Hey Congress: Cut the Spending; Don’t Raise Taxes
On Monday, we growled about a survey of business economists that showed a majority “believe the federal deficit should be reduced only or primarily through spending cuts.” In support of that view, the Tax Foundation observed last month (Fiscal Fact No. 278, July 29, 2011) about the “evidence of what the most effective methods have historically been.” According to the Tax Foundation:
“These methods have been analyzed in studies by Goldman Sachs (GS) and the European Central Bank (ECB), comparing the experiences of countries which have attempted to regain control of similar deficit and debt problems. Though the two papers take slightly different methodological approaches to their analyses, the results and conclusions are remarkably similar:
- Spending cuts are more effective than tax hikes.
- Deficit and debt reduction can occur while taxes are being cut."
In the study's conclusion, David Logan, Tax Foundation economist David Logan, who authored the study, writes:
“The international experience suggests that deficit reduction plans driven by tax increases over spending cuts are far less likely to succeed. Moreover, the most successful efforts put all spending programs on the table, not a select few programs. But contrary to the conventional wisdom in the United States, the international experience indicates that pairing spending cuts with tax cuts can produce meaningful deficit reduction and improved economic performance. That should be the goal for both the While House and the Congress during these intense negotiations.”
The study includes a great deal of information that you will want to read about. For example, Logan say that “lower taxes can accompany spending cuts. So take a few minutes to read the entire paper. And consider membership in the Tax Foundation.