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    Heritage Explains Dangers of PAYGO Budgeting

    01/05/2007

    The new Democrat majority in Congress is cynically using the cause of spending restraint to set the stage for a tax increase.  The Heritage Foundation's Brian Riedl, and his colleague Alison Acosta Fraser explain how a focus on the budget deficit-- instead of limiting overall spending levels-- will lead the country down the wrong path.  They write in the latest Heritage analysis of the Democrat's 100 hour agenda:

    PAYGO also focuses on only the budget deficit, rather than the size of government. A strong PAYGO would ensure that new or expanded programs are balanced with other spending cuts or tax increases, but it would not prevent the government from taking a steadily larger share of citizens’ paychecks. PAYGO would allow escalating entitlement program costs to push the size of the federal government to nearly 50 percent of GDP by 2050. PAYGO would also promote the expiration of all Bush tax cuts and force millions of Americans to pay the Alternative Minimum Tax. As a result, tax revenues would rise from the historical average of 18.3 percent of GDP to a record 23.7 percent by 2050. The slow-growth economies of Western Europe show that such levels of spending and taxation cause serious long-term economic damage. Therefore, PAYGO must be supplemented with serious caps on the
    growth of spending and taxes.