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It’s been said before, but merits repeating: Washington has a spending problem, not a revenue problem.
The CBO’s latest economic predictions highlighting America’s rising federal deficit underscores this point.
The Wall Street Journal notes:
The Congressional Budget Office said the federal budget deficit would total $804 billion this year, 43% higher than it had projected last summer, and exceed $1 trillion a year starting in 2020. The deficit was $665 billion in the fiscal year ended Sept. 30.
Opponents of tax reform are quick to blame the recent Tax Cuts and Jobs Act. In reality, they could not be further from the truth.
Historically, following the Kennedy, Reagan and Bush tax cuts, the economy showed strong economic growth, which led to higher federal revenues over time.
A report from Americans from Prosperity and Freedom Partners highlights the trend of tax cuts spurring economic growth over the years:
In the 10 years following the Kennedy tax cut (proposed by JFK in 1962 and enacted in early 1964, just months after Dallas), federal tax receipts increased by $283 billion. The decade following the Reagan tax cuts of 1981 (fully phased-in by 1983), revenue rose by $400 billion. In the 10 years after the Bush tax cuts, tax receipts climbed by $227 billion.
Rather than blame tax cuts, which have a proven track record of fueling economic growth and increasing federal revenue, lawmakers in Washington should take a hard look at their own wasteful spending habits.
America’s deficit is rooted in overspending by Washington.
An obvious recent example is the $1.3 trillion omnibus spending bill, which significantly boosted federal spending.
Moreover, Washington has also allowed spending on entitlement programs to spiral out of control. Entitlement programs like Social Security and Medicare already account for two-thirds of federal spending.
As the Wall Street Journal describes:
Even before the recent flurry of fiscal stimulus, the CBO expected deficits would widen over the coming years as revenues failed to keep up with outlays including spending on major social programs such as Social Security and Medicare as the population ages.
As the U.S. population ages, more Americans will find themselves dependent on these programs while the portion of taxpayers paying for these programs continues to decline.
The Wall Street Journal reports that in 2018, the top 20 percent of American income-earners will pay 87 percent of all federal income tax revenue – up from 84 percent last year.
Even while being able to keep more of their hard-earned money thanks to the tax cuts, they will pay an even greater share of the overall burden.
As the size of entitlement programs continue to expand, so will the cost burden on taxpayers, especially those in higher tax brackets.
And as the code continues to get more progressive, fewer and fewer Americans will be responsible for the brunt of the funding for programs that more and more Americans depend on – making it increasingly difficult to enact reforms.
Entitlements are on fiscally unsustainable path, and Congress’ reluctance to address the issue only kicks the can further down the road for future generations and a smaller share of Americans to contend with.
It’s time for Congress to put current and future taxpayers first by reining in federal spending.
One step in the right direction would be to use rescissions, or a process to rein in federal spending from last month’s $1.3 trillion omnibus spending bill.
This process has been tried and tested in the past. Since 1974, presidents have proposed 1178 recessions, 461 of which Congress has agreed to, which has saved American taxpayers a total of $25 billion over the years.
Enacting rescissions would be a good first step towards reducing federal spending and putting America back on a sustainable path.
However, rescissions alone are not a long-term solution.
If lawmakers continue spending on autopilot and ignore the growing debt, the federal budget deficit isprojected to be 8.8 percent of our GDP by 2046 and future generations of Americans will be in trouble.
If left unchecked, federal spending will lead ordinary Americans to face devastating tax hikes, cuts to benefits, and eventual cuts to other essential programs. For example, interest on the debt alone is on track to eclipse all defense spending within the next five years.
To truly address America’s crushing deficit, Congress must enact meaningful reforms to make unsustainable entitlement programs like Social Security and Medicare fiscally solvent again.
By pursuing serious reforms to cut federal spending and eliminate the federal deficit, Congressional leaders can put America back on a fiscally sustainable path and prove to taxpayers that they really do have the best interests of the American people in mind.