Tax Hikes Not Needed to Balance the Budget | Daniel J. Mitchell | Cato Institute: Commentary

Tax Hikes Not Needed to Balance the Budget | Daniel J. Mitchell | Cato Institute: Commentary: "Washington insiders say that tax increases are unavoidable because deficits are too large. Since these often are the same people who supported 'Obamacare' and the so-called stimulus, their crocodile tears about red ink probably are not very sincere. But hypocrisy is not necessarily the same as inaccuracy, so let's look at whether it is possible to balance the budget without higher taxes."

"One approach would be to get rid of counterproductive forms of spending such as the Department of Agriculture, energy-subsidy programs, Department of Housing and Urban Development, Small Business Administration, Department of Education, National Endowment for the Arts, and Department of Transportation."

"For much of America's history, when such restraints were honored, federal spending was on average only 3 percent of economic output. If we did the same thing today, federal spending would be about $450 billion. We'd not only have a balanced budget; we'd have a giant surplus and could easily afford to abolish the income tax."

"Politicians simply need to reduce the rate at which spending is growing.

It's a simple matter of mathematics. The Congressional Budget Office estimates that tax revenue will grow by an average of 7.3 percent annually over the next 10 years. Reducing the budget deficit is easy — so long as politicians increase overall spending by less than that amount. And with inflation projected to be about 2 percent over the same period, this is an ideal environment for some long-overdue fiscal discipline."

"If spending is simply capped at the current level with a hard freeze, the budget is balanced by 2016. If we limit spending growth to 1 percent each year, the budget is balanced in 2017. And if we allow 2 percent annual spending growth — letting the budget keep pace with inflation, the budget balances in 2020."

"Milton Friedman was correct many years ago when he warned that, 'In the long run government will spend whatever the tax system will raise, plus as much more as it can get away with.'"