Tuesday, February 15, 2011


Sandy Leeds, a Chartered Financial Analyst (CFA), is a Senior Lecturer at The University of Texas at Austin. Here is his analysis of the Tea Party driven spending cuts proposed by House Republicans:

By Sandy J. Leeds

Leeds On Finance
February 13, 2011

House Republicans have suggested $61 billion of spending cuts (some Republicans are arguing that this is $100 billion less than President Obama’s budget proposal from last year; others are admitting that this is just $61 billion of cuts). Apparently, the mainstream Republicans increased their suggested cuts due to pressure from the Tea Party Republicans.

You know that the deficit (and the debt) is my big concern. You would think that this would make me happy. Maybe it’s a start. But mostly, I just see this as a joke – and it’s a reminder of the trouble that we’re in. There are two reasons I think this:

1. The Republicans are simply saying “lets cut everything that the Democrats support.” - They want to reduce spending under the Recovery Act – reducing funding for the high-speed rail. They also want to eliminate the offices of the health care czar and the climate czar. They want to target family planning, welfare and funding for NPR. They want to reduce the budgets of the Departments of Education and the EPA. It would also reduce spending on some food programs for children as well as the Head Start program.

This isn’t shared sacrifice. This isn’t going to do anything but further our political division. This reminds me of when I suggested that Jenny and I balance our budget by cutting spending on anything cultural and that we no longer buy bras. Looking back, my guess is that my budget revisions would have been more happily accepted if I had also suggested that we cut my cable sports packages. Instead, I just suggested cutting things that I was never in favor of.

2. Most importantly, these cuts will have virtually no impact on our deficit. -The 2011 deficit is expected to be $1.27 trillion. If we reduce this by $61 billion, our deficit will be $1.21 trillion. (Wow, that makes me feel better.) The bottom line is that if we’re going to fix our problems, we have to fix Social Security and Medicare. Of course, these are difficult political issues and on one side is going to suggest cuts. It will have to be done jointly.

The End of Unemployment! - You have to love politicians. House Majority Leader Eric Cantor, R-Va., called the proposed spending cuts “a historic effort to get our fiscal house in order and restore certainty to the economy. This legislation will mark the largest spending cut in modern history and will help restore confidence so that people can get back to work.” This is truly classic. Republicans think that we can reach full employment through spending cuts and Democrats think we can shrink our deficit by insuring 32 million more people.

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