Saturday, January 01, 2005

A real conservative speaks

As quoted in Brad DeLong's Semi-Daily Journal. This is by Andrew Samwick originally published in the WSJ.
[I]f we are in a cyclical upturn, then why are our tax and spending policies such that we are running budget deficits (even including the Social Security surplus) in excess of $400 billion? Why have we settled for a rather timid goal of merely cutting that budget deficit in half over five years? Leaving aside the longer-term solvency issues of Social Security and especially Medicare for the moment, if the president and Congress cannot balance the budget with six quarters of growth at a 4.4% annual rate and steady growth in the economic forecast, then I will be considerably less optimistic next year that price changes will be mild and that economic growth will continue. …

Cutting taxes isn't the rational way to make the government smaller, the one true purpose of a Republican administration's fiscal agenda. The way to do that is to reduce government spending so that tax rates can subsequently be lowered with the budget in balance over the business cycle. We are nowhere close to that scenario, and so discussions in Washington policy circles of yet more tax cuts are particularly unhelpful. Taxes may be 'bad,' but long-term deficits are surely much worse. The president needs to keep some of his tax cuts, rescind or sunset the others, rationalize the alternative minimum tax, and then move on to entitlement reform of Social Security and Medicare, which remain the long-term fiscal challenges.

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