Across-the-board spending cuts are very inefficient: A proof

Abstract

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.