Gov’t aims to cut federal spending by 5%
by John Dimsdale
White House budget planners are working to trim 5 percent of federal spending by 2012. Departments and agencies have been asked to identify their lowest-performing programs.
Instead of imposing budget cuts from the top down, White House officials want agencies to come up with their own ideas for trimming the fat. Maya MacGuineas of the Committee for a Responsible Federal Budget says it’s a good idea to turn to the folks on the front lines. “They know the programs the best. They have the hands-on experience with them. And I think they’ll come up with an awful lot of good ideas of programs that are outdated, inefficient and really don’t need to be there anymore.”
The president’s budget director hopes to see a lot of wasteful duplication on the chopping block, such as the elimination of 40 programs to promote job training. But Howard Rosen with the Trade Adjustment Assistance Coalition, which advocates for worker retraining, says you’re not going to balance the budget by going after small programs. “The reason they’re small is they don’t have a very loud constituency and so it’s very easy to cut these programs.”
The inspiration for making agencies cut the budget came from the Defense Department, which has turned to the military bureaucracy to identify savings.
Bernanke sees lackluster recovery
Meanwhile, Federal Reserve Chairman Ben Bernanke told a House committee today that economic growth will continue, despite a struggling housing and job market, government spending, and European debt that he says will only affect our country modestly.
“The federal budget appears to be on an unsustainable path,” Bernanke said. “Among the primary forces putting upward pressure on the deficit is the aging of the U.S. population, as the number of people expected to be working and pyaing taxes into various program is rising more slowly than the number of people projected to receive benefits.”
Jill Schlesinger, editor-at-Large at CBS’s MoneyWatch.com, says U.S. debt is forecast to rise from 53 percent of the economy to 90 percent. “It affects us basically by saying our bond yields will go up, it will be more expensive to do stuff,” she says.
Linked to the budget, of course, is national debt. There was a report out saying that the size of our debt is creating a major drag on our economy. This is important because by some accounts a 1 percent increase in GDP can create almost a million jobs. How concerned should we be about our growing debt?
A Treasury report says U.S. debt will top $13.6 trillion this year and $19.6 trillion in 2015, which Bernanke didn’t expound on very thoroughly. “Clearly we do need some fiscal planning right now, but Bernanke was quite short on details,” Schlesinger says.
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