"Out of debt"
A lot of Americans think the federal government can't do anything it sets out to do. But that's erroneous. What we have learned in the last decade is that both presidents and Congress, both Democrats and Republicans, are very good at doing one thing: running up government debt.
That's the reason for the National Commission on Fiscal Responsibility and Reform, appointed by President Barack Obama to find ways to stem the red ink. Under President George W. Bush, who had a GOP Congress for most of his tenure, a budget that had been running a surplus plunged into deficits. Under Obama the pace of deficit spending has become even scarier, with this year's shortfall expected to be nearly $1.5 trillion.
As it happens, the tax cuts passed under Bush are scheduled to expire Dec. 31. Republicans want to extend them, and the administration agrees except when it comes to upper-income households. But if Congress and the president can't agree, they will all vanish, hitting the economy with a big tax increase.
Given the ever-deepening budget hole in which Washingtonfinds itself, there is some appeal in trying to pull in more tax revenues. But at this stage, it would be a terrible mistake, not only for the health of the economy but for the nation's long-term fiscal health.
Given the total collapse of spending restraint over the last decade, there is no reason to think a tax increase would do much to bridge the gap. More likely, Congress and the president would spend every extra nickel — and then spend some more.
Nor does it make sense to place a new weight on the economy when it is already struggling to grow. At the same time, Congress can't afford to indulge the notion that endless borrowing is a sustainable strategy.
What to do instead? The wisest option is to extend the tax cuts for a year and then see what the deficit commission proposes to curtail our addiction to debt.
Undoubtedly that will include some measures to boost revenues, preferably by closing or limiting tax loopholes that have outlived their usefulness. But those changes will have to be more than matched on the outgo side — as indicated by co-chairman Erskine Bowles, who suggests a healthy ratio of $3 in spending cuts for every $1 in tax increases.
That won't be easy, but it's essential if we hope to foster lasting prosperity while sparing the taxpayers of tomorrow an insupportable debt burden.
Coupled with spending discipline, revenue measures can be one leg of the journey back to fiscal sanity. But if they are the first and only leg, they will be a fatal detour.