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Balancing Budgets

Why do balanced budget proposals always make up their deficits with automatic spending cuts? Why couldn’t we have a system where the budget automatically adjusts taxes up to close the deficit in the previous year, unless Congress passed a 2/3rds vote to find appropriate cuts?

You’d have to watch out for Laffer Curve effects, because you’d get into a place where your raised taxes would actually make the deficit worse, but the aforementioned 2/3rds vote could take care of that.

The danger is that this year’s Congress would spend like a sailor and let next year’s Congress deal with the aftermath. But you spend like a sailor in order to keep your job, so you’d be in next year’s Congress!

An example. Let’s say you had a massive recession and this year’s budget was, say, $1.5 trillion in the hole. At the end of the year, CBO and/or JCT would take that number, adjust for inflation, population growth, and new interest due to the deficit spending, and determine that (for example) we need $1.7 trillion more in revenue. They’d split that into the various tax brackets (or a VAT, if we had one), and raise all rates across the board (or proportionally, or whatever) so that tax receipts next year should be $1.7 trillion more.

Now in a recession you don’t want to raise taxes, so Congress instead can pass a bill that’d find $1.7 trillion in cuts (again, as scored by CBO). If they only find $1 trillion in cuts, then taxes go up to cover the $.7 trillion that’s left. If they find $2 trillion in cuts, taxes go down. Congress has the final say, because that’s their job, but the default path is a budget balanced by bringing income into line with spending.

To take it a step further, this plan would require you to know how much extra revenue could be generated with various increases (which is kind of the opposite of what the CBO does now, but not dramatically different). With that information always available, you could just remove the need to pay for laws in the laws themselves, and just assume that they’ll be picked up in the next automatic stabilization. You might not want to do that all the time, but for the vast majority of things it’d be simpler.

Has any government tried this before?