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Mitt Romney pitches smaller government: Is his target realistic?

While President Obama sees sizable government as fostering economic growth, Mitt Romney wants to cap federal spending at 20 percent of GDP. Is that goal feasible – and economically helpful?

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By the way, why is the 24.3 percent figure so different from the 42 percent one he cited in the debate? The answer is that higher figure is one that includes state and local governments, tallied by the international Organization for Economic Cooperation and Development.

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Romney hasn't offered a full plan on how to reach his goal, says Maya MacGuineas, president of the Committee for a Responsible Federal Budget. Voters deserve more specifics, she argues, so they can weigh the idea's costs and benefits.

Obama tried to nudge Romney on this point in the debate: "You know, his running mate, Congressman Ryan, put forward a budget that reflects many of the principles that Governor Romney's talked about. And it wasn't very detailed. This seems to be a trend. But ... if you extrapolated how much money we're talking about, you'd look at cutting the education budget by up to 20 percent."

"I'm not going to cut education funding," Romney replied.

What he has specified is a three-pronged strategy on spending cuts: eliminate unneeded programs using a China test (is it so important that the United States would borrow money from China to pay for it?), turn other programs back to the states (with block grants to help them pay, in the case of Medicaid and worker training), and "sharply improve the productivity and efficiency" of government.

In the debate, Romney generated Internet buzz by naming Big Bird of "Sesame Street" (along with the Public Broadcasting Service generally) as something he liked but that wouldn't pass his China test. Separately, he has identified Amtrak, funds for family planning, and foreign aid for cuts.

He says he'll cut the federal workforce through attrition and try to repeal the "union giveaway" called the Davis-Bacon Act.

So some guidelines and nuggets have emerged. But those remain different from releasing a detailed plan with line items for each federal agency.

Whether Romney's target is "realistic" is a matter of politics more than economics. There's no magic number for the correct size of government, and budget experts don't call 20 percent impossibly small, given Romney's call for Medicaid block grants to states and his different approach to health-care reform. 

But is his plan viable politically? That's a different question. Ms. MacGuineas is one of many budget experts who say that entitlement reform and other elements of a debt solution will ultimately require bipartisan support. US public opinion appears split, with voters supporting efforts to streamline government but also wary of a "spending cuts only" approach to fiscal reform.

Many economists expect the solution will require a mix of tax hikes and spending cuts. And even if Romney's goal were pursued aggressively over the next decade, some economists doubt the 20-percent-of-GDP level could be sustained against the backdrop of rising baby-boomer retirements after 2020.

"Pressure is just going to grow over the longer term," argues Diane Lim Rogers, chief economist at the Concord Coalition, another group supporting fiscal reform. "Romney really is proposing a much smaller government," going well beyond merely cutting waste, she adds.


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