How to cut expenditure strategically: Swaziland and the United States

May 24, 2011

Last week the World Bank told Swaziland to cut its spending in order to curtail its sprawling deficit. And how should this be done? Well, by simply administering an across the board pay cut to civil servants. Not too sophisticated. Expect trouble.

When the USA had its own fiscal crisis earlier this year, David Brooks of the New York times suggested a much more rational approach to reducing expenditure. In a nutshell, this is what he said:

“Trim from the old to invest in the young. We should adjust pension promises and reduce the amount of money spent on health care during the last months of life so we can preserve programs for those who are growing and learning the most.”

If  spending cuts are unavoidable, surely it would be more prudent to cut strategically? The World Bank’s advisors tell poor countries to allocate funding on the basis of policy priorities. Surely cuts in spending should be made on the basis of policy priorities as well? And not through indiscriminate measures like across the board cuts in civil servants salaries?

2 comments:

  1. Both approaches by Swaziland/World Bank and the United States may not be the right ones.
    In the first case one is gouging unfairly the civil servants. In the second case, the elderly are paying the price.
    What about the ones who can afford it and who are getting away with it?
    Have you read about Buffet (the third richest man in the world) in the US who complains that he is not getting taxed enough?
    President Obama pointed this out in his book “The Audacity of hope” three years before he was elected President of the US. What has been done about taxing the billionnaires fairly in the US?
    Very little I assume. Is that right?

  2. Thanks George. What I found attractive in David Brooks’s argument was less the prioritization of the young than his suggestion that discussions on how to cut spending should be based on strategic priorities, whatever those may be for a given country.

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