If there is one thing everyone can agree on it’s the the federal government has to get it’s financial house in order. Unfortunately, the process of achieving that goal is not always clear and there are many paths from which to choose.
Although it is mathematically possible to balance the budget without raising taxes, it is impossible in a political sense. For both sides of this argument to accept the budget discipline a toll must be exacted from each side of the ledger. Spending must be cut and taxes must be increased.
By way of example, in the early 90’s when we faced a fiscal crunch taxes were raised and spending slashed. As a result budget surpluses became a reality and were forecast into the next decade.
“starve the beast” theory of fiscal reform.
Different tacks were taken in response to the financial problems 1981 and 2001. Taxes were slashed in some misguided belief that spending would follow. Instead, in each instance spending ballooned and the deficit soared. It becomes fairly clear that if one side is rewarded with tax breaks the other side wants increased spending. It hasn’t worked. Let’s all agree that any imposed discipline has to be comprehensive and coordinated to be effective and enduring.
Most importantly, besides not working in practice balancing the budget without tax increases is the only way to ensure that high-income households pay a fair share of the deficit burden. Without higher taxes as part of the fiscal reform package the middle and lower income households will field the bulk of the budget cutting burden.