"If at the end of the day we need to raise taxes, we should raise taxes."
-Paul Volcker, President's Chairman of the Economic Recovery Advisory Board
On April 6, 2010, before an audience at a New York Historical Society event, the President's Chairman of the Economic Recovery Advisory Board, Paul Volcker, expressed the Obama Administration's openness to increase taxes, particularly with a European-style value-added tax (VAT).
With the U.S. economy suffering its worst downturn since the great depression, a barrage of tax increases could significantly impede any chance of a sustained recovery. Instead of pushing tax increases to resolve the fiscal problems facing our country, Congress should be focusing on what has caused the problem: runaway, federal spending.
Ever Higher Spending: The Obama Administration has increased non-defense discretionary spending by 84 percent in less than two years. Overall, the President's Budget will spend an average of more than 24 percent of GDP over the next 10 years. This includes the $2.6 trillion ObamaCare, the $1 trillion failed stimulus, and nearly $1.9 trillion to finance our massive debt over a 10 year period.
Trillions in Unfunded Liabilities: Last month, both the Treasury Department and the Government Accountability Office [GAO] released reports providing sobering evidence of the federal government's deteriorating fiscal condition. GAO's report alone has the long-term spending gap in excess of $76 trillion. The report highlights a growing fiscal dilemma and estimates that by 2020 roughly 93 cents of every dollar of federal revenue will be spent on entitlement programs and net interest costs. The Administration's approach to addressing the serious budgetary and economic repercussions these trends will produce is by compounding the problem with a new $2.6 trillion health care entitlement.
Ever Higher Taxes: The President's budget calls for nearly $1.8 trillion in tax increases over the next 10 years, and the recently passed ObamaCare raised taxes by $569 billion. The Democrats' agenda of increasing taxes to feed their spending appetite will starve future generations of the freedom and opportunity that Americans currently enjoy. According to a CBO report, individual tax rates would have to be raised by nearly 90 percent to finance the projected increase in spending between now and 2050. The addition of a value-added tax (VAT) would be used to disguise tax increases that would hurt small businesses and reduce job creation.
The Democrats' budget path is unsustainable. The Obama Administration and Democrats in Congress need to scrap their reckless approach of higher spending and ever higher taxes. Without spending restraint, the problem will become worse and more difficult to tackle.