CBO Analysis Shows Economic Benefits Of Fiscal Sustainability Are Large And Nearly The Same Whether Taxes Are Raised Or Spending Is Cut

Source: Chad Stone, Center on Budget and Policy Priorities, September 10, 2007

Key Findings

•Most assessments of the long-run fiscal outlook conclude that higher revenues will need to be a part of any serious effort to prevent budget deficits from growing to unsustainable levels.
•A recent CBO analysis shows that the economic benefits of achieving fiscal sustainability are substantial, and that the difference between the economic effects of reducing the deficit through tax increases and doing so through spending cuts would likely be very small by comparison.
•CBO also finds that any negative economic effects of tax increases can be mitigated by relying more on policies that broaden the tax base than on increases in marginal tax rates. CBO suggests that the economic effects of raising revenue by broadening the tax base can be similar to the effects of cuts in government benefit programs.
•CBO’s analysis also indicates that no policy to restore long-term fiscal sustainability is likely to be successful if the rate of growth in health care expenditures is not reduced.

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