Category Archives: Spending

A Balanced Budget Isn’t the Primary Goal

Over at the Daily Caller, Wayne Crews and I take a look at Rep. Paul Ryan’s proposed budget, the Path to Prosperity. While it would improve on the Bush-Obama status quo, there is room for improvement:

We’re for a balanced budget, and maybe even an amendment. But we’re more for the principle of limited government. The Ryan budget’s main deficit-reducing tactic is to increase federal spending by 3.4 percent per year instead of the currently projected 5 percent. Again, this is certainly an improvement. But after 12 years of breakneck Bush-Obama government growth, it is well past time for actual cuts, in which spending goes down.

Since the Ryan budget relies on economic growth to generate more tax revenue, we also suggest a few reforms that would help make that possible.

Read the whole thing here.

Should Agencies Be Self-Funded?


In Monday’s Politico, the Systemic Risk Council’s Brooksley Born and William Donaldson argue the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) should be self-funded – that is, they should charge enough fees to the entities they regulate to cover their entire budgets.

Current fiscal uncertainty, headlined by the sequester, means these agencies’ missions are potentially at risk if they depend on uncertain Congressional appropriations. “It is both wrong and dangerous to impose funding cuts on these agencies,” they argue.

We will leave aside the fact sequestration means smaller spending increases and not actual cuts, where spending goes down. And I will leave it to my colleague John Berlau to analyze how effectively the SEC and CFTC were pursuing their missions before sequestration.

The point is self-funding is an interesting proposal – closer to the “user pays” principle than the current annual appropriations model. But ultimately, it is still a bad idea. The biggest reason is that it violates the separation of powers. If an agency is doing a poor job pursuing its mission, it needs to be held accountable; there is a reason Congress holds the power of the purse.

Given the amount of wealth in the investment sector, the SEC and CFTC are especially prone to regulatory capture. If those agencies are self-funded, it becomes much more difficult for Congress to discipline them for inevitable misbehavior. Similarly, if an agency engages in regulation without representation and issues regulations without authorizing legislation from Congress, it is much harder to take them to task. Self-funding removes a crucial disincentive to bad regulatory behavior. And as any economist, public choice or otherwise, will tell you, people respond to their incentives.

Born and Donaldson want the SEC and CFTC to become self-funding because the government’s fiscal troubles are putting the agencies at risk of being cut. I propose they treat the root problem of fiscal incontinence rather than its symptoms.

Both legislature and executive should look long and hard for places to cut back unnecessary or low-priority spending. Trillion-dollar budget deficits are simply unacceptable, especially when tax revenues are at record-setting levels. Not only has the Bush-Obama spending binge put future generations at risk, it is also putting some of the government’s highest-priority regulatory initiatives at risk, right now. And symptomatic relief won’t cut it.

There Is Nothing Left to Cut

The White House spends about $277,000 per year on staff calligraphers.

Sequester Symposium

My colleague John Berlau was kind enough to cite me in his contribution to a National Review symposium on the sequester. You can read his otherwise-excellent article here.

Hoover Didn’t Cut Spending

Most people, including Washington Post columnist Harold Meyerson, believe that Herbert Hoover’s laissez-faire budget cuts worsened the Great Depression. I have a letter in today’s paper pointing out that that isn’t true:

Harold Meyerson’s Feb. 27 op-ed column, “The perils of austerity,” claimed that Herbert Hoover cut spending. Hoover actually increased nominal spending by 48 percent in just four years. When he took office, the federal budget was $3.1 billion. His last budget, fiscal 1933, was $4.6 billion. Since there was roughly 10 percent annual deflation during that time, Hoover doubled federal spending in real terms. Even inside the Beltway, that does not qualify as a cut, let alone austerity. Mr. Meyerson should look elsewhere for arguments against sequestration.

Ryan Young, Washington
The writer is a fellow at the Competitive Enterprise Institute.

For more on how Hoover’s reputation is almost exactly opposite the policies he actually enacted, see Steve Horwitz’s excellent paper, “Herbert Hoover: Father of the New Deal.”

Sequestration: Not a Cut


A very important point is being almost entirely overlooked in the sequestration debate: sequestration wouldn’t actually cut spending. As I’ve pointed out before, a cut is when spending goes down. Under sequestration, projected spending increases would merely be a little smaller. Federal spending is set to go up every year through at least 2021, sequestration or not.

It says a lot about the power of political inertia that something as inconsequential as sequestration generates months of dire headlines and heated debate. This is not a cause for optimism. If you prefer a slightly sunnier view, read Peter Suderman’s insightful Hit & Run post (from which I also poached the above chart).

There Is Nothing Left to Cut

The State Department has created a time travel-themed video game.

You can play it here.

CEI Podcast for November 13, 2012: The Fiscal Cliff at Home and Abroad

Have a listen here.

Phrases like “austerity” and “the fiscal cliff” are dominating news coverage not just here in the U.S., but in Europe as well. Warren Brookes Journalism Fellow Matthew Melchiorre explains what both sides of the Atlantic need to do to avoid fiscal catastrophe.

CEI Podcast for September 20, 2012: The Economic Development Administration

Have a listen here.

CEI Policy Analyst David Bier is author of the new study “The Case for Abolishing the Economic Development Administration.” The agency’s impact goes well beyond its modest $286 million budget. On average, the EDA only pays for about one seventh of its projects. The rest of the burden falls on state and local governments and the private sector. Those projects include $2 million for a wine-tasting room, $35 million for a convention center that is projected to lose money, and other boondoggles.

There Is Nothing Left to Cut

The city of Detroit’s water and sewerage department employs a horseshoer. He makes “$29,245 in salary and about $27,000 in benefits”.

The department does not use any horses.