Facing a potential government shutdown later this month, federal policymakers are scrambling to negotiate spending bills while preparing to decide the fate of several expiring tax provisions. Unfortunately, his three widely held but deeply mistaken beliefs threaten to distort Congressional deliberations and further jeopardize America's future.
as mark twain “It's not what you don't know that gets you into trouble. It's what you know that's never the case.”
False Belief #1: “We [the federal government] You don't have to balance your checkbook. We are like the banker in Monopoly. We are the ones who create the money. We give away money that others use when they play the game. ”
Congressman John Yarmuth (D-Kentucky), who was the House Budget Chairman at the time, was literally arrested. on film That's what I'm claiming. He argued there was no need to rein in federal spending. As Yarmuth said, “We can pay whatever we want.”
That fallacy is why the federal government is poised to spend $6.418 billion this year. That's $204,000 per second.
Considering the speed of light is 186,000 miles per second, the federal government is literally spending faster than the speed of light. (Related: John Stossel: The world needs more Elon Musk and less Elizabeth Warren)
What's causing the problem? The federal government's aging budgeting process pays lip service to the concept of scarcity and does little to encourage careful consideration of national priorities and associated tradeoffs. there is no.
Sadly, thomas sowell “The first lesson of economics is scarcity. There is never enough to satisfy everyone who wants it. The first lesson of politics is to ignore the first lesson of economics.”
Myth #2: Tax cuts are costly.
Several elements of the Tax Cuts and Jobs Act of 2017 (TCJA) are as follows under current law: Phased out and completely expired When Republicans talk about extending these policies, opponents invariably claim that doing so would be “costly.” trillions of dollars.
In reality, changing tax policy does not “cost” anything. Taxation is just one of the tools governments use to obtain their own access to resources from the private sector. Tax cuts change the mix of how the government extracts resources, reducing taxes a little and borrowing a little more.The extraction method is important, but in general few It is more important than the fact that it is the government, not the private sector, that is consuming or allocating these resources.
Federal spending is the real cost.
The federal government has to pay the bills, but the impact of tax policy on economic growth and national prosperity should be a vital consideration. The expected revenue losses associated with tax changes must be weighed against the effects of maintaining an economically destructive tax system or allowing pro-growth provisions to expire. (Related: Alfredo Ortiz: December jobs report is cold comfort for America's Main Street)
For example, the bipartisan Tax Foundation argued last year that permanently extending four key expiring TCJA business provisions would reduce long-term gross domestic product (GDP). 0.6% There was a dynamic revenue loss of $568 billion over 10 years. In nominal dollars, a 0.6% increase in long-term GDP means a cumulative GDP increase of $723.1 billion over 10 years. In other words, permanently extending the TCJA's business provisions would increase GDP by $1.27 for every dollar lost in federal revenue.
If that’s not a worthwhile trade-off, what is?
The bottom line? Cost is not the right word to use when discussing tax policy.Quoting Mark Twain again“The difference between an almost right word and a right word is a really big deal. It's the difference between a lightning bug and a lightning bolt.”
False Belief #3: Recent Moody’s lower federal credit outlook It has changed from “stable” to “negative”, but there is plenty of time to clear up this mess.
In Ernest Hemingway's classic, the sun will rise again, Mike Campbell, a Scottish military veteran, is completely penniless. He asks why he went bankrupt. mike answers“Two ways. Gradually and suddenly.”
The federal government is 21cent Mike Campbell of the century.
$33.9 trillion and trillions more in debt. unfunded liability, the federal government faces a rapidly deteriorating fiscal outlook.According to the Congressional Budget Office (CBO), federal spending will push the budget deficit to nearly zero. $3 trillion annually within 10 years.
But the costs of Washington's profligacy are already beginning to mount. Net interest payments on the federal debt are exploding, given the Biden-era inflation and interest rate increases.Increased by $176 billion I became single just last year. fastest growing Elements of Federal Expenditures. According to the CBO, annual interest costs increase as follows: $1.44 trillion That's up from just $710 billion last year in less than a decade.
pen wharton “Under current policy, the United States has about 20 years of remedial action, after which no amount of future tax increases or spending cuts will result in the government defaulting, either explicitly or implicitly. (i.e., debt monetization causes significant inflation) cannot be avoided.''
God help us!
James Carter served as Assistant Secretary of Labor and Assistant Secretary of the Treasury under President George W. Bush. He then served as Chief Economist on the Minority Staff of the U.S. Senate Budget Committee.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.
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