Tax cuts today are tax increases in the future

The late Milton Friedman, a freemarket economist and Nobel laureate, liked to say that to spend is to tax. Today’s tax cuts, if they lead to deficits, are really just disguised future tax increases. The same is true of today’s deficit-building spending increases. They, too, are poorly disguised future tax increases.

Ultimately, what is spent by government is what is paid for by taxpayers. Those facts come to mind when looking at the Congressional Budget Office’s recent outlook on borrowing. Even though the economy is perfectly healthy, the CBO projects that annual deficits will soon break the $1 trillion mark, a place they haven’t been since the Great Recession, when high unemployment and a collapsed stock market caused tax revenues to plummet.

The reasons for these deficits are obvious and bipartisan:

❚ Republicans cut taxes by $1.4 trillion over the next decade.

❚ Congressional Democrats and Republicans worked together to hike spending on core government programs by $300 billion in the next two years, and likely by more than $1 trillion over the next decade.

❚ Neither party has shown much willingness recently to address government’s biggest spending problem: benefit programs such as Social Security and Medicare, whose costs rise automatically each year based on how many people retire and what health care providers think they should be paid.

Where does that leave us? By Friedman’s analysis, it leaves some of the biggest tax hikes in history waiting for the next generation of tax payers, many of whom can’t even vote yet.

The federal government has already deferred payment on $21.1 trillion (the current national debt) and doesn’t need to speed up the rate at which it foists future taxes onto the young, who also happen to be the poorest Americans with the fewest resources.

House Speaker Paul Ryan should take especial note: In announcing his decision not to run for re-election, Ryan said he hoped to spend more time with his family. May we suggest this include some quality time apologizing for the crippling taxes his children will have to pay, in part because of decisions made on his watch.

We also suggest that all members of Congress apologize in advance for the predictable debt crisis now one step closer. What happened in Greece is not impossible here. Washington had plenty of time to address the gathering fiscal storm coming with the Baby Boom retirement.

The era when lawmakers of either party could claim to be fiscally responsible is over. What America has is a race to borrow from the future to reward important constituencies now.

For Republicans, the groups that must be indulged are wealthy heirs and passive investors in closely held companies (including The Trump Organization). They made off like bandits in the recent tax law while many middleclass tax breaks were made temporary.

For Democrats, the favored are those who expect to receive far more in retirement benefits than they paid in over a lifetime’s work. They demand pliant leaders who tell them such indulgences won’t have serious consequences.

Friedman is right. Whatever is spent is ultimately a tax. The coming storm of taxes will fall on those least able to pay when they are least able to pay it. On that day, let’s remember all those who made it inevitable.