- March 19, 2013
How the House Budget Would Boost the
Slowing federal spending will alleviate fears of higher future taxes, spurring more investment and consumption.
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.
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 The Affordable Care Act would be repealed.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…)