RALEIGH – Be it in Raleigh or Washington, liberals have spent much of the past several months resisting budget-balancing deals that focus on reducing government spending. They argue that such spending-side solutions are “imbalanced,” and that conservatives ought to agree to support revenue increases in exchange for budget cuts.

Let’s take them up on the offer.

Recessions smack government budgets in two different ways. As unemployment increases and incomes stagnate, more residents turn to government programs such as Medicaid, food assistance, public housing, and jobless benefits. At the same time, higher joblessness, lower incomes, and (eventually) lower real-estate prices translate into lower-than-expected revenue to government.

As your expenditures rise and your revenues fall, you lose your surplus, then run a deficit.

As a fiscal conservative, I believe that government was too big and too expensive before the onset of recession in 2007-08. So I think it makes perfect sense to rely mostly on budget reductions to eliminate budget gaps. Not only do these reductions address the short-term fiscal problem but they also set the stage for higher levels of economic growth over time – assuming, of course, that politicians don’t simply restore all the excess spending in future years.

But there is nothing in the theory or practice of fiscal conservatism that requires policymakers to rely solely on operating-budget cuts to close short-term deficits. There are revenue-side solutions that make sense, too – that don’t act as disincentives for households and businesses to increase work, saving, and investment.

Here are two good options for state and federal policymakers to include in any future budget deals.

• Mining the Balance Sheet. Governments own billions of dollars worth of assets – from underutilized buildings and property to valuable infrastructure and recreational facilities – that would be more effectively use if leased or sold to private entities.

The John Locke Foundation has long advocated privatizing North Carolina’s state-owned port and railroad facilities, and using asset sales, leases, or public-private partnerships to move such programs as state parks closer to the marketplace. At the federal level, there are also plenty of assets available for privatization. Rather than continue to hold these assets on the federal balance sheet while running operating deficits north of $1 trillion. Washington should sell or lease them as soon as possible.

• Growth-Enhancing Tax Reform. What’s also true at the state and federal levels is that our tax code is full of biases, distortions, and indefensible gifts to special interests. Both the Left and Right agree that fundamental tax reform is needed, although they don’t really agree on what fundamental tax reform looks like.

They also disagree about its goal. When liberals see “tax reform,” what they hear is “tax increase.” Whether it is a broadly applied bias such as the tax deduction for mortgage interest or a narrowly applied bias such as the ethanol tax credit, they want to eliminate the egregious tax provision and leave marginal tax rates unchanged, resulting in an immediate increase in the overall tax burden.

To conservatives, what makes more sense is to offset the short-term fiscal impact of eliminating tax biases by reducing marginal tax rates. Particularly during a recession, it makes little sense to us to reduce the incentive for households and businesses to work, save, and invest.

There’s a way out of the impasse, as the Wall Street Journal argued in several editorials last week: devise a tax-reform package that is revenue neutral in the short run but revenue enhancing in the long run.

That is, if we get tax reform right – if we move as close as possible to a flat-rate tax on consumed income – that our economy will grow faster than it otherwise would, with salutary effects on both private and public finances. More to the point, by eliminating bracket creep, such a system would better align revenue trends with fiscal needs. Revenue wouldn’t grow quite as fast during future economic booms as it has in the past. But revenue also wouldn’t drop as much during future recessions as it has in the past.

If politicians had any sense, they’d do this. So what do you think will happen?

Hood is president of the John Locke Foundation.