Tuesday, December 8, 2009

Spending Our Way To Financial Security

From time-to-time over the years I've heard people complain that "The Government" is incapable of cutting its own spending. Once a government program is in place and the money allocated, the theory goes, it becomes almost impossible to cut it off down the road. Even during this Great Recession, supposed "spending cuts" touted by government officials usually tend to be mere reductions in the rate of growth of spending, when you look at the fine print.

This concern is becoming even more acute now, as the public debate on proposed health-care reform legislation increasingly focusses on the need for cost reduction, not just "bending the cost curve." Anyone who is skeptical about the ability of the Federal government to achieve that may look no further than the evening news last night. No sooner was it revealed that the estimated cost of last year's bank bailouts under the TARP program had now dropped by $200 billion to $141 billion (because banks have been repaying the loans more quickly), than Obama administration officials and other Congressional leaders began talking about how to spend some of this "savings." However well intended these proposals may be, they miss the point that when our Federal government is already laboring under a $1.5 trillion dollar budget deficit this year alone, this $200 billion estimated savings is not cash in our pocket. It means we might merely need to borrow a little less. (But even that's in jeopardy if the government adds more programs now, to spend some of this "savings.") Embedded below is 2 minute piece from the CBS Evening News last night about this.

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