Here’s the Solution to the Deficit. Hint: It Isn’t Taxes.

The U.S.’s fiscal trajectory is deteriorating much faster than most politicians are willing to admit.

The Congressional Budget Office reported last month that the federal deficit will grow by almost $25 trillion over the next decade. Major health and retirement programs are projected to grow faster than the economy and population growth. Interest costs will explode, consuming half of federal income-tax revenue over the next decade. Social Security will go insolvent in six years; the federal debt will reach levels last seen during World War II in half that time.

Meanwhile, the debate among politicians is still stuck on how to palatably and effectively tax their way out of the problem.

Their desperate search for new revenue streams explains the growing political interest in tax proposals, from both Democrats and Republicans, that would have seemed fringe not long ago: wealth taxes, new forms of capital-gains taxation, and tariffs as long-term funding sources. These proposals are gaining traction, in part, because politicians are running out of painless ways to fund the governmental growth they are unwilling to constrain with spending cuts. Unfortunately, they won’t work.

Consider President Donald Trump’s tariffs, which he promised will “lower our debt.” Before the Supreme Court ruled many of them unconstitutional, they were projected to raise $2 trillion to $3 trillion over a decade—not nearly enough to right-size the budget. Even if the tariffs remained in place, the deficit would increase from 5.8% of gross domestic product today to 6.7% by 2036 and to more than 9% by 2056.

What should worry fiscal hawks is that many Republicans have begun to embrace tariffs as a viable revenue source while downplaying their economic costs. Tariffs are taxes paid by Americans. Celebrating them as a partial fix to the deficit signals a new willingness on the right to raise taxes—a troubling shift for a party that once defined itself by opposing them.

The revenue proposals on the other side of the political aisle are even more economically destructive.

California voters will soon weigh a proposal to impose a one-time 5% tax on billionaires’ net wealth. Recent analysis by Stanford economists found that the tax could actually result in the state losing $25 billion in revenue after accounting for future lower income-tax revenue from high-net-worth taxpayers fleeing to other states. This outcome was seen across Europe in the 1980s and ’90s before wealth taxes were widely abandoned.

Wealth taxes are uniquely damaging because they target a stock of productive capital rather than an annual flow of income or consumption. Wealth isn’t just cash or gold bars in the back of someone’s closet. It is made up of operating businesses, housing, factories, research labs, and intellectual property.

And there simply isn’t enough untaxed wealth to close a multi-trillion-dollar deficit. A decade of revenue from Sen. Bernie Sanders’ proposed federal wealth tax, for instance, would barely fund a single year of the deficit.

The same is true for income taxes. Billionaires already pay an average tax rate of 38% on their income. Even sweeping tax increases across the entire income distribution would fail to solve the U.S. fiscal problem.

That’s because our national debt is a spending problem, not a revenue problem. Even if the government collected revenue at its historic high of 20% of GDP, as it did in 2000 when the budget briefly ran a surplus, it would still face a deficit of nearly 5% within a decade. It would rise to 8% in subsequent decades.

Research by Jack Salmon, an economist at the Mercatus Center, has shown that 98% of the “structural deficit can be attributed to spending policy decisions.” The CBO has similarly estimated that Social Security, Medicare, and other federal health programs account for more than 100% of noninterest spending growth over the next three decades.

When governments hit this kind of fiscal wall, they often turn first to tax increases. But history suggests that tax-heavy deficit-reduction strategies fail. Research by Harvard economist Alberto Alesina comparing fiscal adjustments across more than a dozen countries shows that tax-driven plans trigger deeper and longer recessions and usually fail to reduce debt levels. Alesina found that spending cuts are more likely to stabilize finances without prolonged economic dislocation.

Models by Stanford economists shows that restraining the growth of federal spending lowers expected future tax rates and debt, boosting short- and long-run private investment, personal consumption, and GDP growth. This is because spending cuts address the root cause of the debt problem: unchecked growth in government transfer programs.

If warnings from economists and the CBO aren’t enough to get Washington’s attention, rising interest rates should. Investors now demand about double the return to lend to the U.S. government than they did four years ago, reflecting growing concerns about the country’s fiscal trajectory.

Until Congress confronts the reality that spending growth is out of control and taxes alone can’t solve the problem, the deficit will keep expanding and the eventual fiscal reckoning will only get more painful.