Tuesday, October 4, 2011

The myth of spending cuts

One of the major positions of the modern conservative party is that spending cuts are the only way to balance budgets. They won't consider any tax rate increases (at least, not on the wealthy -- they have no problem raising the poor's taxes), and they say that only by reducing size of government will we be able to stimulate job growth and economic prosperity.

There are quite a few problems with this. One of the major ones is that cutting spending at the federal level does not necessarily mean that those costs disappear. Instead, they are relegated elsewhere, particularly to those who pick up the slack that is left behind by the programs that see their funding slashed. Sometimes, like when a program or department is redistributed to the private sector, those costs are taken up by companies who are there to serve those needs. This is what happened with the private prison system. In other places, those costs are relegated to the consumers and citizens that use the programs.

This last point is one that particularly irks me, considering the things that have been done in the name of "cutting the budget." For example, the GOP has targeted the fund that helps poor women get health services, saying that this will help balance the budget. As I've said in a previous post, the GOP tends to target the programs that have the least amount of impact on the overall budget because they happen to be the programs the least agree with. Unfortunately, this move would actually cost America more money by shifting those costs to individuals and medicaid.

The truth is, spending cuts harm the economy because they tend to harm the people most dependent on the government. If we require the poor to take more and more of their own costs of living, that leaves less and less money for them to reinvest in the economy. This is the largest group of spenders in America, and so getting them to spend their money should be a top priority to getting the economy moving. Instead, the GOP is looking to cut the programs that most benefit them, causing more and more of the burden to be placed on those who can least afford and on those who we need most to help our economy turn around.

Instead of spending cuts, we need revenue increases. This means raising taxes, even if only temporarily, on the wealthy and on businesses. Closing tax loopholes that are targeted to the wealthy and to businesses is also a good way of raising revenues. Once the government has more revenue, it can start funding those programs that most benefit the poor at the levels they need to be funded. The main reason so many things like medicare, medicaid, and education are failing is because they don't have the funding due to spending cuts in these areas. If we restore that funding, they will operate better, and lift some of the burden from our most vulnerable citizens.

Once we've done that, those citizens will automatically have more money to spend, which they will. More money spent equals more demand, which means more jobs, and so on and upward. By helping one group, just one group, start the process, the effect can spread through the economy and get things going in the right direction.

So, there is no such thing as spending cuts, just like there is no such thing as a job creator that failed to create jobs because of the tax burden or excessive regulation. Instead of cutting spending, we need to raise revenues and then streamline and reconfigure our federal government so that it runs more efficiently. Efficiency in government will save more money in the long-run than cutting spending, because efficiency does eliminate costs while "spending cuts" doesn't. It's possible, and in all likelihood necessary to our economic future.

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