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Treasury Release Equating Fiscal Discipline With Spending Restraint

DEC. 11, 2002

Treasury Release Equating Fiscal Discipline With Spending Restraint

DATED DEC. 11, 2002
DOCUMENT ATTRIBUTES
  • Institutional Authors
    Treasury Department
  • Subject Area/Tax Topics
  • Jurisdictions
  • Language
    English
  • Tax Analysts Document Number
    Doc 2002-27203 (1 original page)
  • Tax Analysts Electronic Citation
    2002 TNT 239-19
FISCAL DISCIPLINE = SPENDING RESTRAINT

 

December 11, 2002

 

 

"More money spent in Washington means less money in the hands of American families and entrepreneurs, less money in the hands of risk-takers and job creators. And if the Congress won't show spending restraint, I intend to enforce spending restraint."
President George W. Bush

 

[1] The Federal government is responsible for providing its citizens with a finite set of essential services. Nonetheless, the temptation for government spending to grow infinitely in size and scope is ever-present. Fiscal discipline requires policymakers to keep Federal spending under control, to minimize the drain of resources from the private sector to the public sector.

[2] Not only is spending restraint crucial for the fiscal health of the Federal government, but it is essential for the economic health of the nation as a whole.

  • As the following chart shows, periods of high Federal spending on goods and services were, on balance, associated with periods of relatively lower private investment.

  • This relationship is particularly keen for the last decade or so, when Federal spending declined as a share of the gross domestic product until about 2000 and then rose, while private investment did the opposite.

  • This suggests that undisciplined Federal spending has a deleterious effect on private investment and the economy.

 

[3] Limited Federal spending is the only true measure of fiscal discipline. As Milton Friedman, Nobel Laureate in economics teaches: "The whole of what government spends is extracted from the community's resources, not solely that part financed by what are called taxes." A tax increase -- regarded by many as the ultimate act of fiscal discipline -- merely substitutes one method of extracting resources from the private sector for another.

  • Extracting resources from the private sector dampens private investment, and this translates into lower productivity and fewer jobs.

 

[4] Taking money out of America's hands and putting it into Washington's is not fiscal discipline -- and acting as if it were threatens the future of the nation's economy.
Treasury Office of Economic Policy
DOCUMENT ATTRIBUTES
  • Institutional Authors
    Treasury Department
  • Subject Area/Tax Topics
  • Jurisdictions
  • Language
    English
  • Tax Analysts Document Number
    Doc 2002-27203 (1 original page)
  • Tax Analysts Electronic Citation
    2002 TNT 239-19
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