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Speak Out on Out-of-Control Spending

Posted By Kathryn Nix On June 23, 2010 @ 10:30 am In Economics | Comments Disabled

This upcoming Saturday, AmericaSpeaks [1], a non-partisan organization devoted to re-energizing democracy in the U.S., will hold a nationwide discussion on the federal budget and runaway spending in Washington.  Americans with all viewpoints are encouraged to make their voices heard regarding this crucial aspect of America’s future.

With the president’s National Commission on Fiscal Responsibility and Reform in the throes of its own discussion on how best to tackle growing deficits, this opportunity could not come at a better time.  To contribute effectively, citizens must understand the following:

  • What’s the problem? The federal government’s fiscally irresponsible behavior has put the United States on a collision course with disaster of Greek proportions [2].  This year alone, the federal deficit will reach $1.5 trillion [3].  By 2020, continued trillion-plus deficits are expected to reach 8.3 percent of gross domestic product (GDP)—compared to the historical average of 2.3 percent—doubling the national debt.  Federal Reserve Chairman Ben Bernanke warned [4] recently that without serious action, the national debt could rise to 100 percent GDP by 2020.  These trends carry serious economic risks.
  • What got us here? As Heritage budget expert Brian Riedl outlines in a recent paper [5], it is excessive spending, not ­low revenues, that will account for 92% of deficits by 2014 and 100% by 2017.  Though the left often attempts [5] to portray looming deficits as a direct result of the 2001 and 2003 tax cuts, the wars in Iraq and Afghanistan, and the creation of a Medicare drug prescription benefit under President Bush, the fact of the matter is that growth in deficits is most largely attributable to spending on the entitlement giants: Medicare, Medicaid, and Social Security.  Moreover, though tax revenues remain near their historical average, and will even rise slightly above it in years to come, spending is on course to leap well beyond its historical average to levels not seen since World War II.
  • How do we get out of it? Since it is out-of-control spending, not a lack of taxation, that is the problem, tax increases cannot be an effective solution.  In order to pay for entitlement spending, federal income taxes would have to double by 2050.  A value-added tax (VAT) has been offered as a solution, but this would only hinder economic growth and serve as a new source of revenue for lawmakers in Washington to continue their bad spending habits.  Any kind of tax hike would hurt savings and job growth—the opposite of what is needed during a time of economic incertitude.

During AmericaSpeaks’ discussion of how best to address Washington’s spending debacle, participants should be wary of suggestions from proponents of big government to offer tax hikes as the solution.  Citizens must ask themselves the question, [3] “Can Washington really be trusted to use new revenues to close the deficit gap, or would they just spend the money on new programs?”

All citizens can participate and host their own discussions as part of Saturday’s event.  To learn more, click here. [6]


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2010/06/23/speak-out-on-out-of-control-spending/

URLs in this post:

[1] AmericaSpeaks: http://usabudgetdiscussion.org/

[2] Greek proportions: http://blog.heritage.org../2010/05/14/we%e2%80%99re-not-greece-yet/

[3] $1.5 trillion: http://www.heritage.org/Research/Factsheets/Enough-Is-Enough

[4] warned: http://www.federalreserve.gov/newsevents/testimony/bernanke20100414a.htm

[5] recent paper: http://www.heritage.org/Research/Reports/2010/06/The-Three-Biggest-Myths-About-Tax-Cuts-and-the-Budget-Deficit

[6] click here.: http://org2.democracyinaction.org/o/5874/p/salsa/event/common/public/search.sjs?distributed_event_KEY=127

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