2010 June 08 Tuesday
Big Spending Cuts For UK Government?

New British Prime Minister David Cameron is going to try to shift Britain off the road to financial ruin. Meanwhile, the Obama Administration and Congress are putting the pedal to the metal as they speed down that road the Brits are trying to get off.

Prime Minister David Cameron's government has been selling the current recession as a once-in-a-generation chance to reduce the role of government in British society and get control of an annual budget deficit that has grown to about 12 percent of gross domestic product – about four times the level that the European Union deems safe. The government has promised that spending cuts are being considered everywhere, from defense to schooling.

Whether Cameron's minority government can pull this off remains to be seen. But the Brits seem to realize they've got to cut spending or face ruin. So they've got that big advantage over, say, the people inside the Washington DC beltway or the Americans (notably retirees) who are sucking off the government teet.

In the Wall Street Journal Fred Barnes argues that if the Republicans gain control of the House of Representatives the result for the nations finances could be quite salutary. Bill Clinton showed some spending constraint once the Democrats lost in Congress.

Here are the numbers: Average nondefense discretionary outlays per year under Nixon and Ford increased 39.7% over those of Presidents Kennedy and Johnson, followed by another 39% boost under Mr. Carter, a 14% drop under Mr. Reagan, a 12% jump under the first Mr. Bush, a 7.6% hike under Mr. Clinton, and a 31.2% increase under the second Mr. Bush.

Only four times in the past half century have nondefense discretionary expenditures in real terms decreased in a two-year congressional cycle. And only Reagan's first Congress—controlled by Democrats—cut more (15.5%) than the Republican Congress that Mr. Clinton faced after the 1994 election (3.7%). The other two reductions came under Reagan (2.5%, the 1986-87 budgets) and the younger Mr. Bush (.01%, the 2006-07 budgets).

America has changed demographically so much since the Reagan era that financial rectitude just might not be in the cards. A sovereign debt crisis combined with a stagnant economy seems a more likely outcome. I expect Peak Oil wil assure this outcome.

Share |      By Randall Parker at 2010 June 08 10:47 PM  Economics Government Costs


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