Budget

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As a fiscal conservative, I believe we need to work to achieve a balanced budget as soon as possible.  In order to reduce the deficit, it is important that we practice fiscal discipline by keeping our spending limits sensible and establishing an accountability system for our Federal programs. 

Congress and the Administration must do a better job of exercising fiscal discipline.  However, it is my view that our current deficits are not the result of Americans being under taxed.  Rather, government spends too much.  It is the level of spending rather than the level of taxation which reflects the real burden of the growth of government. 

First of all, I think that the Administration should be commended for its effort to provide greater transparency in the budgetary process.  The inclusion of expenditures on items such as the wars in Iraq and Afghanistan provides a clearer picture of our fiscal outlook.  At the same time however, with the unemployment rate reaching 8.5 percent for the month of March, this already exceeds the level projected for the end of the year in the Administration’s budget.  Therefore, it is clear that the deficits will clearly exceed those projected in its budget proposal.

According to the nonpartisan Congressional Budget Office (CBO), outlays will top $4 trillion for this year alone and will consume 28.5 percent of our nation’s economy.  By 2019, CBO estimates that spending will still constitute 24.5 percent of Gross Domestic Product (GDP) – about 4 percentage points above the historical average.  On the revenue side, CBO estimates that the Administration’s plan will increase taxes by $1.5 trillion.   The proposal would more than double the level of public debt over the 10 year CBO projection – resulting in debt equal to 82 percent of Gross Domestic Product by 2019.   

I understand that the current economic crisis requires the government to increase outlays during this recession.  I support additional funding for infrastructure spending to rebuild our nation’s highways, bridges, and waterways.   In fact, it is my belief that the focus of the Administration and the Congress should be centered on economic recovery.  The use of the budget process to increase entitlement spending by $1 trillion in order to provide a down payment for a new government health care plan and new education spending would be better considered on their own merits.  The primary aim of fiscal and monetary policy at this time should be to provide an environment for sustainable economic growth.   Similarly, when our nation is in the midst of an economic contraction, it is hardly the time for Congress to be entertaining a “cap and trade” program that would entail higher energy costs for Americans.  Moreover, limiting the home mortgage deduction when housing markets are imploding, and the charitable contribution at a time when charity is most needed, seems to be out of step with our current economic problems. 

In a broader sense, I have both intermediate and long term concerns about the Administration proposal.  If we are to produce a sustainable economic recovery, the short term explosion in federal spending in combination with the massive increases in the money supply by the Federal Reserve System will have to be ramped down as our economy recovers.  Otherwise we will see significant inflationary pressures and higher interest rates.   This was the unfortunate pattern our nation witnessed in the late 1970’s which led to a very severe recession.  Unfortunately, the Administration’s budget proposal does not reflect the need for spending restraint in the out years of the budget cycle. 

Secondly, it is my belief that we have a responsibility to avoid passing a massive debt burden on to our children and grandchildren.  A doubling of the debt burden over the next 10 years to 82 percent of GDP will impose a significant tax burden on them coupled with the prospect of a lower standard of living.  In conjunction with the coming explosion in entitlement spending entailed by the aging of the “baby-boomers,” we are simply “kicking the can down the road” for the next generation to address.  As both a father and grandfather, this greatly concerns me.  The time is long overdue for a holistic look at the budget process which takes into account our immediate needs and which doesn’t plant the seeds for the next economic bubble.  If nothing else, we must learn from the current crisis that it is not possible to indefinitely live beyond our means.
 
It was for this reason that I supported the budget alternative introduced by Congressman Paul Ryan.  Under this plan, budget deficits would be half those proposed by the Administration and debt held by the public would be $3.6 trillion less over the 10 year budget period.   Both national defense and veterans’ health care would be prioritized.  On the revenue side, the proposal recognizes the need for lower marginal tax rates for small businesses and reforms the tax system for American families.  Individuals would be able to pay their taxes under the existing tax code or move to a highly simplified system that fits on a post card, with a few deductions and two rates of 10 percent and 25 percent.  The proposal includes generous standard and personal exemptions such that a family of four earning $39,000 would not pay tax on that amount.  In order for Americans to revive their lost savings, this budget alternative would repeal capital gains taxes altogether through 2010.   Although our budget alternative did not pass the House, it is my intention to continue to work for these initiatives throughout the 111th Congress. 

It is my belief that a sustainable economic recovery will require greater incentives for work, savings, and investment rather than increased levels of spending, taxing, and borrowing.  Although I do not feel that the Administration’s budget is the right fiscal course for our nation, I am confident that the debate over the budget will serve as a template for dialogue over the future course of our nation.  It is my intention to continue to voice my belief that the American people rather than government are the source of wealth creation in our economy.  It is for that reason I remain optimistic that despite any differences we may have over policy, it is the hard work of Americans which will ensure that our future will be brighter than it might appear today.