‘Skinny Budget’ Outline Is the Right Stuff

Published April 3, 2017

Taxation, along with its mirror images of spending and appropriations, produces consequences that affect everyday people. Reducing spending and tax burdens is a moral, compassionate move for lawmakers and the president to take.

President Donald Trump’s proposed “budget outline,” offered in March, significantly departs from decades of business-as-usual government appropriations, refocusing the federal government’s priorities on core functions and getting government out of the way of consumers and producers.

Trump’s so-called “skinny budget” shifts government spending away from discretionary spending, an optional part of the federal appropriations process. Trump also suggests closing down questionable government offices, such as the U.S. Institute of Peace, a “peace academy” designed to be a Bizarro-world, pacifist alternative to government military academies, such as West Point and the Citadel.

Historically, a president’s budget proposal is considered “dead on arrival” when given to lawmakers. Throughout former President Barack Obama’s reign, for instance, his proposals were generally ignored or met with near-unanimous bipartisan rejection. Many of Trump’s proposals, however, have received significant praise from fiscally minded legislators in Congress. Even the notion of a president proposing zeroing-out wealth transfers from taxpayers to government cultural programs, such as the National Endowment for the Arts (NEA), is refreshing.

Currently, NEA annually receives $146.2 million in taxpayer funds, or about 0.001 percent of all federal spending. To compare, individuals use Kickstarter, a popular website facilitating the transfer of private donations for artists and other creative individuals, to provide more than $250 million in “arts funding” every year. One website, without any government mandates, provides more cultural enrichment to the people than the massive federal government’s chief arts program.

In addition to the benefits of cutting redundant or unnecessary programs in the name of efficiency, reducing optional spending makes real dollars-and-cents sense for everyday Americans. Increased government spending leads to increased government taxes, which means more of people’s money goes to the government. Transferring increasing amounts of money from Americans’ wallets to the U.S. Treasury causes less money to be available for goods and services, now and later.

Instead of promoting economic growth, as politicians often claim, the crowding-out effect of government spending sprees stunts economic growth. By consuming people’s money now, taxation encourages people to work less, earn less money, invest less money in individuals and businesses seeking capital for expansion, save less money for future purchases, and take fewer entrepreneurial risks. All these effects on individuals, in turn, can burden wealth creation on a national scale.

In 2016, Jean-Marc Fournier and Asa Johansson, two economists with the Organization for Economic Cooperation and Development — an international home for pro-government policies, if there ever was one — studied data from 35 countries and arrived at an unsurprising, facts-based conclusion: big government slows down the economic machinery.

“Larger governments are associated with lower long-term growth,” Fournier and Johansson wrote. “Larger governments also slow down the catch-up to the productivity frontier,” or the maximum, optimal economic potential.

The culprit, Fournier and Johansson write, is government spending. “Public spending on subsidies also reduces growth. Public subsidies that do not correct market failures can distort the allocation of resources and restrict competition. For example, R&D subsidies may finance projects that have lower returns than other projects, or lead to duplication or relabelling of existing non-R&D activities as R&D investment. Also, public subsidies targeted at declining industries, such as agricultural subsidies, may preserve low-productivity enterprises and postpone the necessary reallocation of resources to a more productive use.”

Preventing people from allocating their money as they see fit and allocating other people’s money to promote the government’s best interests causes everyone to have fewer dollars in their own pockets. Likewise, using others’ money to “protect” people — likely classes of people favored by the government, for whatever reason — from incentives that would otherwise encourage them to seek gainful employment in sectors currently in need of laborers, effectively pays people to remain trapped in declining, obsolete occupations and decaying towns.

Reducing spending — in some cases, all the way down to zero — on underperforming or duplicative government programs opens a path for renewed and increased prosperity for all. Everyone has a chance to succeed when government gets out of the way.

Although Trump’s “skinny budget” may not be passed into law verbatim, lawmakers should work with the president to do the right thing and keep intact the intent and spirit behind the budget outline.

[Originally Published at American Thinker]