Will America Be a Fiscal Failure?

Investor's Business Daily has an excellent editorial on fiscal policy, and not just because they quote me. They understand that America's fiscal problem is spending rather than deficits. They also realize that tax increases are completely misguided since the economy will be less vibrant and politicians will feel more leeway to spend money. The net result would be continued deficits and even bigger government.

...leaders of President Obama's deficit commission offered up the darkest of outlooks for our financial future — calling current trends in U.S. budgets a "cancer" that will "destroy the country from within" unless halted soon. ...Based on current estimates, today's total federal debt of just over $13 trillion will hit $20 trillion by 2020. Beyond that, the coming retirement tidal wave of 65 million baby boomers will push Social Security and Medicare spending to stratospheric levels. America's debts will become crippling. By some estimates, total U.S. commitments for entitlements total $107 trillion over the next 75 years or so. That's an unpaid tax bill of $912,000 per household, or $351,000 for each child born today. Besides, raising taxes will do little other than ruin the economy. As noted recently by the Cato Institute's Dan Mitchell, repeated studies over the years have shown that the optimal size of federal government spending to the economy is well below about 20% of gross domestic product. Anything above that kills off economic activity. ...By the way, when state and local spending are added in, government in a few short years will take up more than half of all U.S. GDP. In short, the U.S. is essentially on the road to becoming just another stagnant, state-run welfare economy. The only real answer: Shrink government to expand the private sector. Anything else, such as massive tax hikes, is doomed to failure.