You may recall that yesterday I commented that there is no realistically foreseeable level of taxation that will pay for the programs we’ve already got. Today the Tax Foundation has a little support for my assertion:
During the fiscal year that’s just beginning, fiscal year 2010, the federal government plans to spend $3.8 trillion dollars, the largest annual expenditure ever. On the revenue side, taxes will bring in about $2.3 trillion, so the federal government is creating a shortfall of approximately
$1.5 trillion. That projected deficit will vary as the months pass, but it may well end up being even higher than the record-setting deficit in 2009 of $1.4 trillion. Those huge amounts translate into a federal government that will spend $33,000 on each household but that will raise only $19,000.
Although President Obama and the Congress do plan to raise taxes, which will cut into the deficit, they also have new spending plans, leaving the budget with historically huge deficits throughout the next decade. Those deficits will be financed by selling U.S. Treasury bonds to people all over the world and paying them back with interest in years to come. But instead of borrowing, could a congress willing to bring taxpayers the full bill for this year’s spending erase the deficit by raising taxes this year?
And here’s what they came up with:
I’ll go out on a limb here and predict that isn’t a realistically foreseeable level of taxation. That means that we can’t get our fiscal house in order by additional taxes alone. We’re going to need some spending restraint and some borrowing.
Keynesian theory says we should balance counter-cyclical stimulus with pro-cyclical cuts. Unfortunately, we’ve never had the stomach for making the cuts and the result is the mess that we’re in right now.
Don’t expect growth to pull our onions out of the fire, either. Just as you don’t count on winning the lottery to pay your rent, don’t count another dot com boom to enable us to continue our profligate spending ways.
Hat tip: TaxProf Blog