Editorial: Perdue pushes peers on funding
The Savannah Morning News Editorial Board
Retailers know one way to spur consumers to action during the holiday season is to note Christmas Day’s rapid approach.
In that spirit, Georgia Sen. David Perdue is reminding his fellow lawmakers that there only 20 legislative days left until the next government shutdown.
Perdue flew back to Washington, D.C., on Monday, stopping for a visit with this publication’s editorial board en route to Savannah-Hilton Head International Airport. The looming deadline was foremost on his mind, and his concerns went beyond avoiding another petty, partisan stare down such as the one that partially closed the government for 35 days earlier this year.
Perdue, a first-term Republican, will insist legislators consider passing new budget measures rather than continuing resolutions. The latter is a stopgap measure, maintaining appropriations at the same levels as the previous fiscal year, and the fallout would significantly impact the Savannah region.
Continuing resolutions would delay funding committed to the Savannah harbor deepening and for area military programs for a year, Perdue said. President Donald Trump’s administration has proposed substantial funding increases for those projects, including $130 million to finish dredging the shipping channel.
“We need to move forward,” Perdue said. “Nobody should go home until a budget deal is done.”
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Over the last few months, I’ve traveled the country to campaign for Republican U.S. Senate nominees because too much was at stake to sit on the sidelines. We had an opportunity to grow our Republican majority, and last night we did just that.
Why is it so important?
We are seeing the greatest economic turnaround in American history. President Donald J. Trump’s agenda is working and the American people agree. That’s why we have improved our strong majority in the United States Senate.
We have turned the direction of our country, but there is still more work to do. With the help of these impressive new Senators, we can continue to grow the economy, strengthen our global security situation, and deal with our outrageous $21 trillion debt. We also need a serious immigration solution, an infrastructure system that works, trade policies that give us a level playing field, and an education system that prepares workers for the jobs being created by this economic turnaround.
I believe we can do this in the United States Senate and President Trump is committed to delivering results for the American people.
Senate funding progress is not a permanent solution
By U.S. Sen. David Perdue
September 19, 2018
In March, President Trump said he would never again sign another last-minute, massive spending bill. In May, a group of 16 Republican senators came together to say we were willing to work nights, weekends, and through the annual August recess to deliver results, specifically on confirmations and funding. This additional time created an opportunity for Congress to fully fund the government on time for the first time in 22 years.
Congress got close, but missed its chance.
Despite some progress, in typical Washington fashion, Congress has again found a way to fall short of fulfilling its constitutional responsibility. There is still time before the end of the fiscal year on Sept. 30, but Congress has thrown in the towel. It has turned to another continuing resolution to keep the lights on until December. This is completely unacceptable.
Amazingly, some senators are patting themselves on the back for partially funding the federal government — but there is no reason to celebrate. In the real world, you are held accountable to complete the job. Working through August was never about spending more time in Washington. It was about confirming as many nominations as possible, due to Democratic obstruction, and funding the government. It’s that simple.
Since the Senate stayed in session this August, we successfully completed 90 percent of the funding bills for the first time in 22 years. This is a huge step forward, but we still didn’t get it all done. The Senate has completed and passed nine of the 12 appropriations bills in three tranches. Both chambers have been working diligently to sort out the differences in conference. The remaining funding is being held up due to controversy over border security.
Meanwhile, congressional leadership decided to roll the unfinished bills into a package tied to defense funding and call it a day until December. This is a total sleight of hand. It is caving to Senate Democrats who are doing everything they can to derail President Trump’s agenda, including funding for border security and the wall.
Another funding failure further exposes the underlying problems with the funding process used by Congress since 1974. It has only fully funded the government four times in the past 44 years. It has locked Washington in a cycle of continuing resolutions and last-minute spending deals. This week marked the 184th time Congress used a continuing resolution. Until politicians have the will to do something about this broken process, these funding lapses will continue.
There is a different way to deliver results. Over the last year, as a member of the Joint Select Committee on Budget and Appropriations Process Reform, I have worked in a bipartisan, bicameral way with my colleagues to create a politically neutral platform that funds the government on time every year.
