Opinion: America needs real fiscal reform

Yahoo

14-05-2025

A thin majority (52%) of Americans believe it is possible to both balance the federal budget and cut taxes at the same time, while slightly less (48%) believe the budget could be fixed simply by reducing the growth of spending in Washington.
An optimist would take comfort that at least a good portion of the public believes fiscal sanity is within reach. Without at least a belief, the nation doesn't stand a chance.
But others may say those figures, part of a poll conducted by RMG Research for Napolitan News, demonstrate how few people grasp the challenge of closing an annual deficit that hovers around $2 trillion, let alone what it would take to chip away at a national debt that is nearing $37 trillion.
I will always lean toward the optimists, especially when I consider how dire the opposite — total fiscal collapse — would be. But I'm also a realist. Donald Trump's proposed budget doesn't get us there.
Oh, it would do a lot of things you might like.
You could deduct the interest you pay on car loans. Every baby your family brings into the world would receive a $1,000 savings account as a start on life, with parents or others allowed to add up to $5,000 per year to the account, tax free, until the child is 31. Taxes on tips and overtime earnings would disappear, within limits, and people 65 or older would see an extra $4,000 added to their standard deduction, meaning they would pay less in taxes. Lower taxes will spur economic growth.
It would make some deep cuts, including to bureaucracies and redundant programs.
But it also chips away at Medicaid, an entitlement program for which states pay about 30%, by pushing more costs onto states, much of which they can't afford.
Many poor people would lose services, as was made clear in an analysis sent to two members of Congress earlier this month by the non-partisan Congressional Budget Office.
It may be easier to pick on low-income, needy people than the more well-heeled recipients of Social Security and Medicare. It may be tough to say no to the military. But you can't fix the budget without fixing them first.
The proposed budget is 'more rhetorical than revolutionary,' wrote Veronique de Rugy, the George Gibbs Chair in Political Economy and Senior Research Fellow at the Mercatus Center.
In a piece published both by Reason magazine and the Cato Institute, she said the cuts may look impressive, but they 'lose luster' when compared to the added spending for the military and border security and the continuation of the 2017 tax cuts.
'And for all its fiery declarations, the budget fails to truly confront the drivers of our fiscal crisis,' she said.
Any genuine discussion about fiscal sanity should begin with the University of Pennsylvania's Penn Wharton Budget Model brief that was released nearly two years ago. It estimated that disaster will come when the nation's total debt equals about 200% of its economic output, or GDP. And, at the time, the scholars there estimated the nation had 20 years, probably less, until that point.
Disaster will be triggered when investors believe the U.S. is no longer capable of paying its debts.
When that happens, according to the brief authored by Jagadeesh Gokhale and Kent Smetters, 'no amount of future tax increases or spending cuts could avoid the government defaulting on its debt whether explicitly or implicitly.'
The U.S. would have little choice but to inflate the dollar in an attempt to pay off the debt at interest rates that would have to rise in order to attract skittish investors. That would lead to the destruction of wealth and increased unemployment.
Viewed against those predictions, both the Trump administration and those who decry his proposed cuts miss the point. Yes, politicians should be more surgical and smart than they are now in cutting. But no one should turn a blind eye to what's at stake.
Fifteen years ago, former Wyoming Sen. Alan Simpson, a Republican, and Bill Clinton's former chief of staff, Democrat Erskine Bowles, got together and devised a credible plan to save the nation fiscally through strategic tax hikes and budget cuts.
No one in Washington wanted to touch it.
That was when the national debt totaled only $12 trillion.
As de Rugy put it: 'We don't need more of the same; we need evidence of a serious turnaround. Until that happens, we have little choice but to assume that Trump's budget is another big-government blueprint in small-government clothing.'
Instead of just believing, maybe Americans should start demanding action while there is still time.