As the economy grows each year the caps are supposed to stop Congress from increasing spending in line with it. Two-thirds of the planned savings are supposed to happen between 2017 and 2021; only a third is scheduled for the next five years.
That is implausible for two reasons. First, it assumes that future Congresses will abide by today’s promise to limit their spending and that representatives elected in 2016, 2018 and 2020 will happily slice ever deeper into the federal budget to fulfil it.
Second, because the deficit cuts build over time, by 2021 federal discretionary spending is supposed to fall to 5.4 per cent of gross domestic product. Pigs may also fly – but not if the research project to give them wings has to be funded from a federal budget of that size. Since 1971, with little variation depending on which party held power, discretionary spending has averaged 8.7 per cent of GDP.
The lowest level federal spending has hit in the past four decades was 6.2 per cent of output in 1999, as a decade-long economic boom headed towards its dotcom apogee and the peace dividend from cold war victory paid out in full.
Wednesday, August 3, 2011
Robin Harding in the FT echoes my thoughts, only he says it much better: