27 February 2013

Spending: Less is More

FT | Jeffrey Sachs | Obama has always planned to slash spending
Really? News to me! Let's find out what I've been missing.
Each year he has put a budget on the table. Each year that budget has called for a sharp decline in discretionary spending as a share of gross domestic product in 2012 and later years.
Oh. Sachs left out the very important "...relative to total measured economic production, once you ignore the 'welfare' side of our 'welfare & warfare' system" caveat from his title. Not as snappy with that in there, but far more accurate.

Moving on...
The administration is now vigorously blaming the Republicans for the pending cuts. Yet the level of spending for fiscal year 2013 under the sequestration will be nearly the same as Mr Obama called for in the draft budget he presented in mid-2012.
Very interesting.
In [Obama's 2009 budget] plan, discretionary outlays (both defence and non-defence) would rise temporarily from 7.9 per cent of GDP in 2008, the final full year of George W. Bush’s presidency, to 8.8 per cent in 2009 and 9.8 per cent in 2010, mainly because of the stimulus spending and the surge in Afghanistan. But then discretionary outlays would decline to 8.7 per cent in 2011, 7.8 per cent in 2012, 7.4 per cent in 2013 and to just 6.3 per cent in 2019, the final year of the 2009 10-year budget framework.

So what "Obama has always planned to slash spending" really means is "Obama has always promised to slash spending later, especially once he was out of office, but proposed spending more right now, and even then to get to lower levels in the future you need to assume a fast-growing economy and ignore the plurality of spending which is labeled 'mandatory'."

These words are tricky things. When I say something like "I'm going to eat less tonight" what I mean is "I'm going to eat less tonight." When a politicians says "I'm going to eat less tonight" what he apparently means is "I'm going to eat more than I did last night, but less as a proportion of all the food in the pantry, plus I'm not going to count any of the meat or cheese or bread I eat, and also I'm going to have a gigantic lunch and snack before dinner."

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