Veronique de Rugy | We can’t have low taxes and big government

As the country approaches the "fiscal cliff," President Obama and House Speaker John Boehner are still trying to agree on a deal that would raise taxes only on the highest income earners without doing anything meaningful to control the explosion of spending on entitlement programs. Thankfully, it’s not too late to learn from one particular mistake of the Bush years: Lower taxes for most coupled with higher spending make for bad policy outcomes.

However, this is sustainable only if spending goes down along with taxes. In a recent paper called "What Went Wrong with the Bush Tax Cuts," my colleagues at the Mercatus Center, Matt Mitchell and Andrea Castillo, explained that "Cutting taxes allows policymakers to give voters something they want, while appearing to rein in the size of government. But this is a temporary illusion unless the tax cuts are combined with necessary reductions in spending — a far more difficult but also the more important task." And indeed, the Bush administration didn’t cut spending. It didn’t restrain spending. It significantly expanded the burden of the federal budget.


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