The Consequences of Excessive Government Spending

From CF&P, "Deficits, Debts and Unfunded Liabilities: The Consequences of Excessive Government Spending":

RELATED: Donald Marron, at National Affairs, "America in the Red":

Some Americans prefer a large, active government that provides a broad range of services and redistributes income among individuals and families in order to diminish disparities in economic outcomes. Other Americans prefer a smaller, limited government that provides essential public services — defense, a legal system, and a basic social safety net — but leaves most other decisions to individuals, families, and the private sector. A smaller government makes the task of keeping spending — and therefore deficits — under control somewhat easier. But if we choose a larger government, Americans must recognize that we will have to pay for it through higher taxes. Unbridled borrowing is simply not a viable long-term option ....

President Obama has backed himself into an unsustainable position with his campaign pledge not to raise taxes on Americans who earn less than $250,000 a year. The difficulty of upholding that pledge has already been illuminated by the debate over how to pay for an expanded federal role in health insurance. Once we turn to our ongoing fiscal problems, it will become obvious that high-income Americans simply do not make enough money to bear all the costs of fixing the federal budget. Consider some recent analysis by the Brookings-Urban Tax Policy Center's Rosanne Altshuler, Katherine Lim, and Roberton Williams, whose calculations suggest that the top two marginal tax rates would have to be increased to at least 70% to bring the deficit under control through tax increases on high earners alone. And even that measure seems unlikely to work — since, as they note, these calculations do not take into account the negative economic consequences of such high tax rates ....

Lobbyists are already arguing that various temporary provisions in the 2009 stimulus bill should be made permanent. While the congressional committees with oversight of education spending have found a way to eliminate $80 billion from the federal student-loan program, they plan to use most of it to expand other spending, rather than to reduce the deficit. The committees in charge of energy and environmental policy are considering proposals that would create almost $1 trillion worth of carbon allowances over the next ten years — only to give away or spend 99% of that money. And then there is the Democrats' health-care initiative, which would make a series of cuts to the budget only to use the savings to expand the federal government's role in financing health care.