Our nation’s economy is struggling and Congress needs to put partisan politics aside and develop a credible plan that will reduce our budget deficit while ensuring future growth and prosperity.
We can achieve these goals. We did it in the 1990s under President Clinton and we can do it again, but we need a credible budget plan that involves cuts to military and domestic spending, control of entitlement spending and reform of our tax code.
Republicans have proposed cuts only to domestic programs, which account for only 12 percent of our budget. Cuts to domestic spending alone will not balance the budget and they jeopardize our recovery. In fact, Goldman Sachs has stated that Republican proposals to slash spending by $61 billion in 2011 could reduce U.S. economic growth by 1.5 to 2 percentage points in the second and third quarters of the year. Economist Mark Zandi says such cuts would result in a loss of more than 700,000 jobs nationwide, and 13,500 jobs in Maryland.
I believe we should look to the President’s Debt Commission as a model for getting control of our budget deficit. The bipartisan Commission recognizes that cuts to domestic spending alone will not balance the budget. Instead we need a comprehensive plan that looks at all spending – including entitlements and defense – along with revenues.
President Obama has begun to deal with our budget deficit with a five-year spending freeze on domestic discretionary spending, and by identifying billions of dollars in cuts to defense spending over five years. We also have moved forward in reducing entitlement spending with the passage of the Affordable Care Act (ACA), which the Congressional Budget Office estimates will save $210 billion over 10 years.
But we also need to look at tax reform. Today, loopholes, shelters, tax breaks, subsidies and other special provisions are causing us to hemorrhage more revenue than we collect. If we eliminated all the tax breaks, corporate loopholes and special provisions, we could cut the tax rate in half.
As a member of the Senate Finance Committee, I have proposed that we consider a progressive, consumption-based tax, one that is a fairer, more efficient way to raise revenue. It also would not have the loopholes, shelters or special provisions that riddle our current income tax system.
With a consumption tax, we could decide how much revenue we need to raise and adjust it accordingly. It would replace some existing income taxes and it can be structured to ensure that low-income individuals are exempt. Additionally, it would help American businesses in a global economy. Most other developed nations rely on a consumption tax and U.S. manufacturers are penalized because of our corporate income tax.
The challenges facing the U.S. economy are great, but we can overcome them if we put all options on the table and balance smart cuts with smart investments that will help move our economy forward.