The need for economy in government

BY GUEST OPINION | MAY 05, 2011 7:20 AM

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“The present administration is committed to a period of economy in government … There is not a menace in the world today like that of growing public indebtedness and mounting public expenditures … We want to reverse things,” stated President Warren G. Harding before a meeting of the Business Organization of the Government.

Harding realized the importance of not only restoring the economy from the post-war depression, but also reducing government spending, paying down the national debt, and cutting tax rates.

Charles Dawes, who later served as vice president under President Calvin Coolidge, served as the first director of the budget and was Harding’s lead on pursuing economy in government. Both Harding and Dawes understood the difficulty in reducing government spending.

The federal government needs to embrace economy in government before the level of debt leads to economic ruin. Government spending is consuming 25 percent of gross domestic product, and the national debt is more than $14 trillion and rising. In addition, the federal government has been running trillion-dollar deficits over the last few years. President Obama has proposed a budget of $3.7 trillion, which does not adequately address the need to reduce spending. At the heart of the fiscal crisis are the unfunded liabilities of Social Security, Medicare, and Medicaid.

Recently, Republicans in Congress have been pushing to roll back spending, but Democrats and some economists are arguing that cutting federal spending now will jeopardize economic recovery and result in further unemployment. Historically, following limited-government policies that promote economic growth leads to periods of economic prosperity, as the 1920s (and the 1980s under President Ronald Reagan) demonstrate. The escalating national debt, along with the increasing amounts of regulation, and uncertainty over current policies such as the Patient Protection and Affordable Care Act, are all placing further anxiety on the economy.

Both Harding and Coolidge understood the importance of following policies rooted in traditional limited government. Under both administrations federal spending declined, the national debt was reduced, and tax rates were slashed. All of these policies resulted in a period of substantial economic growth. Paul Johnson wrote in his book Modern Times, “Harding can be described as the only President in American history who actually brought about massive cuts in government spending.”

Solving the fiscal crisis and reducing our national debt will not be an easy process, and it will be even more difficult when addressing the need to reform entitlement programs. Although we cannot return to the 1920s, policymakers can certainly learn from the ideas and political philosophy that governed Harding and Coolidge. Their philosophy was rooted in a commitment to constitutional limited government, which is the philosophy that is needed today to not only restore the national economy, but also solve the fiscal crisis.

John Hendrickson is a research analyst for the Public Interest Institute, a Mount Pleasant-based nonprofit research group. The views expressed in this column are those of the author and not necessarily those of the Public Interest Institute.

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