Reducing the Deficits of the Federal Government
It has again become openly fashionable to rhetorically complain about excessive government spending. One can wax eloquent about the fundamental insincerity of the complaint, but this misses a rather elemental and important point: it is possible to reduce the ongoing deficits of the Federal government. The simple mechanism for doing so is tax cuts.
I have written about this previously, illustrating that every tax cut ever enacted since John F. Kennedy has increased revenue to the Federal government. Now it must be said and almost always is pointed out among critics that in the first year of collection, revenues go down. But what is absolutely clear is that within less than five years, government revenues increase dramatically. The growth of federal deficits over the past 60 years is directly attributable to excessive spending and not to a lack of revenue. The roaring power of American revenue generation is the reasonable basis for gradually abolishing deficits and ultimately the debt itself standing at near 30 trillion dollars.
The most recent entry in this economic proof model is the tax cuts enacted by President Donald Trump. The Trump tax cuts went into effect on January 1, 2018. Stephen Moore rightly notes that earlier this month the treasury department reported USFG revenue being near 5 trillion dollars. In the year prior to the implementation of the Trump tax cuts, government revenue was about $3.5 trillion. That is a near 50% increase in revenue paid primarily by taxpayers to the Federal government. This revenue generation is present in an era of 2020-2021 government lockdowns that paralyzed the American economy. This astounding economic magic trick has taken place in every case attempted since John F. Kennedy’s tax cuts in the early 1960s.
The proven tax-cutting model establishes a virtuous political action cycle whereby the deficit can be reduced and by the end of the century, the debt abolished. How is this possible? If government spending is held below the levels of revenue increase on an annual basis, deficits will immediately begin to fall. Of course, at the turn of the 21st century, the United States experienced zero deficits years. Holding spending below revenue increases should not be onerous. In this most recent case, revenue has increased 50% in the past five years. This means an annualized rate of revenue generation around 10% a year. Spending increasing at 5% a year leaves 5% toward deficit reduction and avoids the standard fiscal political trap of saying that reductions in deficits require cuts in spending. That is plainly untrue. It is likely that in a virtuous cycle of tax cutting, spending by the federal government could easily increase by 2-4% without jeopardizing deficit reduction. It is possible to increase federal spending annually while reducing the deficit because revenues are increasing by a greater margin than the spending.
There are more draconian measures for reducing the debt and the deficit that are relatively painless. More than half of the western United States is owned by the Federal government. The primary purpose in that holding is arguably to prevent economic development in the United States. That may seem harsh, but our environmental ethic generally acknowledges this. Since the Teapot Dome scandal of the 1920s, it is a fundamental ethic that the lands of the federal government shall never pass into private hands. A pessimistic reading of this matter by the CATO institute estimates that federal lands and practical assets are worth about $4 trillion. That is not a paltry sum, and it does ignore the ongoing economic values of those lands once held in private hands subject to basic taxation processes. The CATO study also ignores the billions of dollars spent regularly by the federal government to “maintain” these lands. Economic development on private lands would likely increase government revenue dramatically beyond the initial asset sale of such property.
It is important to understand that federalism within our constitutional system provides reassurance that such a model of deficit reduction is possible. The state of Texas is the most dramatic model with a state surplus of $33 billion. Its state legislature meets every other year. Texas’ well-known limited government model produces enduring surpluses that serve a massive and growing population. Even the state of Ohio has a surplus in the billions. States like New York and California indicate the opposite outcome of deficits. Nonetheless, the examples of large states holding fiscal surpluses is another indicator that there is realistic hope of reversing our national course and making progress on reducing deficits and ultimately the debt.
Dr. Ben Voth is a professor of rhetoric and director of debate at Southern Methodist University in Dallas, Texas. His forthcoming books examine the political rhetoric regarding race and sex in the presidencies of Woodrow Wilson, Warren Harding and Calvin Coolidge (Lexington 2023) and Political Campaign Communication (10th edition).