John Taylor

A Credible First Step Toward a New Budget Strategy?

Last week the Senate voted down the House proposal (HR1) to slow the growth of spending in the current fiscal year 2011. Now alternative plans are being laid to slow the growth of spending in 2011 by roughly the same amount as HR1, possibly through a series of shorter continuing resolutions prorated at $2 billion per week. Simultaneously the House is developing a budget resolution for 2012 with the aim of reducing spending growth and the deficit in later years. Hence, the 2011 budget actions should be viewed as a first step of a longer term budget strategy. This first step is crucial. It establishes the credibility of the whole strategy.
Would a step any smaller than HR1 be credible? The following chart tries to present the basic facts in a simple way. It shows federal outlays from FY2000 to FY2011 as a share of GDP with and without HR1. The data are from CBO.
First note the remarkable explosion in government outlays in the past few years. In 2007 outlays were 19.6 percent of GDP. In 2011 outlays will be 24.7 percent of GDP.

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