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tering or violating the deficit targets would be politically difficult, policymakers who want to increase the growth of spending have little alternative except a tax increase. With the highly unlikely exception of policymakers choosing to spend less than allowed by coming in under the yearly deficit target, every single additional dollar of taxes will simply be used to increase spending.
The budget resolution for fiscal year 1989 illustrates the effect of Gramm-Rudman on spending. Using the administration’s economic assumptions, the Congressional Budget Office estimated that total revenues will be $964 billion. The deficit target for FY ’89 is $136 billion. The sum of these two figures, $1.1 trillion, is the total amount of spending allowed and is, as might be expected, the amount legislators decided to spend.
Total 1988 spending is estimated to be $1,055 trillion, thus the $1.1 trillion spending limit in 1989 means spending can increase only by $45 billion. While still a large increase, it is an improvement over the previous eight years, when spending rose by an average of $59 billion. GrammRudman has reduced policymakers’ ability to increase spending since spending increases must now be matched, dollar for dollar, by higher taxes.
Tax increase supporters will claim higher taxes are needed to protect the budget from being cut. Supposedly, without additional revenues, the only way to meet the
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