Shortsighted Spending Cuts

Harry Stein and Hilary Gelfond explain why austerity is so out of hand.

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idea light bulbCritics have described some of the federal government’s austerity over the past several years as “penny-wise and pound-foolish.” Across-the-board spending cuts may have reduced short-term budget deficits, but they also slowed economic growth and job creation while undermining long-term investments in infrastructure, education, and innovation. Some cuts, however, not only damaged the economy, but also targeted sectors of the federal budget devoted to preventing wasteful spending or ensuring that the government collects revenues efficiently and fairly. In short, those spending cuts cannot even be described as penny-wise.

It may be counterintuitive to imagine a spending cut that increases deficits, but when cuts hinder competent program administration and oversight, the resulting increase in waste, fraud, and abuse is often larger than the related spending cut. Everyone agrees that waste, fraud, and abuse should be prevented in federal programs, but making that happen is easier said than done. Competent administration depends on adequate staff and resources, and rooting out cheating and corruption requires strong oversight.

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