What effect does the two party system have on spending cuts?As opposed to a system with more parties.

There really is not any party system that makes spending
cuts easy.  Spending cuts are always unpopular because they have major negative impacts
on some people (who were benefitting from the programs that got cut) and only minor
positive impacts on other people (who have to pay marginally lower taxes because of the
spending cuts.  Therefore, it is hard to say that spending cuts would be easier to
accomplish in a multi-party system.

The one argument that
you can make is that a two party system encourages parties to take very centrist
positions.  Each party must try to get a majority of all the votes cast, which means
that they have to try to appeal to a very broad range of people.  A party that tries to
appeal to a broad range of people may need to create programs (which cost money) that
will benefit many people.  This leads to big programs (like the Republicans' Medicare
drug benefit) that cost a lot but benefit a broad range of
people.

In this way, you can argue, the two party system
makes it necessary for parties to create big, expensive programs that make spending cuts
difficult.  However, please do note that there is no party system that can make spending
cuts popular.