Q. Should Congress increase taxes to reduce the federal deficit?
A. Out-of-control government spending has resulted in record-level deficits and a national debt of more than $14 trillion. President Obama and some members of Congress are arguing for higher taxes to reduce the deficit. The thing is, expert analysis tells us that from World War II through 2009, every dollar of new federal tax revenue resulted in $1.17 in new spending.
When it comes to the goal of deficit reduction, history shows us that it is lower taxes that help to bring about the private-sector economic activity needed to create jobs and increase revenues to the federal Treasury. Most recently, the expanding economy, spurred by the tax relief enacted in 2001 and 2003, helped to reduce the annual budget deficit from $412.7 billion in 2004 to $160.7 billion in 2007. Some now cite the 1993 tax increase as an example of how raising taxes reduces deficits. The reality is that the 1993 tax increase accounted for only 13 percent of the deficit reduction achieved in the 1990s. The biggest source of deficit reduction, 35 percent, came from a reduction of defense spending. The next biggest source of deficit reduction, 32 percent, came from other revenue created by pro-growth tax and trade policies, including a 1997 tax cut on investment. Another 15 percent of the deficit reduction of the 1990s came from interest savings. These figures come from the Treasury Department and the White House Office of Management and Budget.
During the last two weeks, I met with Iowans in 33 counties. I didn’t hear that taxes are too low. People understand that the problem is that Washington overspends. Government spending increased by 22 percent during the last two years. The answer to the deficit problem is not raising taxes to support more government spending.
Q. How should Congress reduce spending?
A. I support a comprehensive approach that includes discretionary spending freezes and reductions, a balanced budget amendment to the Constitution, and increased efforts to stop fraud, waste and abuse in federal programs. I am a co-sponsor of the Reduce Unnecessary Spending Act, a bill I also cosponsored during the last Congress, which would let the President single out specific spending items in bills that land on his desk. Congress would then have to hold an up-or-down vote on the spending items. Under this proposal, any and all funds that are rescinded would go to reducing the deficit.
Washington must learn to live within its means. Congress and the President need to focus on policies that grow the economy, not the deficit. What’s more, it’s not just an economic issue. It’s also a moral issue. It’s wrong to spend today and leave the bills to the next generation.