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  • Debt Limit: Talk of Tax Increases Distracts from Spending Problem

    In response to President Obama’s press conference last week, House Majority Whip Steny Hoyer (D–MD) claimed, “Clearly we need additional [spending] cuts. But…revenues have not been resolved.”

    Wait a minute. Revenues have not been resolved?

    My, how quickly one’s memory can fade. Lest we forget the fiscal cliff deal, hastily passed earlier this month, let’s remember that in addition to increasing spending, it chiefly contained tax increases on business and investment. Ironically enough, it also allowed a payroll tax increase that has already dealt a blow to the very middle-class workers Obama so zealously vowed to shield from tax hikes.

    The Heritage Foundation’s Curtis Dubay examined the fiscal cliff deal and writes,

    The fiscal cliff deal delivered the tax increase portion but not the spending cuts. In the rapidly approaching debates on raising the debt limit, replacing the delayed sequester spending cuts, and the continuing resolution to fund the federal government for the rest of the 2013 fiscal year, Congress must demand that spending be cut to deliver on the other side of President Obama’s promised balanced approach.

    Obama got his tax increase out of the fiscal cliff fight, though that new revenue is to projected deficits like a drop of water is to the Pacific Ocean. Now it’s time for him to deliver on the “balance” of his promise and propose credible spending cuts.

    On their part, conservatives should not capitulate again on tax hikes. In the imminent debt limit debate, they should remind the country that we have a spending problem and communicate concrete ways to reduce federal spending. They can start with bipartisan reforms to Medicare and Social Security and thus lay the groundwork for bolder entitlement program reforms in the future.

    Structural changes to these programs are crucial to reining in spending and debt. As Heritage’s J. D. Foster warns:

    Talk is cheap, but the consequences of continuing on today’s path of massive deficit spending will prove very expensive, if not downright ruinous, for future generations. And so Republicans are exactly right to use the debt ceiling debate to force the President to move beyond conversations and dialogue, to leadership and action.

    Only the first part of Hoyer’s statement stands correct: We clearly need to cut spending further. The days of blindly increasing the debt limit without changing course must end.

    Posted in Economics [slideshow_deploy]

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