January 15, 2013

“Spending cuts” in Washington are not like actual reductions in spending

Filed under: Economics, Government, USA — Tags: , , , , — Nicholas @ 00:02

A. Barton Hinkle clues us in on how to save big in our budget plans:

Would you like to save $20,000 this year? Of course you would. Here’s how: Plan a month-long vacation to Disneyland, and budget $20,000 for the trip. Then don’t go. Presto! You just “cut” your family budget by 20 grand.

This sounds absurd — because it is. Yet that is precisely how Washington operates.

A couple of weeks ago, President Obama claimed on national TV that “I cut spending by over a trillion dollars in 2011.” But as many people quickly pointed out, in fiscal 2011 federal spending rose from $3.4 trillion to $3.6 trillion. Nevertheless, the President repeated the claim on Jan. 2, insisting that “last year we started reducing the deficit through $1 trillion in spending cuts.”

What he meant was that in 2011 he agreed to “cut” spending in future years, in much the same way canceling a future vacation “cuts” your own budget. It is a fiction necessary to sustain the president’s pose that he wants a “balanced approach” to deficit reduction.

That is also nonsense. Take the midnight deal to avert the fiscal cliff, which the White House says will reduce the deficit $737 billion. Of that amount, $620 billion comes from raising taxes. Some balance.

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