This is an older story, but what the heck I was on vaction (New Orleans is quite nice this time of year, btw). Here is the main point of the article,
President Obama plans to convene his Cabinet for the first time today, and he will order its members to identify a combined $100 million in budget cuts over the next 90 days, according to a senior administration official….Earlier this month, both chambers of Congress passed Obama’s $3.5 trillion budget outline for 2010, which includes unprecedented new investments in health care, education and energy. But the huge budget, which contemplates a $1.2 trillion deficit, has drawn the ire of small-government conservatives, who say that such high deficits jeopardize the nation’s economic future.
Here is Greg Mankiw’s take on the above,
Just to be clear: $100 million represents .003 percent of $3.5 trillion.
To put those numbers in perspective, imagine that the head of a household with annual spending of $100,000 called everyone in the family together to deal with a $34,000 budget shortfall. How much would he or she announce that spending had to be cut? By $3 over the course of the year–approximately the cost of one latte at Starbucks. The other $33,997? We can put that on the family credit card and worry about it next year.
This is quite right, but it also struck that this is pretty much how California has been handling its budget crisis. Kick the can down the road and hope for…I don’t know a miracle? California is a state that has epitomized fiscal irresponsibility. Spending has grown faster than the rate of inflation and population growth to such an extent that we are going to be seeing significant increases in taxes across the board. Increases in the sales tax, car registration fees, income taxes and so forth. Everyone will be hit, at precisely the time when raising taxes will likely have a negative impact on the state’s economy. Fortunately for the rest of the country though the United States does not have a balanced budget requirement.
