Economist Steven Conover has an interesting perspective on the issue of the national debt. One thing he notes is that the best way to reduce the debt is to increase the rate of economic growth — which should be head-smackingly obvious. What isn’t a way to reduce the debt is to raise taxes. On the short term a tax hike raises revenue, over the long term they provide an anchor on future growth which reduces revenue.
I’m not quite so sanguine on the issue of the national debt. Yes, it’s not earth-shatteringly high, but it still is too high. The best way of reducing the national debt is to cut federal spending. President Bush has been talking a good game about spending cuts, but he’s yet to show the cojones to actually start vetoing fiscally irresponsible legislation. The Medicare drug benefit was a massive expansion of federal entitlements that will cost billions more than estimated — if Bush passes more legislation along those lines the deficit is only going to get worse.
Congresscritters of both parties have a strong predilection for pork — it’s what keeps them elected. However, it’s going to require a great amount of fiscal restraint in order to keep the deficit at a manageable level without harming our policy priorities for the future. Sadly, the concepts of “restraint” and “Congress” rarely go together.
President Bush would be wise to borrow Sen. Kerry’s one good idea and reinstate the terms of the Gramm-Rudman-Hollings Act and PAYGO budgeting. One of the biggest reasons for the economic successes of the 1990s was the fact that Congress was both gridlocked and under statutory limitations that prevented runaway spending. The best way to keep Congress’ hands from raiding the cookie jar is by ensuring that they can’t get into it in the first place.