Balancing budgets

March 28, 2009

Tom Bowman, Adam Smith Institute Blog

Earlier this week, Adam linked to the Economy League of Greater Philadelphia's Budget Challenge, which gives anyone and everyone the chance to try their hand at balancing Philadelphia's budget. I had a go last night, and found balancing the budget - which is currently projecting a $170m deficit - pretty easy. In fact, I ended up with a $81.1m surplus. Give it a go and see how you do.

In case you're interested, I kept funding for fire services and housing the same, and only reduced budgets for public health, policing, vehicles, and the city pension fund by 10 percent. City administration faced a larger cut of 20 percent, but biggest cuts were reserved for libraries, business licensing and inspections, and prisons, which all saw their budget cut by 30 percent. My reasoning was that Philadelphia has an unnecessarily large public libraries programme, that licences and inspections are annoying and pointless, and that far too many people currently get sent to prison for trivial drug offences. 

I also raised the sales tax by 1 percent, which is why I had such a big surplus. However, had the website given me the opportunity, I would definitely have used that surplus to cut the taxes on business and employment - something which would undoubtedly have a very benign economic impact.

The only reason I point all this out is because it demonstrates that cutting government spending should not be nearly as difficult as most commentators suggest. As Tom has written before, given that public spending in the UK has doubled since 1997, savings should not be difficult to come by.  Indeed, this report by two ECB economists for the Fraser Institute suggests that if we could make the British public sector as efficient as the American, Luxembourgian, Japanese, or Australian ones, the UK could save almost £96bn a year without cutting any services.

http://www.adamsmith.org/blog/tax-and-economy/balancing-budgets-2009032…