The Balanced Budget Breakthrough

The United States stands at a fiscal crossroads with national debt exceeding $36 trillion and interest payments consuming a staggering portion of the budget.

This crisis threatens to undermine economic stability and future prosperity for generations to come.

However, a breakthrough is within reach by leveraging economic growth and prudent policy extensions.

The last balanced federal budget was in 2001, when annual spending was under $2 trillion.

Since then, debt has skyrocketed, driven by factors like entitlement expansions and pandemic-era spikes.

The 2017 Tax Breakthrough

The 2017 Tax Cuts and Jobs Act (TCJA) ignited a massive economic boom with record-low unemployment and high incomes.

Its pro-growth design focused on work, investment, and entrepreneurship, creating a resilient foundation.

Without extension by end-2025, families face an average $1,500 tax hike, which could stifle recovery.

Recent legislative wins, such as spending cuts, show progress toward fiscal discipline.

Why Economic Growth Is Key

Growth boosts revenues naturally, reducing the need for tax increases or severe austerity measures.

It cuts assistance demands and builds confidence in the economy, fostering long-term balance.

According to estimates, achieving a balanced budget requires unprecedented growth rates under current scenarios.

Historical data shows that post-WWII booms provided a template, but missteps like FDR's 1937 pullback led to recession.

CBO baselines project modest growth, highlighting the challenge ahead.

Implementing Spending Reforms

Spending restraint is critical to complement growth-driven revenues and avoid unsustainable deficits.

Drivers of the spending explosion include:

• Entitlement growth due to an aging population.
• Post-9/11 military increases.
• New programs like the Affordable Care Act.
• COVID-era fiscal spikes adding $1.5 trillion annually.

Recent efforts have proposed significant cuts, such as a $1.79 trillion reduction package.

Unwinding pandemic-era expenditures can help realign the budget with pre-crisis levels.

Risks of Alternative Approaches

Pursuing tax hikes or a Balanced Budget Amendment (BBA) carries substantial dangers that could backfire.

A BBA might amplify recessions by neutering economic stabilizers like unemployment insurance.

During the Great Recession, simulations show unemployment could have soared from 10% to over 20%.

Key risks include:

• Fiscal multiplier effects causing $2.50 output loss per $1 cut.
• Entitlement and defense spending being hard to reduce.
• Growth alone being insufficient without hard choices.

Relying solely on growth ignores the need for structural reforms in spending and tax policies.

A Clear Path Forward

Extending the TCJA and enforcing spending discipline offer a viable route to a balanced budget.

This approach avoids the pitfalls of Washington's spending addiction and promotes sustainable prosperity.

Benefits of this path include:

• Higher savings and investment without crowding out private sectors.
• Potentially 7% higher GDP per person by 2040.
• Equivalent to $325 per month in tax savings for Americans.

Energy policy wins, such as expanding production and cutting regulations, can further boost affordability and growth.

State-level BBAs have shown success, providing a model for federal enforcement.

Conclusion: Seizing the Moment

In this uncertain economy, urgency is paramount to prevent the largest tax hike in history and debt spirals.

The balanced budget breakthrough hinges on proactive policies that foster growth while curbing excesses.

Key metrics to monitor include:

• Debt-to-GDP ratios nearing record levels.
• Interest payments reaching $892 billion in FY2024.
• Total spending tripling since 2001 to about $7 trillion.

By embracing a pro-growth path, the U.S. can achieve fiscal stability without sacrificing economic vitality.

This moment calls for bold action and unwavering commitment to a brighter fiscal future.