Paul F. deLespinasse: Slashing expenditures to balance budget would be a tragic mistake

If we don't reduce annual deficits, the national debt will become increasingly burdensome. Government must pay interest to investors holding its bonds, and as interest rates rise and the total debt increases, interest payments could become a much larger part of the annual budget.

Unless something is done, interest payments could exceed our military budget by 2029.

A group of radical Republicans proposes to cut major parts of the annual budget by 30% in order to balance that budget. But cutting this arbitrary amount across the board would be a horrible mistake. It would deprive Americans of vitally important government services.

It could also could throw the country into a serious recession. Increasing government expenditures stimulates the economy, but the converse is also true. A large and sudden reduction in spending could cause a major increase in unemployment.

But the fact still remains that we cannot afford to continue running huge annual deficits that are inflating the national debt. To reduce these deficits, we must either cut what is being spent or increase the taxes which produce the money used to pay for the services we are buying or some combination of these measures.

Obviously, we need to cut expenditures to the greatest extent that is compatible with providing needed services to Americans.

But since a major reduction in expenses would be irresponsible, we are left to confront the unpleasant fact that we will also need to increase tax rates as well as collect existing taxes that too many are currently evading.

Tax increases have historically not damaged the economy like major reductions in expenditures would.

And since there are not enough rich people to "soak", the needed tax increases will have to apply to nearly everybody. This is also an unpleasant fact, and it flies in the face of the present stance of politicians from both major parties.

Many Republican politicians have taken the Norquist Pledge never to raise any taxes. And leading Democratic politicians like Barack Obama and Joe Biden have repeatedly pledged not to raise taxes on anybody making less than $400,000 a year, which would exclude about 98% of the population from paying higher taxes.

A reasonable way to raise federal taxes might be to increase income tax rates on people in the top half of annual incomes. In order to protect future Social Security recipients, we will also need to increase the FICA payroll tax which supports Medicare and Social Security.

If we don't increase the payroll tax we will have to reduce payments to the retired by about 25% when the Social Security Trust Fund runs out of money in the mid-2030s.

The Social Security/Medicare payroll tax, half remitted by workers and half by employers, affects low and medium income workers but does not apply after employees earn more than a certain amount in a year. It also is paid on income from the ground up, unlike the income tax with its annual exemption at the bottom end.

Most income tax is paid by middle and upper earners. So increasing both the Social Security/Medicare tax and the income tax on higher brackets could distribute the increased taxation fairly on the entire population.

In order to enact the necessary tax increases, our political leaders will need to level with their constituents and explain to them the unpleasant facts of economic life.

To make it possible for leaders to get more honest about this, those of us in the academy and the press will have to educate people about basic economic facts.

Will it become possible to elect politicians who tell voters the unpleasant truth? Or will those telling people what they want to hear continue to win … allowing the country to slide toward an economic disaster that would destroy everyone?

TANSTAAFL — "There ain't no such thing as a free lunch!"

Paul F. deLespinasse is a retired professor of political science and computer science at Adrian College. He can be reached at pdeles@proaxis.com.

This article originally appeared on The Daily Telegram: Paul deLespinasse: Slashing spending to balance budget a mistake