Okay if Government “can’t cut spending”, how about some restraint?
The fiscal policies followed by successive governments-deficit spending, unfunded liabilities and the over all debt load of The Bahamas-will eventually become a burden for everyone through higher taxes or inflation, if restraint is not built into the system.
Dr. Dan Mitchell of the Libertarian Think Tank, the Cato Institute recently provided food for thought-ideas that might help our policy makers-in an article that first appeared in Investor’s Business Daily on March 4, 2011.
Pointing out that”good fiscal policy doesn’t require miracles-or dramatic shutdowns”but limiting the growth of the public sector, and coupled with normal revenue growth, government red ink disappears surprisingly quickly
He provides a few excellent examples from around the world:
Between 1994 and 1999 the US increased spending only 3percent each year and the result was a budget surplus.
In the early 90’s in Canada, average annual increases in government spending was only 1percent. In 1992 spending was 53percent of GDP and the deficit was 9percent of GDP. By 1997 spending was 44percent of GDP. Again after just five years, there was a small surplus.
The story was pretty much the same in Ireland. Government spending was 60percent of GDP in 1985 with deficits consuming another 12percent of the economy’s output. After just four years of fiscal restraint, spending was around 43percent of GDP and deficits were reduced to 2.7percent of GDP.
In Slovakia they increased their annual budget by only 1.3percent of GDP on average over the three years from 2000 to 2003 and the public spending dropped from 36.9percent of GDP to 29.2percent. With other pro-growth policies like the flat tax and personal retirement accounts, economic growth was robust. And finally,
From 1990 to 1995 New Zealand dropped spending from 53.5percent of GDP and deficits of 4.5percent of GDP down to spending of only 43.1percent of GDP and a budget surplus of 2.8percent of GDP.
In the US Dr. Mitchell points out that;”Two percent annual spending increases would lead to fiscal balance by 2021. Limiting spending growth to 1percent annually would balance the budget by 2019. A spending freeze would balance the budget by 2017.”
So if the government”can’t cut spending”, surely the Budget can be held at current levels in an attempt to get the country’s fiscal house in order in the not too distant future?
Yours in Liberty,