People with absolutely antithetical ideas will now have to work together to resolve a looming fiscal crisis and a long-term debt crisis, while creating a climate for economic growth in a stagnant global economy. No problem.
The first thing we must resolve is simple: Who do we represent? With many loud voices in the Washington echo chamber, it’s an essential first question. I have 750,271 people in my district, and my first responsibility is to them. I’m the only voice they have in the House of Representatives. Their values and collective wisdom matter. While this may seem simplistic, it actually clarifies every other decision that follows.
The second question is also essential: What will solve the problem, not just make for a good press release? Many things sound good, but they don’t work in the real world. With a divided government and an equally divided nation, now is the time to fix the problems rather than just debate them, starting with the tax code.
Five years ago, the federal government spent a trillion dollars less per year. In 2007, we spent $2.73 trillion, and in 2011, we spent $3.60 trillion. The growth in the gross domestic product in 2007 was 1.9 percent, but the growth in the GDP in 2011 was 1.7 percent. Our tax revenues have dipped slightly — thanks to long-term economic malaise — from $2.56 trillion in 2007 to $2.30 trillion in 2011. The task is to respond to the huge deficits we face now after spending grew by a trillion dollars.
Some would say: Increase income taxes now to the level of our federal spending, and spend less in the future. But individual income taxes bring in only $1.09 trillion a year, and corporate income taxes bring in only $181 billion a year.
To increase individual or business taxes enough to rise to the level of current federal spending, both would have to more than double for everyone. Repealing all the Bush-era tax cuts for those making more than $250,000 a year would cover only 16 percent of the deficit.
There just aren’t enough rich people to cover even a fifth of the spending problem in Washington. It may make for good politics to “stick it to the rich,” but it doesn’t solve the problem.
There is no way to raise tax rates enough to solve the deficit problem. We spend more than we can afford as a nation, so we must reduce spending. I’m confident that every agency, office and grant recipient can provide a great answer to why they need their current spending level, or more, but we can’t afford it.
We must determine what we need to do and what we can no longer do. It should be done with great deliberation, because we’re not dealing with just numbers; we’re dealing with the economic future of millions of families and the employment future of thousands of government employees.
There’s another way to increase federal revenue. It’s called profit. I don’t know when the six-letter word “profit” became a four-letter word in America, but when people make more money, they pay more in taxes.
Economic activity is the best revenue plan for America. When people make less, raising rates incentivizes them to move their money and hide it.
Vice President Joe Biden waits to conduct a mock swearing-in ceremony with Sen. Brian Schatz, D-Hawaii, in the Capitol's Old Senate Chamber, December 2, 2014. Schatz was sworn in to serve the remainder of his term since he was appointed to the seat after Sen. Daniel Inouye, D-Hawaii, passed away.