After two months of talks, the super committee announced failure on Monday to agree on reducing federal deficits by $1.2 trillion over the next decade. But as the late economist Herb Stein once remarked: If something cannot go on forever, it won't. That applies to the mounting budget shortfalls. But how?
President Obama's answer is higher taxes. But he can't be serious. Just accommodating his spending plans over the next decade requires across-the-board tax increases of 20%. Over the next 25 years, taxes would need to rise across the board by 60%.
Instead, what is needed is spending reform that offers goals, specifics and ways to blend fiscal responsibility with modernizing government. This includes near-term action on discretionary spending and longer-term action to reform entitlements and reduce the growth of Social Security and Medicare. Then revenue contributions can be addressed in the context of tax reform.
The first goal is to reduce federal spending to a healthier 20% share of GDP from today's bloated 25% within a decade. A tall order, yes, given the profligacy of the last few years. But it can be accomplished by eliminating unnecessary federal programs, empowering states, and reforming and streamlining government.
