Governmental Costs and Tax Levels

Governmental Costs and Tax Levels

Governmental Costs and Tax Levels

Governmental Costs and Tax Levels

Excerpt

Both major political parties in the United States are now committed to the principle that sound fiscal policies are essential for economic stability. While it is recognized that budget deficits may be expected in periods of depression -- because of shrinking revenues and increasing expenditures for relief purposes and to stimulate recovery -- it is nevertheless agreed that over a period of years receipts must equal expenditures; and, if debts incurred in periods of great emergency are to be reduced to manageable proportions, revenues must exceed expenditures.

Developments since the war have convinced many people that fears formerly held with respect to the ability of the United States government to maintain fiscal stability were grossly exaggerated. Despite the continuance of federal expenditures on a level far higher than had been contemplated, budget operations show a sizable surplus, and it is believed by many that substantial tax reductions may now be made and that at the same time some reductions in the national debt can be achieved. The view is widespread that this country has again demonstrated its capacity to meet the enormous financial requirements of depression and of war without undermining its financial foundations.

The purpose of this study is to subject this conception to realistic tests. To gauge the prospect for maintaining financial stability, it is necessary to view the problem in the perspective of something like a five-year period. Only in this way can one see the outcome of current expenditure trends and appraise the effects of possible fluctuations in the national income on fiscal stability and the possibility of tax reduction. Concretely, where will current commitments and policies with respect to such major classes of expenditures as veterans' benefits, social welfare and education, foreign aid and relief, and national defense lead us? What are the implications of these trends for tax reduction?

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