On Thursday, March 29, 2007, The U.S. Commerce Department reported that U.S. economic growth was moderately stronger in the fourth quarter than previously thought. Gross domestic product (GDP), which measures total goods and services output within U.S. borders, expanded at a 2.5% annual rate instead of 2.2%, the department said in its final revision of fourth-quarter economic performance. The final figure meant the economy expanded by a solid 3.3% during 2006. This is the third straight year that GDP expanded at a rate over 3% percent (3.2% in 2005, 3.9% in 2004). Why am I bringing this to your attention, because it is additional proof that the economy operating under the Republican-controlled government was in much better condition then the Democrats have led voters to believe. Considering that the House is passing their budget resolution today, the outlook of the U.S. economy is certainly a prime concern for the country right now.
House Democratic leaders expect to win easy adoption of their fiscal 2008 budget plan Thursday, rejecting Republican criticism that it relies on a big tax increase to reach a $153 billion surplus in 2012. House Democrats say their budget blueprint would erase the federal deficit without raising "a single penny" in new taxes. But the proposal requires either that millions of middle-class families be hit with higher taxes next spring or that somebody else pay an extra $50 billion. That stark choice is the result of the inexorable expansion of the alternative minimum tax, a parallel tax structure that adds $6,800, on average, to a family's tax bill. Next month, an estimated 4.2 million Americans will pay the tax. Next spring, that number will balloon to 23 million unless Congress takes action. Democratic leaders have made overhauling the AMT a top priority, but they have yet to lay out a plan to make up the revenue that would be lost. According to Rep. Paul Ryan (R-WI), the ranking Republican on the House Budget Committee, the Democrats budget shows proceeds from the tax continuing to swell. Ryan claims that Democrats will have to raise taxes by $50 billion if they intend to fix the AMT while keeping all other spending within their budget parameters.
However, in the “special” world that Democrats seem to live in, they have created “reserve funds” to pay for projects that they don’t have the money to implement. For example, Democrats are promoting a $50 billion, five-year expansion of children's health insurance but have not yet come up with a source for that money. Instead, they have created a special reserve fund that health-care advocates in Congress will be required to fill with an equal amount in tax increases or spending cuts to get their money. If you look throughout the Democrat’s budget, they have reserve funds set up for multiple projects. This little maneuver is a way for Democrats to spend money on programs without violating the pay-as-you-go rules they set up at the beginning of this session (Pay-Go). The Senate budget resolution (S Con Res 21) relies on about two dozen reserve funds. The beauty of reserve funds, from the Democrats’ perspective is that it allows them to fully fund program without cutting defense spending, raising taxes, or increasing the deficit. Sadly, these reserve funds are all empty. To fill them with the necessary funds, Democrats will have to decrease defense spending, raise taxes, or increase the deficit…see the problem?
All of last year, Democrats blasted the Bush Administration for creating the worst deficit in U.S. history. Therefore, we should only assume that they will not increase the deficit. With U.S. troops in Afghanistan and Iraq, I do not believe the Republicans would want to cut defense spending, for fear of the political backlash that could come with cutting funds for troops in a war zone. That only leaves one choice…raising taxes. With three years of GDP increases of more then 3%, should Congress even be willing to raise taxes? The Commerce Department’s report shows that investment in new-home building plummeted by 19.8% and has declined for five straight quarters. The fourth-quarter drop was the sharpest since a 21.7% plunge in the first quarter of 1991 when the economy was on the brink of recession. If people are not buying new houses, should Congress take more money out of their pockets? I am not an economist, but this does not seem like sound fiscal policy to me.
While denying that they want to raise taxes, House Democrats say they want to preserve key parts of Bush's signature tax cuts. However, they project a surplus in 2012 only by assuming that all of the cuts expire on schedule in 2010. The budget plan expresses support for certain cuts that would require another reserve fund to be filled with hundreds of billions of dollars in tax increases to cover the cost. House Budget Committee Chairman John M. Spratt (D-S.C.) acknowledges that particular problem, saying Democrats have three years to figure out how to come up with the money to keep their favorite tax cuts. Considering how efficient Congress has been in dealing with fiscal problems, do the American people really trust Congress to come up with a solution within that time frame, especially with most focus in Washington already drifting towards the 2008 Presidential elections?
The problem inherent in Congress is that they are afraid to cut funding to programs, even if there is statitistical evidence that the program is not serving its purpose. This is especially true regarding programs within the U.S. Department of Education (ED). Every year, ED releases a Performance and Accountatbitly Report, which shows the adequacy of each program under its jurisdiction. Programs are assessed using the Program Assessment Rating Tool (PART). PART was created to show what programs are and are not working, allowing Congress to make informed decisions about the programs they fund, using American tax dollars. Every year, President Bush uses data collected through PART as justification for cutting funding to programs that are deemed ineffective, or not producing the results they were created to produce. To save $2.2 billion in taxpayer dollars, the President's budget request recommends eliminating 44 programs that are duplicative, narrowly focused, or unable to demonstrate effectiveness. Once again, Congress is ignoring this proposal, and there by continues to waste $2.2 billion dollars in taxpayer’s money, and that is just within ED. that number increases exponentially when considering all the other government agencies within the U.S. government.
Why does Congress continually fund programs that are deemed inadequate? The simple answer is that the goal of every elected official is to get reelected. By cutting a program’s funding, you are essentially laying off anyone who has gained employment under this program. That is certainly an unfortunate, but that is not reason enough to continue to waste money on useless programs. It is bad enough the federal government consistently provides financial bail0outs to the airline industry and Amtrak. Continued farm subsidies to farming combines that do not need the federal money are already wasting American tax dollars. As such, the U.S. cannot afford to keep funding wasteful programs simply because advocates for those programs do not want to lose their jobs. If less money is spent on wasteful programs, more money is opened up for new, more efficient programs. God forbid, that excess money could also be used for additional tax cuts, which has been proven induce economic growth. More growth means more jobs, there by allowing those laid off but cutting programs to find alternate career paths. This is certainly not an easy choice to make, and not an easy choice to live with. However, these elected officials were not elected to only make easy decisions. The purpose of elected officials is to do what is best for the country, not what is best for a specific group of advocates.
So, I advise all of you to enjoy what little economic growth we are seeing while you can. Because there are bumpy roads ahead.
Resources:
“GDP Growth Revised Up,” Reuters, 3/29/2007.
http://money.cnn.com/2007/03/29/news/economy/gdp.reut/index.htm
Lori Montgomery, “Budget Plan Wipes Out Deficit But Leaves $50 Billion Dilemma, “Washington Post, 3/29/2007.
http://www.washingtonpost.com/wp-dyn/content/article/2007/03/28/AR2007032802060.html
Joel Havemann, “Democrats' Budget Relies on Empty Reserves,” LA Times, 3/27/2007.
http://www.latimes.com/news/printedition/asection/la-na-budget27mar27,1,4795960.story?coll=la-news-a_section
Thursday, March 29, 2007
Give It The Old College Try
Sorry for my long absence, yet again, but I am going to try and get back into a rythm here. However, I must be honest, with law school on the horizon for next fall, I forsee another serious lack of posting in the future. If I cannot get into at least a weekly schedule, I will probably close this off. We'll see how things go.
Subscribe to:
Posts (Atom)
