After House GOP leadership offered up a budget with a paltry $35 billion in cuts, the new Tea Party members rightly balked. This morning the Wall Street Journal reports that House leadership is putting another $26 billion of cuts in its budget for the remainder of the year. That’s a total of $61 billion over the remaining seven months of the year.Annualized, that is a cut of of $104.6. That is what House GOP leadership promised at the beginning of the new Congress, but does anyone think that’s enough?
America is facing a fiscal deficit of $1.48 trillion in 2011, according to the CBO. That’s nearly 10% of projected GDP. So 10% of what America “produces” next year will be money the government borrowed from the Fed, China, Russia, Japan, and the oil states. That’s not a sustainable way to run an economy.
A quick economic review: Economies are based on only a few inputs, consumer spending, investment, government spending, and the net of exports and imports. Add those together and you get GDP. This week Chairman of the Federal Reserve Board of Governor, Ben Bernanke, lamented before Congress that China will not allow its economy’s investment portion to decrease by spurring greater consumption at home. In the same testimony he argued that his strategies would ultimately spur consumer spending to increase America’s GDP. China’s GDP is very out of balance, but America’s is too. The U.S.A. has been reliant on consumer and government spending for far too long and needs a sustained increase in investment.
Congress can help those investment dollars flow by lowering or eliminating the corporate income tax. As an ever-decreasing portion of overall revenues, the corporate tax does more to discourage foreign investment in the United States than it does to fund government. The corporate tax portion of revenues has been steadily declining and was on 12% of government receipts in 2008. Besides, when corporate income is finally distributed to shareholders, it’s taxed then at the shareholders’ marginal tax rates.
At the conservative gathering happening in Washington right now, called CPAC, Senator Rand Paul told fellow conservatives how it is. He said, referring to the proposed budget cuts, “It’s too timid.…We must be more bold.” Boldness seems to be in short supply in Washington. I see today a lot of supposed presidential candidates working at building their base, not at laying out ideas for the future. I see Former Speaker Newt Gingrich singing the praises of ethanol subsidies. Ethanol subsidies? Where is the constitutional validation for that? I e-mailed House Committee on Agriculture chairman, Congressman Frank Lucas (R-OK) to ask him where the constitution justified such subsidies. I’ll be sure to let you know if he gets back to me with an answer, but don’t hold your breath. When Congresswoman Nancy Pelosi was asked where the constitution justified Obamacare, her answer was “Are you serious? Are you serious?” Let’s hope Congressman Lucas and Former Speaker Gingrich come up with a better defense for ethanol before 2012.
Without sustained, bold leadership from conservatives in the House and Senate, the budget deficit appears here to stay. As long as Republicans are bashing Senator Rand Paul for proposing cutting foreign aid (an absolutely fabulous idea when Americans are going hungry and borrowing from foreign countries) and singing the praises of ethanol subsidies, the country has major problems that a switch in partisan power is not going to fix.
Nancy Pelosi’s Answer to a Question about Obamacare’s Constitutionality: