Treasury’s study, which took into account the obvious fact that the right tax cuts can boost an economy, found that Gross National Product, or GNP, grows the most if tax relief is limited to permanent marginal rate cuts and is offset by lower spending.
It also found that GNP declines in the long run if the government raises income taxes in the future to make up for today’s shortfalls. So we should certainly take that option off the table. After all, Congress cut taxes three years ago to improve economic performance. We don’t want to wreck that growth by raising taxes down the line.
The economists also determined that GNP increases in the long run if tax relief is made permanent and financed with future spending restraint. That’s a better approach, but it still assumes that tomorrow’s lawmakers will spend less than today’s are spending. History shows this isn’t likely.
In other words, the report provides plenty of good news. It predicts we will be able to make the tax cuts permanent, grow the economy and shrink the deficit -- if we’re willing to hold the line on spending.
Americans deserve the benefits of permanent lower tax rates and the smaller, less-intrusive government that should go with them. But the only way to get there is to cut spending. If we can’t do that, we may find ourselves with no loaf at all.