Tuesday, January 26, 2010

Discretionary Spending Freezes

The discussion about Obama's spending freeze has been fairly negative. The freeze excludes defense spending and entitlements--the bulk of the budget--and comes into effect even as the economy will still be hurting.

Still, it's worth pointing out that this idea would have been great to have about nine years ago. The graph to the left shows how non-defense discretionary spending--so excluding Homeland Defense, Veterans Affairs, and war spending--grew by 60 percent between 2000 and 2008. Despite Bush's reputation as a ruthless slash-and-burn conservative, (discretionary, non-defense) government spending exploded under his watch. The states, too, went on a binge--Mitch Daniels estimates that state spending rose by 6 percent annually in the past decade.

Both of these trends are unsustainable. It's not clear what exactly state and federal governments are doing that require their spending to rise faster than people's earnings.

So all else considered, I can't say this sort of cap is a bad idea. It would be even nicer still if we treated defense and entitlements as "real" spending too, but one can't have everything.

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