Tuesday December 11, 2012
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National Commission on Fiscal Responsibility & Reform
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In February 2010, I was asked to serve on the President's National Commission on Fiscal Responsibility and Reform. This was a tremendous honor and challenge--confronting our ever-increasing national debt and deficit and unrestrained federal spending. Over the next ten months, I joined with my fellow commissioners to learn about and discuss our country's financial situation. In early December 2010, the commission issued its report and recommendations on what must be done to get our country back to fiscal health. I joined with my Republican Senate colleagues on the commission, Judd Gregg of New Hampshire and Tom Coburn of Oklahoma, in support of the report, which was to be voted on by the commission as a whole document rather than holding votes on each of its many recommendations.
Upon announcing my support for the full report, I issued the following statement jointly with Senator Coburn:
"Our debt crisis is a threat to not just our way of life, but our national survival. History has not been kind to great nations who borrowed and spent beyond their means. Doing nothing will, sooner rather than later, guarantee that this nation becomes a second-rate power with less opportunity and less freedom. The plan developed by the debt commission, while flawed and incomplete, will help America avoid this fate and secure freedom for future generations.
"The time for action is now. We can’t afford to wait until the next election to begin this process. Long before the skyrocketing cost of entitlements cause our national debt to triple and tax rates to double, our economy may collapse under the weight of this burden. We are already near a precipice. In the near future, we could experience a collapse in the value of the dollar, hyperinflation or other consequences that would force Congress to face a set of choices far more painful than those proposed in this plan.
"This plan will not just avert a disaster, but help drive the kind of economic recovery we need to create jobs and spur growth. The plan’s provisions to lower tax rates while creating fairness in the tax code are similar to pro-growth policies supported by President Reagan. The plan also reduces discretionary spending and takes meaningful steps to preserve Social Security. Taking steps now to reduce our debt burden and slow unsustainable entitlement spending can help prevent massive and debilitating tax increases in the future. Finally, all of these steps will send a clear signal to investors that America is serious about getting its fiscal house in order.
"Still, the plan does not do nearly enough to address the crisis in health care spending. Eighty percent of our debt problem comes from Medicare. This proposal takes some helpful steps in the area of health reform, such as repealing the CLASS Act and reforming the Sustainable Growth Rate (the “doc-fix”), but Congress has to address Medicare’s unfunded liabilities more aggressively. We also have to repeal the misguided health care law we passed last year, which will make our debt crisis even more severe.
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"The real choice facing Congress and the American people, however, is not whether to support the commission’s recommendations, but whether we will rediscover the wisdom of our founders and apply the principles of limited government written into our Constitution. The debt problem is almost entirely the consequence of growing government far beyond our founders’ intent. This plan is merely a down payment that will begin the process of reforming government at all levels. |
Senators Crapo and Coburn at news conference to announce their decision to support the Fiscal Commission report, December 2, 2010. |
"As we begin this process with this plan, or a better plan, everyone in America should be prepared to sacrifice, beginning with politicians in Washington. Everything has to be on the table. There can be no sacred cows. Our oath to the Constitution must trump our oaths to parties, interest groups and ideology. This challenge is a matter of national survival but we know America has faced great challenges before and emerged stronger and more prosperous. The good news is all of these problems can be solved. If we act now in the spirit of service and sacrifice that built this country, we can create a future that honors the tremendous sacrifice that came before us."
More Resources
- To read the full report and recommendations from the National Commission on Fiscal Responsibility and Reform, please click here.
- To read the recently released GAO report titled: "Opportunities to Reduce Potential Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue" click here (pdf, 2.2 MB).
- Click here to listen to Senator Crapo and Senator Tom Coburn (R-Oklahoma) discuss their reasons for supporting the recommendations of the Fiscal Commission, December 2, 2010.
MP3 format; studio quality; runs 23:59
- Watch Senator Crapo discuss the report and recommendations on national news and cable programs. Click here to go to Senator Crapo's YouTube channel or click the individual interviews listed below:
- Senator Crapo on Bloomberg TV, December 2, 2010. Runs 3:43.
- Senator Crapo on "Your World With Neil Cavuto", Fox, December 2, 2010.Runs 5:55.
- Senator Crapo on "Hardball with Chris Matthews", MSNBC, December 2, 2010. Runs 7:23.
- Senator Crapo on "Washington Journal", C-Span, December 3, 2010. Runs 18:48.
- Senator Crapo on "America's Newsroom", Fox, December 3, 2010. Runs 4:08.
