The Budget

The Budget

One of the biggest problems facing our nation today is the need for a comprehensive solution to put our country on the road to a strong, fiscally-sustainable economic future. Unfortunately, over the past few years, despite the intense public debate and dangerous brinksmanship with our nation’s financial obligations, Congress and the President have failed to act decisively to solve the problem.

On December 1, 2010, the Simpson-Bowles commission released a proposal to reduce the deficit by $3.9 trillion over ten years, including changes to spending and the tax code. Unfortunately, the commission did not have the necessary votes to recommend that the proposal be considered by Congress, and neither the House nor the Senate elected to independently consider legislation based on the proposal.

On August 2, 2011, President Obama signed the Budget Control Act into law as P.L. 112-25, which prevented this country from defaulting on its loans and made significant cuts to discretionary spending. However, the law merely slowed the growth in our debt, when we need to focus on reversing the trend.  

Most recently, on November 21, 2011, the members of the Congressionally-appointed Joint Select Committee on Deficit Reduction, which was mandated by P.L. 112-25, announced that they had failed to reach an agreement on recommendations to Congress to reduce the deficit by $1.5 trillion over the next ten years.

These failures by both Congress and the President to work in a bipartisan fashion and report legislation that would have addressed our fiscal crisis in a comprehensive and fair fashion are absolutely inexcusable. Balancing the federal budget and keeping it balanced is one of Pete's top priorities.

For an overview of the Budget Control Act and its provisions, click here.
 

Click the image to view a larger graph.

In FY 2011, the federal government spent the equivalent of 24.1% of our nation’s gross domestic product (GDP), a way of measuring the size of the United States economy. Its revenue (taxes), however, equaled just 15.4% of our nation's GDP.
 

The Solution: Difficult But in No Way Impossible 

When President Bill Clinton left office in January 2001, the nonpartisan Congressional Budget Office projected that we would pay off our national debt by Fiscal Year (FY) 2006 and that by 2011, the federal government would have a $2.3 trillion surplus. Today, we have a projected FY 2011 deficit of nearly $1.3 trillion and a massive $15.3 trillion national debt.

We can take our cue from recent history that the solution must be substantive and balanced. When our budget was balanced in 1969 and for four years from 1998 to 2001, federal spending and tax revenues represented around 20 percent of our GDP.

The Congressional Budget Office currently estimates spending in FY 2012 to be nearly 24.1 percent of GDP and revenues to be around 15.4 percent. These two extremes cannot continue if we are to balance the budget and provide for a sound economy for future generations.
 
There is no simple or painless solution to our current predicament. For example, if we eliminated the entire federal government this fiscal year – no Federal Aviation Administration to ensure our planes fly safely or Food and Drug Administration to ensure our food and pharmaceutical products are safe; no federal courts or prisons to provide justice or border security to provide protection; no care for veterans, no White House, no Congress, nothing – and only kept the Department of Defense, entitlement programs such as Social Security, Medicare, and interest on the national debt, and did not touch taxes, our deficit for FY 2011 would still be $634 billion.

That is why all spending and tax programs must be included in a global solution to our deficit crisis. Any serious proposal to reduce the deficit must be comprehensive, and address all spending programs, including domestic discretionary spending, defense spending, as well as entitlement spending, such as Social Security and Medicare, and taxes and inequalities in the tax code. This crisis will not be solved without making conscious value judgments on what programs provide the greatest benefit. Without a comprehensive approach involving the many, the Obama Administration and Congress cannot balance the budget, and we will only magnify the burden for the few.

The Spending Problem

Congress has already been steps taken to reduce domestic discretionary spending. For example, as Ranking Member of the Energy and Water Development Subcommittee, Pete worked long and hard with Republican Chairman, Rodney Frelinghuysen, and other members of the Subcommittee to cut spending for the Department of Energy and Water projects by $1.4 billion over the last two years.

The Subcommittee meticulously looked at each program under its jurisdiction and made a myriad of decisions, some to increase spending and some to reduce it, given the purpose and value of each program. In some areas, they felt a program no longer had value, such as a $187 million carbon capture program for a coal fire plant in West Virginia, the Subcommittee eliminated funding. In others, they decided to reduce spending, as in the case of the $427 million in cuts to renewable energy programs relative to FY 2010. In other instances, they determined that an increase in spending was necessary, such as a $20 million increase for improved industrial technologies and a $19 million increase for vehicle technology to improve vehicle mileage per gallon and reduce our dependence on foreign oil.

Our fiscal crisis, however, cannot be solved by only addressing discretionary spending. Lawmakers must also make thoughtful decisions about our entitlement programs, such as Social Security and Medicare, not only to rein in their growth but also to preserve their solvency for future generations.

For an overview of government spending as a percentage of your tax contributions, click here.

Inequalities in the Tax Code

Over the last couple of years, tax revenues as a percentage of the GDP have been at their lowest levels since 1950. Some of this can be attributed to the financial crisis and resulting unemployment. For instance, the Congressional Budget Office recently estimated that the deficit would be reduced by one-third if unemployment fell to 5.2%. Regardless, our tax code needs to be reformed. In addition to being unsustainable, it is unfair and unequal.

For example, from 2008 to 2010, 30 major US companies, including GE and Boeing (which receives over 50 percent of its revenue from American taxpayers due to its defense contracts,) made $160 billion in profit and did not pay one penny in federal corporate income tax. 

In 2010 the top 25 hedge fund managers alone made a combined $22 billion yet they paid a lower tax rate than a teacher or firefighter from Northwest Indiana. This sort of inequality is not fair and needs to be addressed.

Since 2001, the Bush tax cuts have cost $2.7 trillion dollars in reduced revenue, as each dollar of these tax cuts has been borrowed. Pete has argued that these tax cuts have not appreciably changed the lives of most of the residents of the First Congressional District of Indiana despite their costs, and has suggested that the American economy is not better for them over ten years later. He believes that it is time to examine each provision and decide which ones make sense today, which ones need to be changed, and which ones need to be eliminated.

Additional Budget Resources

President Obama's FY13 Budget
The Congressional Budget Office (CBO)
CBO Infographic on the Federal budget
The Debt Limit: History and Recent increases
The House Committee on the Budget
The Joint Committee on Taxation
Bureau of the Public Debt
The Office of Management and Budget

ˆReturn To Top