The Ghost of Tax Day Future

I spent most of Tax Day in Dubuque so I didn't read yesterday's scary column in the Wall Street Journal by R. Glenn Hubbard bearing the captioned title. You need a subscription so I can't link, but I will tell you that Hubbard reminded all of us that a generation from now, absent any changes, entitlement spending will consume 10 more percentage points of GDP than it does today. This means that, without reducing any other federal spending, the size of the federal government will go from about 20% of GDP today to 30%, requiring a 50% tax increase.

That's scary enough, but consider this: It is not possible to cut other federal spending enough to pay for this. We spend only 4% of GDP on defense and 3.1% on all other nondefense federal programs.

And it gets worse. Economists Eric Engen of the Federal Reserve Board and Jonathan Skinner of Dartmouth college estimate that paying for increased entitlement spending through tax increases would depress annual growth by a percentage point. Over time, that turns out to be huge.

Remember this the next time the Dems demagogue entitlement reform.