Welcome Back, Congress
January 13, 2012
The 1970’s sitcom “Welcome Back Kotter” depicts a dysfunctional classroom of trouble making students. When Americans “Welcome Back Congress” next week from their Christmas break, a group of dysfunctional and trouble making members of Congress will begin work on reducing the national deficit and debt. With a work week of only 2 days next week, there won’t be much time to get anything done so the following week is when the legislative process will begin to heat up when Congress returns for a full work week (by congressional standards) and the President gives his State of the Union address. Since last year’s State of the Union, the national debt has increased by $1 trillion despite numerous spending fights with threatened government shut downs, a debt ceiling crisis averted with sham spending cuts, and a Super Committee that failed to come up with $1 trillion in spending cuts over ten years. The first order of business when Congress returns is to cut spending and taxes to put the country back on the proper fiscal path.
When the 112th Congress was sworn in last January there was quite a bit of excitement about the expectations of spending cuts. Initially promising $100 billion in spending cuts, the House of Representatives passed a spending cut package of only $61 billion. That legislation quickly died in the Senate and never reached the President’s desk. Despite the failure of all attempts to cut spending, it is time for Congress to get back to work and aggressively cut spending. From The National Commission on Fiscal Responsibility and Reform, to the Congressional Budget Office’s “Reducing the Deficit: Spending and Revenue Options,” there are numerous ideas as to where to cut spending. In addition to the President’s announcement of asking for more powers to consolidate federal agencies and programs (read story here), President Obama’s fiscal year (FY) 2012 budget included his Fiscal Year 2012 Terminations, Reductions, and Savings list which outlines $33 billion in potential spending cuts. The President’s FY 2013 budget will probably have another list of spending cuts. The problem isn’t where to cut spending; the problem is the political courage to cut spending.
Any economic growth will be fueled by tax cuts. It is critical for the tax code to allow individuals and businesses to keep more of their money so it can be put to productive use in the free market rather than a bloated government bureaucracy. Cutting the corporate tax rate is an important step in helping the economy get back on track. The corporate tax rate of 35 percent (the second highest in the world) is an example of an outdated tax system and a burden that stifles innovation and business expansion. This rate is higher than every one of America’s major European trading partners and is higher than China or Canada. In fact, since 1992, the average OECD combined statutory rate has been lower than America’s and it has continued to fall. Today, it is nearly 10 percent lower (25.1 percent) than America’s 35 percent. Add in the state and local taxes that U.S.-based companies pay and the gap widens even further. According to the Tax Foundation, “While there are many benefits of cutting the U.S. corporate tax rate, we’ve compiled 10 that should help convince lawmakers that this is the right policy direction for the nation….Cutting the corporate tax rate will promote higher long-term economic growth. Cutting the corporate tax rate will improve U.S. competitiveness. Cutting the corporate tax rate will lead to higher wages and living standards. Cutting the corporate tax rate will boost entrepreneurship, investment, and productivity. Cutting the corporate rate lowers the tax burden on low-income taxpayers and seniors. Cutting the corporate rate will lower the overall dividend tax rate and taxes on capital. Cutting the corporate tax rate can attract foreign direct investment (FDI). Cutting the corporate rate would lead to lower corporate debt and reduce the incentives for income shifting. Cutting the corporate tax rate can reduce compliance costs. Cutting the federal corporate rate can help the states compete globally.”
It is time for Congress and the President to get serious about cutting spending and taxes because taxpayers can’t afford another of year of empty rhetoric and broken promises.