President's Fiscal Commission Continues to Ignore Spending Problem

Monday, July 12, 2010 4:14 PM by Renae Bartusch

In a speech given this weekend to the National Governors Association, co-chairmen of The National Commission on Fiscal Responsibility and Reform called current budgetary trends a cancer “that will destroy the country from within.”  Co-chairman Erskine Bowles said “we can’t grow our way out of this and we can’t tax our way out of this.” This is only partially true. While the government certainly cannot tax its way out of its spending crisis, research shows that the only way to improve the country’s current fiscal health is to implement pro-growth policies: CBO projects that every 0.1 percentage point increase in real economic growth over the next decade would increase tax revenues by $247 billion. Moreover, history has proven the fecundity of tax cuts - When President Reagan’s reduction in the top rate from 70 to 50 percent and his reduction in the capital gains rate from 28 to 20 percent was fully phased-in by 1983, economic growth averaged 5.3 percent over the next three years.  The Dow Jones Industrial Average more than doubled from 1983 to 1987.

What’s more, the Commission’s constant vacillation on the country’s tax environment ignores the critical issue – that excessive spending has put taxpayers on the hook for the mounting debt. The commission needs to realize is that the deficit is not a problem in and of itself – it is a symptom of the lack of Congressional fiscal restraint. The government is spending beyond its means.

President of Americans for Tax Reform Grover Norquist was invited to testify before the commission on June 30 and drove this point home.  In his testimony Norquist highlighted seven ideas to reduce spending. He also suggests that the commission should release its findings 30 days prior to the election this fall so that candidates running for office can declare their stance on taxes and spending.

Democratic Governor Christine Gregoire appeared concerned in the wake of the speech that the commission’s recommendations will result in more demands on the states. If by “demands” she means “held accountable” then we hope she has every right to be concerned – the path towards fiscal austerity lies in the end of the federal bailout business, starting with its handouts to the states.

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