Washington is filled with talk of a major tax cut proposed by President Trump. I would suggest that now is not the time for a tax cut since our deficit is so high. I am an old-fashioned deficit hawk in that I think the greatest stimulation to the economy is a balanced budget and a reduced deficit.
During my lifetime we have had a lot of talk about tax cuts, but I would submit that not a single one has really stimulated the economy. Indeed, many economists argue that the major tax increase under President Bill Clinton, which led to a balanced budget, laid the basis for a prosperous economy for several years.
I must confess that I didn't always think this. In the late 1970s when I entered Congress, I was a supporter of President Ronald Reagan's proposed tax cuts. Reagan's cuts triggered such a high deficit that a number of other new federal taxes had to be immediately imposed to slow down the deficit. It seems that each incoming president has always proposed in his campaign to cut taxes, but in reality, as our defense spending and domestic spending has increased, taxes have had to be increased to keep the deficit down.
With all the promises of new increased military spending and social spending, we will need to have some tax increases to improve federal revenue over the next few years. We seem unwilling and unable to cut social spending. We are faced with a dilemma: Tax cuts are popular, but it is unpopular to vote for a simultaneous spending cut.
The answer to this dilemma for many is that tax cuts stimulate the economy and create more income. However, this is not true. The assumption that tax cuts stimulate the economy has not worked in the past.
We have had a lot of prosperity but there is no evidence stating it's due to tax cuts. Indeed, as mentioned, one can build a case that Clinton's tax increase stimulated the economy by bringing the deficit down and by having a balanced budget for the only time in recent history. In fact, The Washington Post had a piece on April 26 about the real effect of tax cuts, whether they are under Reagan, Kennedy, Bush or whoever. In fact, tax cuts may slow it in some cases. In my eyes, the real issue is the deficit. I believe at the end of the day the deficit will do more damage to economic growth than anything else.
If we are to avoid increasing the deficit we may need to restore some of the estate tax, increase individual rates up to 50 percent, and still cut spending. However, in our democracy, no incumbent can politically survive if military and social spending is cut. Citizens must understand there is no free lunch. Politicians talk of tax cuts at a time of spiraling deficits is irresponsible. That is the old-fashioned approach that seems to have been abandoned.
Every president and Congress has gone through this cycle at least since 1974 when I started. My questions is: When will we have the courage to do the hard thing, the right thing — to responsibly use tax revenue to pay down the deficit? Citizens must send a wake-up call to both the House and Senate and have the courage to tell them that we can't have a tax cut unless we do something about our spiraling deficit. We cannot just pass a huge deficit onto our children as it will eventually cause an economic train wreck.