Friday, 2 July 2010

Miron: States can easily balance their budgets

Jeffrey Miron has written a short blog post for Forbes discussing the issue of US state budgets.
Politicians and interest groups claim, however, that spending cuts mean draconian reductions in public sector jobs and the loss of critical government services.

The reality is different. State and local spending has grown roughly 30% in real, per-capita terms over the past ten years, and $89 billion is less than 5% of the current level of expenditure. So these cuts will hardly be catastrophic.
The same applies here in the UK, both at a local and a national level, as I've noted previously:
The 25% cuts that Osborne has called for could come through a combination job losses, pay cuts, and efficiency savings. Anyone who thinks this will have a significant impact on public services should consider that 30% cuts (from £655bn down to £460bn) could be achieved simply by rolling spending back to 2002 levels. I remember 2002, and things weren't so bad.
Miron also highlights the role of unions in driving up public sector costs:
Many aspects of state and local spending, moreover, are excessive. Education and transportation spending are bloated by union wages rates, and compensation levels for government employees are much higher than necessary to attract a workforce of sufficient quantity and quality.
I have no doubt that the same applies here in the UK. Margaret Thatcher's greatest accomplishment was to break the stranglehold that unions once held on this country, but their grip is still far too strong. In addition to repealing all of Labour's laws, we should immediately repeal all labour laws; they are no longer necessary.

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