The Lower Spending Solution to Deficits
Kathryn Nix /
With the expiration of the 2001 and 2003 tax cuts fast approaching, the debate over whether to extend the cuts, and for whom, has taken on a new face. Proponents of allowing for tax increases on the highest income brackets, or in some cases, on all Americans, argue that this is a necessary step to reducing projected federal deficits.
But, as Edward Lazear, former chairman of the President’s Council of Economic Advisors, explains in The Wall Street Journal, this creates a false choice between huge deficits or tax increases. He writes:
This argument rests on the flawed premise that we can reduce the deficit only by increasing taxes, as if high levels of spending are a given. Not so. … Americans don’t have to choose between an enormous deficit or high taxes. If we returned to the relative fiscal restraint that prevailed during the Clinton and Bush years, when spending was 19.7% and 19.6% of GDP, respectively, we could avoid the entire mess.