Tuesday, November 14, 2006

Federal Spending and Taxes

From today's Wall Street Journal.

Nice chart, which illustrates that taxes are not particularly low now by historical standards, but I don't fully buy into the accompanying editorial. The "fiscal crisis" that some people are worried about is the looming gap between spending and taxes: as the baby boom generation retires over the next few decades and becomes eligible for Social Security and Medicare, the spending line here will automatically keep rising.

Here is my solution. Like the Journal editorialists, I would prefer to avoid tax increases to the extent possible, but everyone has to come to grips with the fact that something has to give. None of the ways to fix the problem is politically attractive. The choice is among large tax increases, large cuts in promised benefits, or some combination.