Analysis: An Economic Perspective of Rand Paul – Spending and Debt

Rand_Paul_official_portrait_with_flag_editIn the next part of CMU Insider’s ongoing series of contrasting the policies of presidential candidates with economic consensus, I thought it best to take a look at Rand Paul.

Just as before, I am focusing on solely economic policy because it is my field of study and therefore I feel I am less likely to be incorrect than if I were to examine, for example, foreign policy.

Lastly, Paul, like Bernie Sanders, seems more honest and genuine to me than most politicians. Additionally, in terms of foreign policy and to an extent civil liberties, we are not terribly far apart; however, that is not the scope of this analysis.

In order to actually determine Paul’s positions, I will try to stick as close as possible to those listed on his campaign’s website. This week, I am examining Paul’s top billing – spending and debt.

Spending and Debt

Paul mainly talks in broad strokes here about how high current government debt is at the moment, discusses how we “must cut spending in all areas” and then doesn’t provide any specifics on what should be done (aside from enacting a Balanced Budget Amendment for the Federal Government). All of these points are worth addressing.

Its true government debt is rising, but it’s also true the federal budget deficit has been shrinking. Although the deficit is not projected to be reduced indefinitely, the Congressional Budget Office projects the annual deficit for the next decade to be about the average annual deficit of the past 40 years. Personally, as someone who generally dislikes government spending, I find Paul’s rhetoric (and confused use of bolding) here is exaggerated and misleading.

Image courtesy of CBO.

In terms of specifics for what Paul would like to cut, I was able to find his budget proposal for 2014. Within, Paul cuts the US Geological Survey, the Food and Drug Administration and the National Institute of Health each by 20% among many other items. I don’t know much about the optimal amount of funding for any of these groups; however, it is extremely unlikely making such cuts will even dent the long run growth of federal government spending in the United States.

Economists agree that to actually promote long run fiscal sustainability, it is critical to include some sort of major reduction in future promised Medicaid and Medicare benefits and/or significant tax increases. As such, even if Paul was to balance the budget by the end of his administration via his proposed cuts, there is evidence to suggest he is still kicking the looming budget crisis can down the road.

Images courtesy of the IGM Economic Experts Panel of economists across the political spectrum.

Lastly, although I am somewhat sympathetic for political economy reasons (if spending is capped for politicians, erroneous spending is more costly) to conservative-leaning arguments to mandate a balanced budget, such a policy is almost certainly misguided.

Aside from war, where such a cap would likely be ignored or accounted for in some way, it is almost surely beneficial to run a deficit in times of a recession to help pull markets out of an extreme rut. That is why 85% of economists agree that if a budget is to be balanced, it would be best to do it over the full business cycle rather than annually. In other words, in times of relative hardship, the government should run deficits, while if the economy is booming, it is more optimal to run a surplus.

Budgets in such a form are not entirely unknown in the real world either. For example, Sweden has had, what libertarian economist Alex Tabarrok dubs an “unbalanced-budget amendment,” effectively in place since 2000. Such an amendment seems to me to be an idea worth experimenting with, as it pumps the brakes on some of the more egregious government spending while still enabling deficits and fiscal flexibility in times of need.

Although I philosophically agree with some of Paul’s sentiments here, I find his platform to be lacking, which is especially concerning since my impression is he lists these issues as the most important at hand.

The remaining analysis of Rand Paul’s economic platform will be released next week.

Wyatt Bush is the assistant editor of CMU Insider. You can contact him at wyattbush@gmail.com. 


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