Yesterday, I testified before the House Budget Committee (here is my testimony). During the Q&A, my co-panelist announced that the United States did not have a debt problem and that we would only have a debt problem in the future if we repealed the health-care bill passed in March.

Now, I understand that every scholar approaches policy issues with some degree of ideology (where one is trained as an economist can have an influence, too). However, no matter what one’s ideology is, it is odd that anyone would claim that the U.S. does have a spending problem; the co-chairmen of the deficit commission were just in the news for talking about how our country is broken.

And then there is the data. In my article in The American this morning, I look at the latest long-term CBO projections for our debt as a percentage of GDP. Check out this chart.

Even under the extremely unrealistic best-case scenario (blue line), debt continues to grow faster than the economy, increasing from around 60 percent of GDP in 2010 to 80 percent of GDP in 2035.

This is not good news. But then, because I believe that changes in our policies are still possible, I argue in my Reason Magazine column this month that spending can be cut. Here is the interesting and counterintuitive part:

Yet there is evidence that Congress can cut spending—and cut it by a lot. First, consider a new Goldman Sachs Global Economics study by Ben Broadbent titled “Fiscal Tightening Need Not Be Electorally Costly, But It Will Test Government Unity.” Broadbent shows that spending cuts can actually be a good thing politically. “It is commonly assumed that cuts in government spending will be both economically painful and electorally costly,” he writes. “Neither is borne out in the data. We’ve written before about the limited (and sometimes positive) effects of spending cuts on economic growth, at least in open economies. Here we add some simple analysis on the electoral consequences and, like others, find no evidence that spending cuts reduce support for the incumbent government. If anything the opposite tends to be true.” Among other evidence, the paper cites the three governments that executed the most high-profile expenditure-based deficit reductions in recent history and yet were re-elected: Ireland in 1987, Sweden in 1994, and Canada in 1994.
Broadbent’s empirical study complements a 1998 Brookings Institute study by the economists Alberto Alesina, Roberto Perotti, and Jose Tavares. The trio found “no evidence that looser fiscal policy implies longer political tenure.” They also show that “cuts in the government wage bill do not increase the probability that the government will collapse…nor does the popularity of the government fall in the immediate aftermath of fiscal adjustments.”

The whole thing is here.