Spending Cuts Will Not Cause Unemployment

This week Senator Rand Paul published an editorial in the Wall Street Journal describing his proposed spending cuts, adding up to over $400 billion per year.  Paul is the first to put specific cuts in writing.  Within minutes outrage was heard from the beltway establishment.

But, with voters alarmed by exploding government debt and demanding immediate action it’s difficult for the special interests to defend their programs and subsidies on the merits.  So they hook those programs and subsidies to the top public concern of the moment and claim that excessive spending is good for jobs.  Absurdly, they claim “we can’t afford” less spending because the private sector will lose jobs.

But as the chart shows historical data contradicts their claim. Over the past three decades decreases in spending as a percent of GDP correlate not with fewer jobs but with more jobs.

Even though federal spending has already grown an astounding 27% since 2007, there are still 7.7 million fewer jobs than there were at the end 2007.  Yet, even after this manifest failure, so-called “economists” representing the political-media establishment continue to insist that extravagant federal spending is the way to “jump start” employment.

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