Spending Cuts Aren’t the Only Way to Reduce the Deficit

Spending Cuts Aren’t the Only Way to Reduce the Deficit

An increase in revenue would be just as effective as spending cuts in reducing the federal deficit.

The Fiscal Times

The phrase “death tax” was one of the most impressive public relations stunts of all time. 

Using it instead of the actual name — estate tax — almost immediately transformed a tax that applied only to a comparatively small group into a tax that everyone seemed destined to pay.  After all, few people think they have an estate but everyone is sure they’re going to die.  The new name instantly changed the politics of the estate tax by making increases much tougher to enact and reductions far more popular than had been the case before.

When it comes to the current federal budget debate, the new death tax-like phrase is “spending.”  We’re told that spending is the problem, that to deal with the deficit we need to cut spending, and any increases in spending will bring the United States to its fiscal and economic knees in the not-too-distant future.

“It’s not just about one program, it’s about the wasteful and inefficient spending that is a part of every program,” Gretchen Hamel, who heads a new anti-spending organization called Public Notice, was quoted saying this week in Talking Points Memo.

“Our government needs to … find ways to stretch dollars and spend them smart and effectively."

But in much the same way that the phrase “death tax” is incorrect because the government doesn’t actually tax dying, insisting that the only way to reduce the deficit is to cut spending is also deceptive and insidious.

If you suspend your ideology and personal preferences for a moment, it’s actually quite easy to see how wrong it is to say that the deficit is solely a spending problem.

First, on a purely mathematical basis there are always two ways to reduce the deficit: by cutting spending and increasing revenues.  Both will get you where you want to go and the bottom line will be improved if either occurs.

Second, proponents of the deficit-is-only-a-spending-problem tagline frequently cite the fact that federal revenues are projected to be at their historical average in the future but spending is estimated to be much higher than it ever has been before.  That proves, they say, that this is a spending problem only.

Not really or, actually, not at all. 

It’s not written in stone, the U.S. Constitution, or anywhere else that the average annual level of revenues collected must never be higher than when Eisenhower was president, the Vietnam War was fought, and disco was king. Far more important, federal spending is projected to increase both because there has been and continues to be an almost obvious desire for the government to provide additional services and do more things, and because much of what it was already doing now costs much more than it did when Bill Haley and the Comets were the hot band on AM radio. 

Insisting that the deficit is just a spending problem basically says that what Washington is doing, that is, what people have demanded it do and what their representatives and senators thought appropriate to approve -- from Medicaid to agricultural price supports to medical research -- should never have happened and the votes by Republican and Democratic-controlled Congresses and signatures by presidents were inappropriate.  It also says that the higher federal costs of ongoing activities -- for example, defense and intelligence in today’s more dangerous world, and Medicare for an increasingly larger number of retirees – is something the government shouldn’t be obligated to pay.

This means the federal budget deficit can be as much a problem of too little revenue as it is of too much spending.   You may prefer one over the other and be willing to fight to the death to get it done, but that doesn’t in any way mean that revenue increases and spending cuts won’t accomplish the same thing.

But remember, if you die trying, the “death tax” may apply.

Stan Collender is a partner at Qorvis Communications. His blog is Capital Gains and Games.