- Click here to view various editorial cartoons from newspapers around the country about the Fiscal Commission Report.
- Click here and here to read the exchange of letters in February 2011 between me and Senators Coburn and Chambliss with Americans For Tax Reform President Grover Norquist about the potential for tax increases.
Frequently Asked Questions
Why did Senator Crapo vote for the report?
As outlined above, the looming debt crisis America is facing threatens our national survival and we do not have much time to act. While this plan is flawed and incomplete, it starts our country down a path to put our financial house in order and helps drive the kind of economic recovery that will create jobs and spur growth. Everyone in America should be prepared to sacrifice. If we act now in the spirit of service and sacrifice that built this country, we can provide a secure and stable future for generations to come.
Did Senator Crapo vote for a tax increase?
The reports you may be reading are inaccurate and inaccurately describe the plan. In reality, the plan called for a comprehensive reform of the tax code, eliminating tax expenditures, simplifying the code, broadening the base, and bringing the individual income rates down to as low as 8, 14, and 23 percent. Although this may result in increased revenue, it is not a tax increase, but instead lowers both individual rates and the corporate rate, in order to spur economic growth. As Americans For Tax Reform states on its website, "All tax rate reductions that increase revenue due to economic growth are allowable under the pledge and are greatly desired."
How does the Commission Report address Social Security solvency?”
Absent action, there will be a 22% cut to all Social Security beneficiaries because of the looming revenue shortfalls. This plan does not use Social Security for deficit reduction. The proposed changes to the Social Security program are exclusively to ensure that we keep our promises to current beneficiaries and put the program on a sustainable path for future generations by extending its solvency for 75 years.
Will I lose my mortgage tax deduction?
The report, had it been approved and enacted into law, would have called for modifications to the current law on mortgage interest deductions, as a part of the overall commission effort to streamline the tax code by eliminating tax credits and deductions that currently only benefit some, in favor of lowering marginal tax rates on all Americans. Instead of the current mortgage interest deduction, which is capped at $1 million for both principal and second homes, the commission report called for a 12 percent non-refundable tax credit available to all taxpayers for mortgages capped at $500,000. This would be available only for primary homes. I have always been a supporter of the mortgage interest deduction and continue to support it in its current form. Further, modifying or eliminating the mortgage interest deduction is not necessary in order to bring our budget into balance.
Do you support the commission's proposal to tax capital gains and dividends as ordinary income?
Absolutely not. The goal of the tax reform proposals contained in the
commission report was to ensure that our budget can be brought into
balance, on the revenue side, not by raising taxes, but by cutting tax
rates, simplifying the tax code, broadening the base and making our
tax code more competitive. These pro-growth policies would have
such a dynamic effect on our economy that we would expect to see a
surge in revenue to the Treasury, without raising taxes. The specific
proposal the co-chairs included in their report, to tax capital gains and
dividends at ordinary income rates, really is counterintuitive to that
whole goal. Increasing the tax rates on capital gains and dividends
would not lead to dynamic economic growth, but would severely
hamper the savings and investment necessary to achieve the
necessary growth in the private sector. We have seen over and over
again, throughout the history of our government’s fiscal policy, that
reducing rates on capital gains has a tremendous pro-growth effect
and these tax rate cuts generate significantly more revenue to the
Treasury as a result. From my perspective, this commission report
likely would have generated more revenue to put toward deficit
reduction if it had recommended reducing or even eliminating the
capital gains rate, rather than raising it. Since the capital gains and
dividend rates were first reduced in 2003, I have been the leader in
the Senate in introducing and promoting legislation to make
permanent these lower rates. I will continue to advocate for low,
pro-growth rates on capital gains and dividends at every opportunity.
What does the report recommend for addressing the long-term solvency of the Social Security program?
Although the commission report is not perfect, it takes meaningful steps to preserve Social Security. The plan would eliminate the 75-year Social Security shortfall and put the program on a sustainable path for future generations.
Some have argued that this plan will hurt seniors and that raising the retirement age amounts to a cut in benefits. In reality, raising the retirement age not only helps to address the Social Security solvency problem, but also acknowledges that people are living longer.
According to the 2009 Trustees report, by 2030, life expectancy at age 65 is projected to reach 19.2 years for men and 21.4 years for women. If we do nothing now, the situation for Social Security becomes much worse for seniors in the coming years. If Congress does not act and the Social Security Trust Fund runs out in 2037, all Americans would see their benefits reduced by 22 percent.