Federal spending is too high. But federal tax revenues are also too low relative to the spending levels that the public “wants.”

When federal deficits are high, interest rates also move higher in order to attract capital, both domestic and foreign. Higher interest rates raise the cost of capital for investment, including path-breaking research and development spending. Moreover, when the budget of the federal government is larger, resources for the most productive areas of the country are lower. Investment suffers. Productivity suffers. Everyone is less prosperous. Trickle-down does work. Trickle-up policies, such as more welfare and income transfers, are the path to the fiscal graveyard.