There's a good reason that most political debates are so frustrating: They often present us with false choices.
Take how some in the media reacted to the news that President Donald Trump wants another tax cut. Pointing to the growing budget deficit, they labeled the prospect of another cut as sheer folly.
Concerns about the deficit are well-placed. But the answer isn't to abandon plans for Tax Cuts 2.0. Far from it. The answer is to pair it with Spending Cuts 1.0.
To see why, start with a basic fact: In order to grow, the American economy needs investment, like people need food and water. And businesses need confidence that the future holds opportunity, or they invest, innovate and hire less. If taxes are expected to go up in the future, behavior changes today.
The only credible way to keep taxes low is to reduce the deficit. And we do that by cutting spending growth and expanding on the 2017 tax cuts by first making those cuts permanent.
At the end of 2017, Congress cut taxes modestly and increased spending dramatically. The trillion-dollar deficit is the result of profligate spending, not pro-growth tax cuts.
Over the last year, federal tax collections increased by 4 percent. But spending increased at twice that rate, by 8 percent, according to the Congressional Budget Office.
Without serious spending reform, tax cuts are doomed to fail.
Without credible spending reforms today, American workers and businesses will continue to live under the threat of higher taxes in the future. This uncertainty ultimately depresses the expected economic benefits of the tax cuts--which are nevertheless allowing wages to rise, keeping unemployment low and supporting the longest economic expansion in our history.
The ever-present constraint of the seemingly ever growing deficit imperils the successes of tax cuts and resulting economic opportunity.
Conventional analysis wrongly assumes that the only way to fix the deficit is through new taxes. But simply raising taxes won't fix the deficit. Spending growth continues to accelerate faster than the U.S. economy every year into the future.
The problems of deficit and debt are driven by too much spending, not too little tax collection.
Without a clear signal from Congress that taxes and the spending they fund will stay low, Americans will simply continue waiting for the next shoe to drop.
They need the positive certainty that comes with a combined package of tax cuts and spending cuts. Anything else portends higher taxes, fewer jobs and a weaker economy.
Adam N. Michel is a senior policy analyst in the Grover M. Hermann Center for the Federal Budget at The Heritage Foundation.
Editorial on 11/08/2019
Print Headline: Dealing with deficit, debt