MY VIEW: Marc Goldwein and Jason Peuquet
Today is Tax Day and Financial Literacy Day, and just as we examine our own finances, our federal government should do the same. In The Hill, CRFB's own Senior Policy Director Marc Goldwein and Research Director Jason Peuquet write that this year will be critical for our nation's future finances. In laying out the problem, they say:
Having already grown from its historical average of below 40 percent of the economy to about 70 percent today, the nation’s debt is on course to rise to 85 percent of the economy by 2022, and 150 percent by 2040. By contrast, federal revenues have historically been at about 18 percent of the economy. It doesn’t take a financial literacy class to know that if you owe eight times as much as you earn, you are probably in trouble. The time to address our federal deficit is right now.
As regular readers of The Bottom Line already know, the sequester, the expiration of the 2001/2003/2010 tax cuts, and the expiration of the payroll tax cut, among other things, are all due at the beginning of 2013 -- a huge fiscal cliff. While the fiscal cliff would dramatically reduce the deficit, its magnitude could stall an already weak economy. Also, the policies involved are not the smartest way to reduce the deficit.
Do we need more revenue and more spending cuts? Absolutely. But the revenue should come from comprehensive tax reform that lowers rather than raises marginal tax rates and that reduces the deficit by cutting the various deductions, exclusions and credits, which are really just spending in the tax code. And the spending reductions should be focused on cutting wasteful and anti-growth spending and controlling the growth of entitlement costs — not mindless wholesale cuts that hit good spending as well as bad.
Changes set to occur at the end of the year offer an incredible opportunity for our leaders to act proactively and replace the automatic and abrupt savings with smart reforms. We must not let the moment pass us by.
The full op-ed can be read here.
"My Views" are works published by members of the Committee for a Responsible Federal Budget, but they do not necessarily reflect the views of all members of the committee.