Deepening federal budget deficits indicate that one component of the federal budget baseline—either spending or revenue—is out of alignment. Closer inspection reveals that spending is the root cause, but both spending and revenue deserve equal treatment in policy discussions about reducing debt and deficits.
Often, however, Members of Congress and others influencing policy simply tout the need for more revenue as it suits their spending policy aims. A prime example of this tendency comes up in assertions about extending the 2001 and 2003 tax relief packages.
Some, like the Committee for a Responsible Federal Budget (CRFB), have stated that any extension of these temporary tax policies must be “paid for”—either through spending cuts, revenue increases, or a combination of both. This condition is necessary, CRFB claims, because the 2001 and 2003 tax cuts—if Congress extends them beyond their scheduled 2012 expiration—would “cost” nearly $2.4 trillion over 10 years. Assigning blame for federal deficits solely to tax cuts ignores a large and more significant element of the deficit equation: federal spending.
If Congress has decided to vote to extend tax relief, it should also have to vote on the amount of taxpayer dollars it wants to spend. Few spending programs are authorized indefinitely, and this is a good thing. Countless spending programs, such as the highway bill, the farm bill, and all appropriations, are temporary (just like the tax cuts) and should be paid for if they are reauthorized. Programs subject to appropriation, excluding defense funding, are projected to cost nearly $7.7 trillion over the next 10 years. Reauthorizing the farm bill in 2008 continued a policy of giving $25 billion in annual taxpayer subsidies to farmers.
Total federal program spending, which is projected to reach 26.4 percent of gross domestic product (GDP) by 2021, has an undeniable impact on the baseline. Indeed increased spending—not insufficient revenue—is the cause of worsening deficits, as this graph from Heritage’s 2011 Budget Chart Book illustrates.
Blaming deficits on policies affecting only the revenue side of the budget baseline equation may be convenient, but any sound budgetary policy should not be based on such an asymmetrical perspective.