August 06, 2008

BACK WITH A VENGEANCE

By Senator Mike Crapo

Habits are safer than rules; you don't have to watch them. And you don't have to keep them either. They keep you.
-Frank Crane

The deficit is back-with a vengeance. Like a bad habit, federal spending feels too good for Congress to quit. And, to borrow from Crane, the habit is "keeping" Congress-keeping it from its responsibility to be a wise and frugal caretaker of taxpayer dollars. On July 28, the Office of Management and Budget (OMB) estimated a Fiscal Year (FY) 2009 deficit of $482 billion-triple the budget deficit of FY 2007. Even considering the fact that many economists prefer to measure deficits against the size of the economy (Gross Domestic Product (GDP)), OMB's projected FY 2009 deficit represents 3.3 percent of GDP, just shy of 3.6 percent in 2004-a high not seen for a decade. In short, federal spending, both discretionary and entitlement, is out of control.

Even though most FY 2009 spending bills won't be considered this Congress, and an omnibus bill holding spending to FY 2008 levels until January is certain, the appropriations process this year has been illustrative of what will likely occur next year and later. In many cases, proposed spending levels for federal government programs and agencies far exceed reasonable limits which I supported during the Budget process at the beginning of the year. Consequently, I voted against the FY 2009 Senate Budget Resolution.

With a soaring deficit, many of my colleagues in the Senate are ready with an answer; unfortunately, one that's inadequate at best and economically foolish at worst: raise taxes. On the surface, it may seem intuitive: more spending (outlay) and larger deficits require more income (receipts); more receipts must then require more and higher taxes. Well, it doesn't quite work that way. In fact, tax receipts are at historic averages, and federal income tax receipts have been setting records. We are not, in fact, under-taxed as many claim. And, with the tax relief of 2001 and 2003 not yet permanent and set to expire in 2010, middle income taxpayers will, most certainly, become over-taxed:

• Due, in part, to the reinstatement of the marriage penalty tax, 48 million married couples will see an average tax increase of $3,007.
• On average, 12 million single women with dependents will see their taxes go up $1,091.
• About 18 million seniors will see an average tax increase of $2,181.
• A whopping 27 million small business owners (the backbone of Idaho's economy) will see an average tax increase of $4,066.
• The death tax will be fully reinstated (the maximum tax rate will revert from 45 percent in 2009 to 55 percent).
• The maximum tax rates on dividends will increase from 15 percent to 39.6 percent.
• The rate on long term capital gains will jump from 15 to 20 percent.

The solution is not to raise taxes. Instead, we must start on the structural and expenditure side of the federal budget equation.

Skyrocketing deficits and out-of-control federal spending require strict fiscal discipline and structural changes in many government programs. The current and former directors of the non-partisan Congressional Budget Office have testified before Congress repeatedly in recent years about the lack of solvency and impending budget crisis of entitlement spending-Medicare, Medicaid and Social Security. As a member of both the Senate Budget and Finance Committees, I've consistently supported legislation that brings accountability to rising entitlement spending. Unbridled spending spells disaster for our economy.

Hard-working taxpayers expect Congress to tax and spend wisely. Congress's bad habits are getting in the way of responsible behavior.

WORD COUNT: 599