With the federal government approaching $34 trillion in debt, talk has (finally) turned to the question of how to stop the bleeding. A recent op-ed in The Wall Street Journal offered one possible solution:
Had the federal government limited the growth in spending to a maximum of the population growth rate plus inflation during that decade, in 2022 the federal government would have spent $1.6 trillion less than it did, resulting in at least a $200 billion surplus. If the federal government had done this over the past two decades, the national debt would have increased by less than $500 billion instead of $19 trillion.
The article promoted the Sustainable Budget Project, a new initiative by Americans for Tax Reform (ATR) designed to focus efforts on controlling spending at the federal and state levels.
While the spotlight on controlling spending matters, so do the details. On both practical and philosophical levels, the metrics laid out in the op-ed present potential problems in their implementation.
Proposed Reform Encourages Additional Inflation
The Journal article argues that the “sustainable budget” metric, by evaluating state spending growth when compared to population increase plus inflation, will create an “objective, binary metric to determine whether a state government spends too much.” But a binary metric could cause problems in addition to solving them.
To ask the obvious, does last year’s 40-year-record inflation rate, which peaked at 9.1 percent last June, imply that state governments should have grown their spending by double digits in
