Editor’s Note: This is the second of a five part series that compares and contrasts the Romney-Ryan plan with the Obama-Biden plan on entitlements, spending/debt, taxes, jobs, and health care.
The fundamental problem America is suffering from today is out of control levels of spending which are drowning us in red ink.
The Bush administration added $4.9 trillion of national debt over two terms of spending. By the end of the Obama administration’s term, the U.S. Treasury projects that another $6.2 trillion in debt will be added. In other words, these last two administrations will have added about twice as much debt ($11.1 trillion) than the previous 42 administrations combined ($5.7 trillion).
This is insane. The left is obsessed with the fact that the Bush administration lowered tax rates across the board for everyone, which they believe is the cause of the exceptionally high levels of debt over the last 12 years. What they ignore is the fact that federal spending has doubled over that same time period.
Over the last 50 years, federal revenues (taxes) as a percentage of GDP have fluctuated anywhere from 15-20%, with the all-time high being at 20% by the end of the Clinton administration, and the Bush administration lowering it back down to 16.3% by the end of its term.
But federal spending as a percentage of GDP has ballooned from its historic rate of 20% to 26% today. In other words, we’re taxing less and spending way more.
The record high we’ve ever taxed GDP was at 20% by 2000. To match today’s levels of spending, we’d have to raise taxes on all incomes to a new record high of 25%.
Or we can get spending back under control.
Obama-Biden Plan: President Barack Obama and Vice President Joe Biden would have you believe that any talk of spending cuts is “Draconian,” “Machiavellian,” and “social Darwinism.” They would also have you believe that simply raising taxes on the wealthiest Americans will solve all our debt problems. They claim that the rich “aren’t paying their fair share.” Yet according to the non-partisan Congressional Budget Office (CBO), the actual amount paid in taxes by the wealthy is higher than it was before the recession, while the effective income tax rate of the richest 1% is 29.5% when including all federal taxes, or about twice the 15.1% paid by middle class families.
So what’s “fair?” Fifty percent? Seventy-five percent? Even if we seized 100% of America’s 400 richest billionaires’ combined net worth of $1.5 trillion in assets and income, it wouldn’t even cover 2011’s federal budget deficit of $1.6 trillion.
The liberal Center on Budget and Policy Priorities (CBPP) claims that allowing the Bush tax cuts to expire on the rich would bring in $829 billion extra revenue during the next decade. But according to the CBO, the Obama-Biden budgets are projected to incur $9.5 trillion worth of deficits over that same time period.
In other words, raising tax rates on the rich will only cover 8.7% of deficit spending over the next 10 years. We can’t even raise taxes high enough or fast enough to keep up with Washington’s out-of-control levels of spending.
On top of that, the Obama-Biden plan’s solution is to spend more. The $820 billion stimulus “wasn’t big enough.” Despite the record deficit spending, this administration “hasn’t spent fast enough.” Apparently 26% of GDP isn’t good enough, even though it’s caused our debt to eclipse our entire GDP and led to a first ever credit rating downgrade.
Romney-Ryan Plan: The Romney-Ryan plan seeks to get spending back under control to its historic rate of 20% of GDP by 2016, using the House-passed budget as a blueprint.
On June 19, 2011, the House passed the Cut, Cap, and Balance Act by a vote of 234-190. The bill would have cut total spending by $111 billion in fiscal year 2012 and capped total federal spending by creating a “glide path” that limits spending at 22.5% of GDP the following year, and gradually decreased spending levels until locking in at 19.9% of GDP. But most importantly, the legislation would have required that Congress pass a Balanced Budget Amendment which would then be sent to the states for ratification. The bill was struck down by the Democrat-majority Senate on July 22, by a 51-46 vote.
The Romney-Ryan plan accomplishes this by addressing the largest consumer of taxpayer dollars: entitlement reform (covered in the first part of this series). Romney has also pledged to repeal Obamacare, which will cost $2.6 trillion in the first decade alone according to the CBO. It will also lower the debt by privatizing public infrastructure (Amtrak, airports, etc.), cracking down on waste and fraud, and returning funds and spending decisions back to the states to spend on their own residents.
Real spending reform has to come sooner or later. This can be accomplished through smaller government, smarter spending, and localizing control and accountability on expenditures.
The next installment of this series will explore both tickets’ plans on taxes.