It's still possible to cut spending: here's how
The obvious place to begin is the repeal of ObamaCare. We also need to empower the states, streamline the federal government and modernize Medicare and Social Security.

Pete Souza/White House

President Obama is applauded by Members of Congress and House Speaker Nancy Pelosi as he steps to the podium to deliver remarks, Sept. 9, 2009.

Article Highlights

  • Taxes would need to increase 20% to accommodate Obama’s spending plans and 60% over next 25 years

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  • Reduce spending to 20% of GDP from today’s bloated 25%

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  • Look to spending cuts in entitlements, ObamaCare and tax reform

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After two months of talks, the super committee announced failure on Monday to agree on reducing federal deficits by $1.2 trillion over the next decade. But as the late economist Herb Stein once remarked: If something cannot go on forever, it won't. That applies to the mounting budget shortfalls. But how?

President Obama's answer is higher taxes. But he can't be serious. Just accommodating his spending plans over the next decade requires across-the-board tax increases of 20%. Over the next 25 years, taxes would need to rise across the board by 60%.

Instead, what is needed is spending reform that offers goals, specifics and ways to blend fiscal responsibility with modernizing government. This includes near-term action on discretionary spending and longer-term action to reform entitlements and reduce the growth of Social Security and Medicare. Then revenue contributions can be addressed in the context of tax reform.

This article is available in full by subscription to the Wall Street Journal. The full text will be posted to AEI.org Monday, November 28

R. Glenn Hubbard is on AEI's Council of Academic Advisers

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About the Author

 

R. Glenn
Hubbard
  • Glenn Hubbard, a former chairman of the President's Council of Economic Advisers, is currently the dean of Columbia Business School. He specializes in public and corporate finance and financial markets and institutions. He has written more than ninety articles and books, including two textbooks, on corporate finance, investment decisions, banking, energy economics, and public policy. He has served as a deputy assistant secretary at the U.S. Treasury Department and as a consultant to, among others, the Federal Reserve Board and the Federal Reserve Bank of New York.
  • Assistant Info

    Name: Brittany Pineros
    Email: brittany.pineros@aei.org

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