It may seem counter-intuitive to suggest that taxes and the debt can both simultaneously be reduced. In order to trim the debt, it would seem necessary to keep taxes at the current level, or even increase them. But this is not so. It is quite possible to diminish the debt while curtailing taxes, as long as spending is lessened at that same time. The technique is this: to lower spending at a slightly quicker rate than the cuts to taxes. In this way, more money is made available to reduce the debt even while cutting taxes.
Debt, taxes, and government spending form a trio which consistently and inevitably put a damper on the economy. While the numbers change so quickly - amount of national debt, unemployment rates, inflation rates, government spending budgets, tax rates - that any detailed comment about the economy is outdated as soon as it is printed, the general principles remain unchanged. In 2010, Ted Nugent wrote:
President Obama's stated program is to eliminate the tax cuts of President Bush, to raise the top marginal tax rate on the so-called "wealthy" who already pay the vast amount of income taxes, raise Social Security taxes, and provide tax dollars to fund private retirement programs. He supports throwing more tax dollars into the government's feed trough to gobble up. Not me.
Shortly after Nugent wrote those words, taxes on all workers were increased. Every job-holding American is paying more taxes. The national debt has more than doubled in a single four-year presidential term. In the same year, Chuck Norris wrote:
Washington's most recent financial spiral started with the Bush Wall Street Bailout (TARP) of $700 billion (what I call new debt #1). But then it continued under President Obama, who pushed for the next $787 billion stimulus bill (debt #2). And that wasn't enough either. Then they tried the $410 billion omnibus spending bill (with 9,000 earmarks - 60 percent Democrat and 40 percent Republican in origin), which like the others was railroaded through Congress (debt #3). Then President Obama informed us that another $634 billion would be required for a down payment for universal health care (debt #4) and so on. All of that doesn't include other economic stimuli needed on the government horizon, as Representative Daniel Inouye (D-Hawaii), chairman of the Senate Appropriations Committee, noted when he called the mammoth $787 billion spending bill "stimulus No. 1."
Note the bi-partisan guilt: both President Bush and Obama supported "stimulus" bills. Both Democrats and Republicans maneuvered to get earmarked funds. The notion that certain companies were "too big to fail" and needed to be bailed out was simply false. If the government had simply refrained from intervening, and let the free market work its own way to equilibrium, the economy would have found a route to self-correction. Perhaps that self-correction would have included major businesses going bankrupt. Although that would have constituted a short-term hardship, the individuals experiencing that hardship would have also found their way to an economic self-correction. Workers laid off would have eventually found new jobs. Stock market declines would have been reversed as new companies emerged to replace the failed ones.
Instead, government intervention ensured that the temporary and transitional unemployment which is part of an economic self-correction became instead a structural and semi-permanent unemployment. Because the major businesses did not collapse, they did not create the space for new start-up businesses which would have taken their places and which would have lent to the economy that growth associated with such new start-ups.
When taxes, government spending, and national growth are cut, leaving room for the free market to energize economic growth, then the United States will have a chance to reverse some of the damage inflicted on it during the last few decades.