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No, Democrats, tax rates are not the reason for the debt . . . and you don't like to talk about the real reasons
There are three of them, and everyone is scared to death to so much as mention them.
Members of Congress who oppose the tax cut are using the national debt as an excuse for their stubbornness. They cite analysis from the Congressional Budget Office that claims the tax cut will add $1.4 trillion to the debt over a decade.
The CBO is almost always wrong in its analyses because it uses static analysis that gives no consideration to how economic activty might change as a result of the lowered tax rates. Whatever happens to the deficit and the debt over the course of the next 10 years will not be determined by the movement in tax rates.
What will determine it then?
We can make it better with pro-growth policies, and this tax plan is a pro-growth plan. We've just seen two consecutive quarters with GDP growth over 3.0 percent, and that's a very good start. But if we can consistently achieve growth of between 4.0 percent and 5.0 percent, we can significantly reduce how much we're having to borrow to fund government operations because we'll expand the tax base tremendously.
Even so, even consistent 5.0 percent growth is probably not going to balance the budget in the coming years. Why? Because we are already spending more than $4 trillion a year, and that's going to explode on our current trajectory because of three things:
- Social Security
Whether you want to admit it or not, these three entitlement programs are making any sort of fiscal discipline in this country impossible. Current law considers these programs mandatory spending, which means Congress has no choice but to fund them fully according to the aging of the population and how much people qualify for the retirement and health care benefits promised under them.
These entitlement programs are already approaching 70 percent of the federal budget, and within a decade they're expected to be 78 percent of the budget. How can they be so much? Because the aging of the Baby Boomers is a real phenomenon. People are living longer and this particular generation includes an awful lot of them. Yet we have done little to change the entitlement formulas because politicians are terrified of what will happen if they're perceived as breaking their promises.
What we need to do is rethink how these programs work. We've already heard some good ideas. One is to change funding for Medicare and Medicaid to premium support rather than actually paying all the bills. Another is to means-test Social Security or raise the retirement age, so we're not paying benefits to people who don't need them.
We have to cut spending if we're ever going to balance the budget. And that means we have to spend less on entitlements because that's where the money is.
President Trump has said that after tax reform he wants to tackle welfare reform. I'm all for that, but we're kidding ourselves if we think we're ever going to achieve fiscal discipline while leaving entitlement programs as they are. We're not. The only question is whether we fix it now while we're still looking ahead at the inevitable crisis, or whether we wait until the crisis is full-blown.
Which do you think sounds like the better plan?
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