By Merrill Goozner
While liberals go ballistic over President Obama’s call for budgetary freeze on discretionary domestic programs, Jared Bernstein, the former Economic Policy Institute economist heading up Vice President Joe Biden’s economics team, points out an overlooked fact in his surprise posting on The Huffington Post: there’s a lot of waste in the federal budget that a freeze can be useful in reallocating. You could create a lot more jobs and social benefit by cutting agricultural subsidies and shifting those dollars to mass transit projects under the rubric of a budget freeze.
There’s also something to be said for putting a halt to some of the breathless spending increases that have taken place in recent years. Take the FDA. That agency in the past 24 months has seen its budget go from $2.3 billion to $3.0 billion and its total number of employees shoot from 7,116 to 8,554, according to federal budget documents.
Count me among those who believe the FDA, like most regulatory agencies, needed bolstering after years of neglect under the Bush administration. The FDA was seriously short staffed. Its mission has expanded to include policing Chinese drug plants and beefed up monitoring of our increasingly vulnerable food supply. But at some point an agency has to pause to catch it breath, train the new people who’ve come on board, and evaluate the new programs put in place. Now’s probably a good time.
The National Institutes of Health has a separate problem. It was given a steroidal $10 billion or 33% increase over its regular budget by the Stimulus Act, courtesy of Sen. Arlen Specter. That money is just starting to flow out the door. A few years of stasis on the feeding end probably makes sense while that pig moves through the python.
That doesn’t answer the larger question raised by critics. Is massive new stimulus needed to keep the economy afloat and avoid the dreaded double-dip recession? New York Times columnist and Nobel Prize-winning economist Paul Krugman thinks so, as does University of Texas economist James Galbraith, both of whom are a lot smarter than me.
Yet I’m still in a wait-and-see mode. What this economy desperately needs is for the private sector to begin hiring again. If that doesn’t happen in the next six months, then I’d say it’s time for a new stimulus package aimed at jump-starting the private sector. But is massive new infrastructure projects the best way to accomplish that?
I think there’s an equally good yet untried tactic that meets the test of helping to promote long-term budget balance. Why not give a massive tax break for the working poor and lower middle class and fund it with a tax increase on those earning over $200,000 a year (like the plan included in the House version of the health care reform bill)?
It would take money from people who buy government bonds and give it to people who buy privately-made goods. What this economy needs is more consumption, not more savings. The best way to do that without selling more government debt is through progressive tax reform.
Merrill Goozner is an award-winning journalist and author of “The $800 Million Pill: The Truth Behind the Cost of New Drugs” who writes regularly at Gooznews.com.