Balance may be good politics, but it’s bad economics

Yet there is no reason to believe a balance between spending cuts and tax increases will get the nation any closer to a balanced budget or allow the federal government to start paying down its enormous debt. In fact, there is persuasive evidence that raising tax rates will yield little if any increased revenue. Higher tax rates encourage investment in tax avoidance and thus discourage investment in economic growth, which is the only surefire way to increase tax revenues.

The only reason to seek a balance between spending cuts and tax-rate increases is to garner enough votes from both sides of the political aisle to achieve agreement. Whether the nation’s fiscal crisis will be ameliorated by whatever agreements a balanced approach yields going forward depends on the extent to which fiscal conservatives in both parties are willing to tip the balance in favor of spending cuts. From an economic perspective, the last thing we need is balance.

Jim Huffman is the dean emeritus of Lewis & Clark Law School, the co-founder of Northwest Free Press and a member of the Hoover Institution’s De Nault Task Force on Property Rights, Freedom and Prosperity.