NCPA - National Center for Policy Analysis

Republicans: Persevere On Tax Cuts, Or See The Money Spent

August 6, 1999

Highly-respected Harvard University economist Martin Feldstein, a former chairman of the President's Council of Economic Advisers, warns that a tax cut is the only feasible alternative to further government spending.

The House and Senate Republican tax plans would reduce the extra revenue flowing to Washington by $792 billion over the next decade. By contrast, President Clinton would increase government spending by an additional $850 billion over the same period -- on top of the $2.5 trillion increase already called for in current law.

Contrary to the assertion of some critics, the GOP tax plan would not force big cuts in a wide range of spending programs. In fact, according to the Congressional Budget Office, it is consistent with increasing each of the government's four major spending categories:

  • It raises Social Security and Medicare outlays to $1.063 trillion in 2009 from $597 billion this year.
  • It nearly doubles the spending on all means-tested mandatory programs -- like food stamps and student loans -- to $416 billion in 2009 from $222 billion.
  • It increases spending on non-means-tested mandatory programs -- including military retirement and farm price supports -- to $210 billion from $158 billion.
  • And it raises the remaining budget outlays for discretionary programs that Congress must approve each year -- including defense, transportation and environment -- in line with inflation, implying a rise to $677 billion a decade from now from $574 billion this year.

In short, even with the $792 billion tax cut and a $2 trillion- plus cut in the national debt, spending can still rise to $2.4 trillion in 2009 -- a 25 percent rise after adjusting for inflation, Feldstein points out.

He predicts that unless the Republicans hold firm on tax cutting, the Democrats will simply spend the money as soon as they next control Congress.

Source: Martin Feldstein (Harvard University), "The Truth About the Surplus," Wall Street Journal, August 6, 1999.

 

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