hoover’s Economic Policy Working Group website.

EXCERPT FROM THIS ARTICLE: According to our research, the spending restraint and balanced-budget parts of the House Budget Committee plan would boost the economy immediately. With the Budget Committee’s proposed tax reform included, the immediate impact would be even larger. The entire plan would raise gross domestic product by one percentage point in 2014, equivalent to about a $1,500 increase for each U.S. household. Ten years from now, at the end of the official budget horizon, we estimate that the entire plan would raise GDP by three percentage points, or more than $4,000 for each U.S. household……

The reductions in the growth rate of spending are to be achieved primarily through entitlement reforms. The Affordable Care Act would be repealed. Medicaid and food-stamp administration would be turned over to the states. Medicare would be fundamentally reformed. Anti-fraud measures would be applied to federal disability programs. Among the major entitlement programs, only Social Security would remain unchanged; this is a deficiency in the plan. As for discretionary spending, the House budget plan would provide for only slight reductions from the levels that are set by the budget sequester.

This week the House of Representatives will vote on its Budget Committee plan, which would bring federal finances into balance by 2023. The plan would do so by gradually slowing the growth in federal spending without raising taxes.

Still, the plan has been denounced by naysayers who assert that it would harm the economic recovery and that, at the least, any spending reductions should be put off until later. This thinking is just as wrong now as it was in the 1970s. (more…)

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OBAMA CUTS THE MILITARY INSTEAD OF ENTITLEMENTS

Friday, January 6th, 2012
The Wall Street Journal

  • JANUARY 6, 2012

Obama’s Defense Drawdown

Entitlements begin to crowd out the American military.

  • A QUOTE FROM PRESIDENT EISENHOWER – ” WEAKNESS IN ARMS, OFTEN INVITES AGGRESSION.”
  • President Obama yesterday put in a rare appearance at the Pentagon, flanked by the four service chiefs and his Secretary of Defense. Saying that now is the time to cash in a peace dividend, he unveiled plans for a significantly slimmed-down military. This dance was choreographed to convey strength. Everything else about it showed how domestic entitlements are beginning to squeeze the U.S. military.

This self-inflicted attack on defense comes at a strange time. True, the U.S. cut deeply after World War II, Korea, Vietnam and the Cold War—and in each case came to regret it soon enough when new threats emerged. But peace doesn’t characterize our time. Mr. Obama yesterday wielded his familiar line that “the tide of war is receding,” which will please his antiwar base but will come as news to the Marines in Afghanistan or the Navy ships patrolling the tense Strait of Hormuz.

The Pentagon shouldn’t be immune to fiscal scrutiny, yet this Administration has targeted defense from its earliest days and has kept on squeezing. The White House last year settled with Congress on $450 billion in military budget cuts through 2021, on top of the $350 billion in weapons programs killed earlier. Defense spending next year will fall 1% in nominal terms. The Pentagon also faces another $500 billion in possible cuts starting next January under “sequestration,” unless Congress steps in first.

Taken altogether, the budget could shrink by over 30% in the next decade. The Administration projects outlays at 2.7% of GDP in 2021, down from 4.5% last year (which included the cost of Iraq and Afghanistan). That would put U.S. outlays at 1940 levels—a bad year. As recently as 1986, a better year, the U.S. spent 6.2% of GDP on defense with no detrimental economic impact.

What’s different now? The growing entitlement state. The Administration is making a political choice and sparing Social Security, Medicare and Medicaid, which are set to hit nearly 11% of GDP by 2020. And that’s before $2.6 trillion for ObamaCare, which will surely cost more.

1defense

Associated PressPresident Barack Obama speaks at the Pentagon.

(more…)

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