You may think there isn't much common-sense anywhere close to Capitol Hill, but less than a ten minute drive away there is a veritable wellspring to be found in the person of Dan Mitchell, Senior Fellow at CATO. Mitchell is an expert on tax policy and supply-side economics.
With the clock ticking rapidly to the end of the year when higher tax rates and budget sequestration are scheduled to automatically kick in, lawmakers are deadlocked over a solution to avoid going over "the fiscal cliff."
Most of the attention has focused on sucking more money out of the taxpayers pocket and into the U.S. Treasury. Barack Obama and Tim Geithner remain in their "no-deal-without-higher-tax-rates" bunker. The President wants $1.6 trillion more. Republicans are willing to talk about "revenue" increases even if not higher tax rates. They have put $800 billion on the table.
But, Mitchell points out that barring a recession, government will get more revenue even without raising tax rates – quite a lot more, in fact. "Indeed, the Congressional Budget Office projects that tax revenue will climb by an average of more than 6 percent annually over the next 10 years –even if the 2001 and 2003 tax cuts are made permanent," Mitchell explains.
Wow! But, I thought Barack Obama and Nancy Pelosi said those Bush Tax Cuts cost us hundreds of billions, created the trillion dollar deficits, and caused the recession?
If the President and other politicians really wanted a "balanced" solution to the nation's fiscal crisis, Mitchell knows exactly how to make it happen. "All that's really needed to bring red ink under control is a modest bit of spending restraint," he writes in a recent memo.
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And, then there's Mitchell's Golden Rule: "Good fiscal policy exists when the private sector grows faster than the public sector, while fiscal ruin is inevitable if government spending grows faster than the productive part of the economy."
But, since 2007, federal spending has increased nearly 30 percent while the economy expanded just over 8 percent. Sounds a lot like Mitchell's formula for "fiscal ruin," doesn't it?
Back in 2010 when the politicians were also discussing the fiscal mess, Mitchell produced the following seven minute video. It is as relevant today as it was then. Within the Washington cacophony, Mitchell is a tiny island of sanity.
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