February 14, 2007

THE BUDGET BALLOON

By Senator Mike Crapo

If you've ever watched the Macy's Thanksgiving Day Parade, you've seen the multi-story balloons floating through New York City. The federal budget is like one of these massive balloons, and Congress' responsibility is similar to that of balloon handlers. Right now, that balloon is threatening to break free of its tethers. Controlling it requires many adjustments (weather and skyscrapers make this all the more challenging). My colleagues and I on the Budget Committee will be reviewing the Administration's budget proposal to make sure that proposed adjustments head-off ill-conceived tax increases and reign in entitlement spending to get the budget under better control as we anticipate the weather, wind and road blocks of upcoming fiscal years. Our economic forecast is encouraging--employment has expanded for 41 straight months, with over seven million jobs added. Likewise, revenue growth has exceeded legislative and executive branch projections for four years now. In fact, we've just experienced the three largest years of increase in net revenue growth in historyĆ¢??this following 9-11 and the collapse of the dot-com bubble, and during substantial military activity abroad. Increased revenues are the result of a strong economy and tax relief of 2001 and 2003. I've consistently and strongly supported capital gains and dividends tax relief which has allowed people and businesses to sell assets in a cost-effective, lower tax environment. Revenue from asset sales feeds capital investment; jobs are created; and, the economy improves. Loosening capital and revenue flows facilitates an environment where businesspeople, particularly small businesspeople, are willing to take risks and be creativeĆ¢??activity that constitutes the nuts and bolts of our American economic machine. To sustain and promote our momentum of economic growth and job creation, the budget must respond to upcoming challenges. Soon, entitlement programs will make our already enormous budget look, not like a parade balloon, but more like a skyscraper. And the street is only so wide. Social Security, Medicare and Medicaid consume about six percent of gross national product (GNP) today; in little over 20 years, non-partisan projections place entitlement spending at 20 percent of GNP. We need to deflate current spending habits to make things run smoothly down the road. The same goes for minding revenue streams. Our current tax law is highly progressive: the top 20 percent of wage earners shoulder 85 percent of the tax burden and the bottom 40 percent of wage earners pay the payroll tax, but no income tax. Lower income taxpayers eligible for the earned income credit receive double the amount back at tax time today than in the 1990s. Tax cuts put more money back into the pockets of hard-working people, keeping us competitive and growing. Higher taxes (at any income level) reduce productivity and discourage saving and investment.As the Senate Budget Committee sets spending priorities, Idaho's priorities will be heard. My colleagues, Senator Larry Craig and Congressman Mike Simpson, serve on the Senate and House Appropriations Committees, respectively. They, also, will make sure that Idaho priorities are carried through the entire federal funding process. The budget balloon is threatening to come loose. We must employ leverage now to alleviate potential disaster down the road. The President's budget proposal moves to balance in the year 2012. And I would expect that other budget proposals will also balance, because we have the five to 10-year dynamic for this to happen. But looming unfunded liabilities that will start driving deficits and debt in the future have to be paid attention to. I look forward to working with my colleagues on the Budget Committee to craft a responsible, manageable roadmap for our nation's fiscal policies. WORD COUNT: 600