Obama’s Economic Advisors Suggest Cuts

Here is a stunning fact: cutting government spending would help the American taxpayer. That bit of wisdom comes from President Obama’s staff. From the WaPost:

Slowing the growth in health-care spending from 6 percent a year to 4.5 percent would have enormous benefits for the nation’s economy, creating as many as 500,000 jobs a year and increasing annual income for the average family of four by $2,600 over the next decade, the president’s chief economic advisers said yesterday.

I don’t know how they came up with the numbers, but it seems to be basic common sense that if you cut spending, that is less tax money being spent, meaning less taxes that need to be collected, meaning more money for families, individuals, and businesses. Of course, it remains to be seen how the $3.4 trillion budget spending Obama could make that kind of cut:

And the White House economists acknowledge that shaving 1.5 percentage points off the rate of growth in health spending would be extraordinarily difficult–“probably near the upper bound of what is feasible.”

“The kind of reform that will bring about these economic rewards will not be easy. It will require truly game-changing innovations in many areas,” the report says. “But, if we can bring about such changes, there will be substantial benefits to American households, businesses, and the economy as a whole.”

I have a suggestion for the administration: businesses are general pretty good at cutting costs when they need to. Of course if a business has the backing of the taxpayer’s money, it will be less likely to make the tough choices (as we’ve seen with bailed out businesses). If the taxpayer money is the sole source of funding–as the government is–then it’ll be even harder.

Right now federal competitive sourcing is under attack in Washington, at a time when the Obama administration should be looking to expand the program. Using the private sector, allows the government to leverage the power of competition to reduce costs while maintaining or increasing quality of services provided. If the administration is serious about cutting costs, innovative solutions can be found in the private sector.