Economic Professors Point Out Flaws in American Government Budgeting

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If public administration majors really want to do the public a service, they would do well to look for ways to really cut the federal budget.

Two economics professors spoke at the conservative think tank Heritage Foundation on the upcoming Congress and the issue of budgetary reform. The professors, Barry Poulson (emeritus at the University of Colorado-Boulder) and John Merrifield (University of Texas-San Antonio), attended the panel discussion entitled, “Fiscal Rules: What Works and Lessons from OECD Countries.”

Poulson noted that Switzerland has several controls that help to balance the budget, compared to the likes of Germany. Switzerland has a separate and independent audit office that reports regularly on the debt and deficit, analyzing potential impacts of new rules and enforcing existing rules. For example, for any debts over 6%, Swiss rules require paying it off within three years, said Poulson.

By way of contrast, the U.S. requires thirty-four states to present a balanced budget amendment to the Constitution. Nevertheless, this is a possibility due to the election results.

Merrifield pointed out that America’s debt is “over 100% of GDP” when one accounts for interest and other factors, and it may shock most Americans because the media and public perception is that the number is in the seventy percent range. To give context to the higher figure, “half of our revenue” is spent in “debt service,” or repayment of debt. Based on his data and projections, if fiscal rules were put into place that echo Switzerland (i.e. balanced budget), the debt-to-GDP ratio would be lowered to 87% by 2026. To get to that ratio, “we need a lot faster economic growth or spending growth at zero,” said Merrifield.

Photo by Thomas Hawk