NCPA - National Center for Policy Analysis

Federal Spending Undermines People's Freedom

May 18, 2015

Federal spending is rising, deficits are chronic, and government debt is piling up. Deficits are expected to begin soaring after 2017, and official projections show endless rivers of red ink over the long term unless policymakers enact major budget reforms.

Policymakers should downsize every federal department by eliminating the most harmful programs.

Spending cuts would make sense whether or not the government was running deficits. Cuts would spur economic growth by shifting resources from lower-valued government activities to higher-valued private activities. Cuts would also expand freedom by giving people more control over their lives and reducing the regulations that come with federal programs.

  • The Congressional Budget Office (CBO) projects that federal spending will rise from 20.4 percent of Gross Domestic Product (GDP) this year to 22.1 percent by 2025 under current law.
  • Over the same period, tax revenues are expected to rise from 17.7 percent of GDP to 18.3 percent. Despite growing revenues, the government is expected to run increasingly large deficits because of the rapid growth in spending.

Policymakers should change course. They should cut spending, eliminate deficits, and reform the tax code.

  • Congress could balance the budget by 2020 and generate growing surpluses after that. Spending would be reduced to 17.0 percent of GDP by 2025, almost one-quarter less than the CBO projection for that year.
  • Spending cuts would create budget room to repeal the tax increases from the 2010 health care law and to pursue other tax reforms.

Policymakers will have to make large spending cuts eventually, and the sooner the better to avoid accumulating more debt.

Source: Chris Edwards, "A Plan to Cut Federal Spending," Cato Institute, May 2015. 

 

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