Before you continue reading, let this sink in: During the last year, tax collections by Uncle Sam increased by 4 percent. However, spending increased by 8 percent — twice collections — according to the Congressional Budget Office.
These numbers are important and it’s certain that politicians and commentators will refer to them repeatedly if Donald Trump suggests it’s time for a second tax cut. Such talk is thought to be foolish among the politicians and pundits who blame Trump’s Tax Cuts and Jobs Act for running up the federal deficit by $1 trillion while conveniently forgetting how the tax cuts were a shot of adrenalin to the U.S. economy.
Trump’s tax cuts contributed to the red ink on Uncle Sam’s ledger — but the cuts should not shoulder all the blame for the expanding deficit.
Remember, in the past year tax collections increased 4 percent, but federal spending shot up by 8 percent.
The lesson in those number is not to avoid tax cuts, but instead to pair tax cuts with federal spending cuts. Our new $1 trillion deficit wasn’t created because government didn’t collect enough of our income, it’s because our elected leaders didn’t put a hold on spending.
The tax cuts constituted a pro-growth strategy, but the 8 percent spending increase was anti-growth. Our elected representatives managed to ruin pro-growth tax cuts by going wild with deficit spending.
So don’t blame tax cuts entirely for the exploding deficit. Uncontrolled spending is the larger culprit, and each time the federal debt rises, Americans must send more and more money to Washington.
Trump isn’t crazy to call for another tax cut, but if he presses for it, he had better have a plan to cut spending. Dialing back spending would double the benefits of tax cut because Americans would have more money in their hands, and investors would have a greater reason to plow money back into their businesses and industries.
Investment is what fuels growth.
Just as children need nourishment to grow, businesses and industries need investments.
The Tax Cuts and Jobs Act has demonstrated how putting more money in Americans’ hands is a formula for prosperity.
But we can and should do better. Americans never should allow their federal government to increase spending by 8 percent. Our economy eventually will implode if we don’t turn off the spigot. Next go-round, the federal tax cut should and must be accompanied by aggressive spending reductions. Americans desire a strong national economy, but it will buckle if our leaders fail to make the tax cuts of 2017 permanent by cutting spending now.