Recently the Bush administration raised its estimate of the federal budget deficit to $455 billion for this year, and $475 billion for next year. Those will be by far the two largest deficits in the history of the United States, and they come when the Republicans, the supposed party of fiscal responsibility, have the presidency and a majority in both houses of Congress. Clearly, "supposed" is the operative word in the phrase "supposed party of fiscal responsibility." There is no longer even the excuse that Reagan had in the 1980s, when he could point out that it was a Democratically controlled Congress that kept raising spending (although, in fairness, he allowed them to do so without much meaningful opposition, and he and other Republicans supported some of the spending increases). In the present time, Republicans and Democrats have been continually sparring, with Republicans talking about the economic stimulus of tax cuts, and Democrats complaining that the deficits are due to tax cuts, and, unbelievably, in some cases advocating even more increases in spending.

In the midst of these debates, it is important for intelligent citizens to remember one fundamental truth about the nature of tax policy, and its relation to government spending. This is an obvious truth, but one that neither party can be expected to accept, since it exposes the dishonesty of the rhetoric of both parties. The truth about tax policy and spending policy is that they are not two separate things. In effect, spending policy is tax policy, because spending inevitably determines tax policy. This is why the Bush tax cuts are not real tax cuts. Do not misunderstand me: I support pretty much any and all tax cuts, and I supported the Bush tax cut. Furthermore, to claim that the Bush tax cuts should be scaled back or repealed altogether, as many Democrats have, is sheer lunacy. Pushing for higher taxes in an economy this weak, and wanting to take even more real money out of an economy that already has too little, seems to reflect some sort of sado-masochistic economic instincts. However, the Bush tax cuts are dishonest, because they have not been accompanied by corresponding cuts in spending. On the contrary, spending has skyrocketed under the Bush administration, and the eventual consequences of that are inevitable.

When money is spent, it will have to be paid for somehow, sooner or later. For governments, there are a number of options. The money can be paid now, in which case there will have to be taxes now, or the money can be paid later, in which case there will have to be taxes later. The government can simply carry bigger and bigger debt until it is finally forced to default on debts, but that option involves economic disaster. The government can also, in effect, make it easier to pay debts later through inflation. However, inflation itself is in reality a tax on the population, since the money in the hands of real people will decrease in value. Therefore, in terms of real value, inflation takes away from what people have every bit as surely as taxation does. Basically, those are the options, and all of them involve a price being paid for all spending. Thus, when the government lowers your taxes but raises spending, in reality what it is doing is putting off taxing you for the spending until a later date. Make no mistake, though: your taxes will be raised at some point. Tax policy, in this type of scenario, is merely a convenient political tool, the flashy action that the magician makes with one hand so that you do not notice what his other hand is doing. Tax policy can be, and is, changed at will. When politicians are proposing tax cuts, they will claim to be putting money back in the hands of the people. When politicians are proposing tax hikes, they will claim to be exercising fiscal responsibility. Meanwhile, the truth is that the total amount of money that will have to be paid by the people in the end is pre-determined by the amount of money the government spends. Reducing government spending is the only real way to put money back in the hands of the people and exercise fiscal responsibility. The only person who can truly be said to support lower taxes is a person who supports lower spending

Unfortunately, neither major political party wants to reduce spending. In a way, this is natural enough. A reduction in spending generally involves some sort of reduction in government power, so it is unlikely that the government itself will ever seriously support meaningful spending cuts, unless the people can actually force it to do so. Without such spending reduction, no significant tax cuts in the foreseeable future can possibly be permanent. Taxes can be cut today, and then raised again tomorrow, but the money that is spent today stays spent, and the taxes to pay for it will have to be paid someday. So, the next time you hear someone in government say that they are going to cut your taxes, go ahead and support the tax cuts. There is really no reason not to support them. Just look at government spending at the same time, and expect to have to pay the piper sooner or later.