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Telling Washington That Taxpayers are Not the Government’s ATM

Posted By Daniel Anderson On June 25, 2010 @ 7:00 pm In Economics | Comments Disabled

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In the week leading up to the G-20 Summit in Toronto this weekend, German Finance Minister Wolfgang Schäuble has added his voice to the growing discussion about the United States’ recession spending spree.  In a response [2] to President Obama’s call for further international recession spending, Schäuble stated “governments should not become addicted to borrowing as a quick fix to stimulate demand. Deficit spending cannot become a permanent state of affairs.”

As if there were any doubt about the United States’ spending addiction, Heritage budget expert Brian Riedl explains [3], “the annual federal budget deficit is projected to reach 8.3 percent of gross domestic product (GDP) by 2020—more than three times the historical average.”

This means that if the US wanted to balance the budget by 2020, one-third of all spending would need to be eliminated or taxes would need to increase by 50 percent.  Mr. Schäuble is right, this cannot go on.

Tomorrow, Americans across the country will have the opportunity to proclaim their own discontent about the ever-growing deficit.  The America Speaks National Town Meeting [4] plans to bring thousands of concerned citizens together to discuss solutions for this looming challenge.

Some politicians have suggested the solution to the growing deficit is higher taxes, but Americans should speak out against that premise. Data on individual and corporate income tax revenues from Heritage’s 2010 Budget Chart Book [5] shows that higher tax rates do not tend to generate higher revenues because higher rates discourage productive activity—like working, saving, and investing. In fact, the revenue from taxes is overshadowed by the United States’ prolific spending.  According to Riedl [3] “the CBO’s long-term budget projects that tax revenues will continue growing over the next 75 years, reaching a record 22 percent of GDP. However, spending will rise to an unfathomable 67 percent of GDP.”  Riedl concludes, “rapidly increasing entitlement spending will cause nearly 100 percent of rising long-term deficits.”

Higher taxes are not the answer. [6]

Instead, these dialogues must urge Congress to focus on the true source of deficits: excessive spending on entitlement programs. The Budget Chart Book [5] shows these programs consumed 8.1% of federal spending in 2005, but by 2050 they will consume almost 18%.  By 2052, spending on entitlement programs will be equivalent to the 30-year average tax revenue leaving no room in the budget for defense or other much needed federal programs.

Heritage’s Alison Acosta Fraser and Riedl suggest [7] a number of ways to curb explosive entitlement spending, including putting Social Security, Medicare and Medicaid on a long-term budget to be evaluated periodically.  Also, Congressmen Paul Ryan and Jeb Hensarling enumerate possible cost-cutting reforms here [8].

The American people are not an infinite ATM.  Before the government decides to withdraw more money from an economy that desperately needs every penny to recover, elected officials should consider responsible entitlement reforms and spending cuts.

Tomorrow, American’s have the opportunity to ardently declare their dissatisfaction with the debt, their hesitations for the future, and their hope that at this point in history, America can make a stand for future generations and stop the destructive spending policies of the past. The more they speak out against tax increases today, the better the future will be.

Daniel Anderson is currently a member of the Young Leaders Program at the Heritage Foundation. For more information on interning at Heritage, please visit: http://www.heritage.org/about/departments/ylp.cfm [9]


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2010/06/25/telling-washington-that-taxpayers-are-not-the-government%e2%80%99s-atm/

URLs in this post:

[1] Image: http://www.foundry.org/wp-content/uploads/ATM-machine-10-6-25.jpg

[2] In a response: http://www.spiegel.de/international/business/0,1518,702849,00.html

[3] Heritage budget expert Brian Riedl explains: http://www.heritage.org/Research/Reports/2010/06/The-Three-Biggest-Myths-About-Tax-Cuts-and-the-Budget-Deficit

[4] The America Speaks National Town Meeting: http://usabudgetdiscussion.org/

[5] Heritage’s 2010 Budget Chart Book: http://www.heritage.org/budgetchartbook/

[6] Higher taxes are not the answer.: http://www.heritage.org/Research/Factsheets/Enough-Is-Enough

[7] Heritage’s Alison Acosta Fraser and Riedl suggest: http://www.heritage.org/Research/Reports/2009/01/How-to-Reform-Entitlement-Spending-A-Memo-to-President-elect-Obama

[8] possible cost-cutting reforms here: http://www.washingtonexaminer.com/opinion/columns/A-road-map-to-America_s-future-96982629.html

[9] http://www.heritage.org/about/departments/ylp.cfm: http://www.heritage.org/about/departments/ylp.cfm

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