This unfortunate trend can’t continue indefinitely, so sooner or later we’ll reach a point where politicians will feel pressured to address growing fiscal imbalances.
The crowd in Washington will want some sort of “budget summit,” which – if history is any guide – means that the senior lawmakers who created the problem go behind closed doors to craft a deal involving real tax increases and fake spending cuts.
Unsurprisingly, that approach doesn’t work. At best, the tax hike is a substitute for much-needed spending restraint. And in many cases, politicians treat the expectation of higher revenues as an excuse to increase outlays.
This isn’t just the pattern in the United States. Politicians all over the world have been raising taxes, yet debt levels continue to climb.
The right solution, indeed the only solution, is spending restraint. Which is the lesson Steve Davies expounds upon in this video for Learn Liberty.
Every single example Steve cites is supported by strong evidence.
Indeed, I’ve written about each and every nation he mentions.
What makes this debate so frustrating is that all the evidence is on the side of spending restraint.
It’s not just academic scholars who have shown that fiscal consolidations based on spending restraint are far more successful. Even left-leaning bureaucracies have admitted that spending control is the only approach that produces good results.
I’ve shown how limiting the growth of spending is the sensible way to reduce the fiscal burden of government and control red ink. And when I share this table during debates, I always ask my friends on the left to show their collection of nations that got good results with tax increases.
They’ve never answered my challenge.
The bottom line is that we know that the Golden Rule of spending restraint is good for growth, and we know spending restraint is the way to reduce red ink.
Daniel J. Mitchell is a top expert on tax reform and supply-side tax policy and is Chairman of the Center for Freedom and Prosperity. Mitchell is a strong advocate of a flat tax and international tax competition.