Back to Budget Deficits
September 3, 2002
The Congressional Budget Office has released new budget projections showing larger deficits over the next few years than previously estimated. Democrats -- as predicted -- immediately attacked the Bush Administration for cooking the books.
With no budget plan of their own, Democrats are proposing a budget summit to lure President Bush into the same kind of mistake his father made in 1990. The elder Bush abandoned his pledge not to raise taxes, virtually guaranteeing his defeat in 1992. But Bush should have known better.
- A study by the Tax Foundation in 1990 showed that the net effect of all the budget negotiations of the 1980s was to increase taxes AND deficits.
- Deficits increased in almost all budget summit years because Democrats always demanded increases in domestic spending to compensate them for raising taxes, causing a surge in spending after each summit.
- Unfortunately, Democrat pledges to restrain spending were insincere, which is why the only meaningful part of the deficit reduction packages was the tax increase.
- As Ronald Reagan often noted, he was promised $3 of spending cuts for every $1 of tax increase in the 1982 budget deal -- but while the taxes went into effect, Congress never cut spending.
Academic research shows the only thing that leads to real reductions in spending is tax cuts. Even some liberals now concur. Writing on Slate.com, Mickey Kaus recently argued that the Bush tax cut has aided spending restraint, "because Congressional (and executive branch) spenders now know that the money is not there to spend."
As a share of the economy, deficits are a modest problem. [See the figure.] Raising taxes or rescinding tax cuts (the same thing) would fuel additional spending and neither reduce deficits nor aid the economy.
Fortunately, George W. Bush is not likely to be fooled by the budget summit ploy.
Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, September 2, 2002.
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