Across-the-Board Spending Cuts Are Very Inefficient: A Proof

In many real-life situations, when there is a need for a spending cut, this cut is performed in an across-the-board way, so that each budget item is decreased by the same percentage. Such cuts are ubiquitous, they happen on all levels, from the US budget to the university budget cuts on the college and departmental levels. The main reason for the ubiquity of such cuts is that they are perceived as fair and, at the same time, economically reasonable. In this paper, we perform a quantitative analysis of this problem and show that, contrary to the widely spread positive opinion about across-the-board cuts, these cuts are, on average, very inefficient. 1 Formulation of the Problem: Are Across-the-Board Spending Cuts Economically Reasonable Across-the-board spending cuts are ubiquitous. When a department or even a country faces an unexpected decrease in funding, it is necessary to balance the budget by making some spending cuts. Vladik Kreinovich Department of Computer Science, University of Texas at El Paso, 500 W. University, El Paso, Texas 79968, USA, e-mail: [email protected] Olga Kosheleva University of Texas at El Paso, 500 W. University, El Paso, TX 79968, USA, e-mail: [email protected] Hung T. Nguyen Department of Mathematical Sciences, New Mexico State University, Las Cruces, New Mexico 88003, USA, and Faculty of Economics, Chiang Mai University, Chiang Mai, Thailand, e-mail: [email protected] Songsak Sriboonchitta Faculty of Economics, Chiang Mai University, Chiang Mai, Thailand, e-mail: [email protected]