Thanks in large measure to the sure and steady hand calling the shots at the Federal Reserve, the nation's monetary policy helped spur record economic growth in the last decade. Paired with smart fiscal stewardship – some long overdue belt tightening in Washington – Uncle Sam kissed 30 years of deficit spending good-bye and the American economy soared.
Now, instead of seeing deficits as far as the eye can see, the federal budget is forecast to run surpluses for as far as the eye can see. However, among a host of other emerging economic factors, sky-rocketing energy prices and weak retail sales over the holiday season signal that the U.S. economy may be hitting the brakes. As consumers hold more tightly to their wallets, signs of a downturn have put the heat on policy makers to find the magic formula that will ease the economy back on the right track.
As chairman of the Senate Finance Committee, which has jurisdiction over federal tax policy, I will lead an effort in Congress to set the right fiscal climate that will help rejuvenate consumer confidence. Giving people back more of their own money can do wonders. And from a philosophical stand-point, notwithstanding my commitment to debt reduction, I'd much rather have surplus tax dollars stay with the folks who earned them.
History has a way of repeating itself. The mere scent of a surplus can eat a hole through lawmakers' pockets. As we set to work on a tax relief proposal in Congress in the coming months, my guiding principles in the debate are: fairness and simplification. Eliminating the marriage penalty, reducing estate taxes and reducing marginal tax rates fall within those two priorities. Enhancing retirement savings incentives and keeping more middle-income families assigned to a lower tax bracket would also address issues of fairness. Calls for accelerating a tax relief package and making it retroactive to Jan. 1 also may be considered to provide a soft landing for the slowing economy.
The new president is expected to make tax relief a cornerstone of his agenda. And more bipartisan agreement is being voiced that a tax cut may just be what the doctor ordered. Of course, there are still big spenders in Washington who never saw a tax cut that they liked. They'll argue it's fiscally irresponsible to enact tax cuts in light of the national debt and our long-term obligations to Social Security and Medicare. I will argue that it would be fiscally irresponsible to ignore the signs of a weakening economy. The fact is, tax relief fosters economic growth. Plus, the non-partisan Congressional Budget Office is expected to soon release a 10-year forecast that predicts as much as a $6 trillion budget surplus.
As Iowans sit down with their accountants and tax preparers over the next few months, I will be doing my best in Washington to scale back Uncle Sam's share of your paycheck. Sooner rather than later, I hope to have a bipartisan elixer for the economy hammered out that spells tax relief for hard-working Americans.