This week’s reading focused on the politics behind the desire to balance budgets which is particularly relevant in the wake of this past week’s State of the Union Address and our current economy which faces a budget deficit in the trillions. One of the proposed solutions to combat the growing deficit is to implement a three-year spending freeze. How will this affect companies that rely on federal spending or contracts to keep their doors open during the recession?
The federal government historically has been one of the remaining spenders or buyers of goods during economic hardship. Many of the contractors I deal with in my job are still operating due to federal government contracts for equipment and services that support national defense and security. JLG Industries, which has local manufacturing plants in both Shippensburg and McConnellsburg, has faced economic uncertainties over the last several years. However, for the time being, they are able to continue to manufacture products because of Department of Defense contracts and continue to provide jobs in their communities.
While the administration’s intent is to not freeze spending for defense and national security, I would imagine that other industries that rely on federal agency contracts will be negatively affected by the proposed spending freeze. The freeze will also likely impact educational programs that are already underfunded at the state and local levels.
I’m certainly not an economist and I can’t claim to understand exactly how the proposed budget freeze will affect the economy. And I understand the public’s perception is that government spending is out of control. Maybe we will be able to look back and say that it was the best plan of action for the nation under the current circumstances. I suppose I just don’t understand how a spending freeze for certain federal agencies will make much of a difference when programs that depend on federal spending will be adversely affected. Especially when we consider that the entitlement spending will continue to increase in the coming years. There is still a need to reform Social Security and Medicare spending, but very little attention has been given to those issues lately.
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I agree with much of what is stated here. I read something early last week that said that the spending freeze will only amount for a tiny sliver of the overall budget even though it was in the "millions". It seems that spending is running wild these days and congress is not working together to rein in control, or possibly things are so far gone no one knows what to do. I think this weeks reading in the Wildavsky book was very relevant to the current state of budget affairs. The book talked about how both sides were holding out and the president was vetoing or threatening to veto.
ReplyDeleteI personally don't feel that this spending freeze will have any effect on saving the American tax payer any money. I also can't say for sure as you stated whether or not it would hurt the economy but taking money from certain programs. I think this administration and congress need to re-evaluate the ways to stimulate this economy and while being fiscally responsible is a good start working together for the good of the American people and not for political advancement is what is going to help reform.
I think in the end Congress and the administration need to make a list of the most important issues and start tackling them together one by one. Right now it seems we are all over the board fighting about health care, medicare, jobs, foreclosures, and budget deficits.
The following link is to a PBS article that investigates the spending freese"
http://www.pbs.org/newshour/bb/business/jan-june10/deficit_01-26.html
I agree with LeAnn's comment about things going so far that no one knows what to do. While balance is the most important budget constraint, the federal government's definition of balance always includes borrowing. What happened to the budget surpluses we had during the Clinton administration? I understand that we are at war which accounts for part of the deficits but we have programs like medicaid, social security and cash assistance that need to be reformed in order to stop wasteful spending. I also thought the returned TARP money was going towards the deficit, not other programs. Like Rubin said, people will always want something for nothing but then they want to complain about the massive amounts of government spending.
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