To be successful, this new funding process needs to include specific milestones for completing funding and appropriate consequences if Congress fails to meet those markers.
I came to the Senate to help tackle our national debt crisis. While the Senate has made significant progress on funding this year, permanent change will not happen unless we get serious. It will not happen if Congress refuses to hold itself accountable for failure. It will not happen if Congress continues to accept a broken funding process.
The Joint Select Committee is our last chance to fix this problem, but the window is closing. We have to hold ourselves accountable to the same standards of people in the real world and put a politically neutral platform in place that funds the government on time without the use of continuing resolutions or sweeping funding bills after the end of the fiscal year.
With the size of our national debt, we can no longer kick the can down the road, as Congress did again this year.
Read more in Washington Examiner.
Trump: “I will never sign another bill like this again”
March 23, 2018
President Trump said he has signed the 2,232-page omnibus spending bill — but warns he will never do this again.
“There are a lot of things we shouldn’t have had in this bill but we were, in a sense, forced if we want to build our military, we were forced to have,” Trump said.
“There are some things we should have in the bill. But I say to Congress, I will never sign another bill like this again.”
Read more in CNN.
I opposed the so-called “omnibus,” which is another word for “massive spending bill.” Here’s why:
Clearly, Washington his hit a new low. We are six months into the fiscal year and Congress just now voted to fund the remainder of it. To say nothing of the fact that this is after two shutdowns and five continuing resolutions.
Frankly, it’s beyond pathetic.
This spending bill is the product of a few politicians getting in a room and deciding how to spend a trillion dollars. The result is a massive spending package on track to add another trillion dollars to the national debt.
Washington’s broken budget process has failed yet again. It is critical that this budget process be changed to deal with the structural problems that always lead to this unacceptable outcome.
I came to the United States Senate to do all I can to change Washington, and I am not giving up. As I’ve said many times before, changing the budget process alone will not solve our $21 trillion national debt crisis, but we will not solve the debt crisis unless and until we change this broken budget process.
How Tax Reform Will Lift The Economy
The Wall Street Journal
Editor’s note: The following is a Nov. 25 letter to Treasury Secretary Steven Mnuchin :
Dear Mr. Secretary:
The present debate over tax reforms proposed by President Trump’s administration and embodied in bills that have passed the House of Representatives and the Senate Finance Committee has raised the basic question of whether the bills are “pro-growth”: Would the proposals raise current and future economic activity and generate federal tax revenue that would reduce the “static cost” of the reforms? This letter explains why we believe that the answer to these questions is “yes.”
Economists generally think of fundamental tax reform as a set of tax changes that reduces tax distortions on productive activities (for example, business investment and work) and broadens the tax base to reduce tax differences among similarly situated businesses and individuals. Fundamental tax reform should also advance the objectives of fairness and simplification.
The quest for such fundamental tax reform has been pursued by policy makers and economists for decades. Examples include the Tax Reform Act of 1986, proposals for reducing the double taxation of corporate equity by the Treasury Department and the American Law Institute (enacted in part in 2003), the “Growth and Investment Plan” from President George W. Bush’s Advisory Panel on Federal Tax Reform, and arguments from President Obama’s administration to lower corporate tax rates. The proposals emerging from the House, Senate, and President Trump’s administration, fall squarely within this tradition.
Reducing Corporate Tax Rates, as Proposed, Will Increase Economic Activity
While the overall House and Senate tax plans contain numerous household and business provisions, we focus on the corporate tax changes, returning to other provisions before concluding. A key concept in this context is the “user cost of capital,” which essentially measures the expected cost to firms of making additional investments in equipment. A considerable body of economic research concludes that reductions in the user cost of capital raise output in the short and long run. Several of the proposals that have emerged in the current debate are key to lowering the user cost of capital. For example, expensing, which allows firms to deduct the full cost of investment at the time it is made, lowers the user cost of capital relative to depreciation over time. A lower corporate tax rate also lowers the user cost of capital, which not only induces U.S. firms to invest more, but also makes it more attractive for both U.S. and foreign multinational corporations to locate investment in the United States.
There is some uncertainty about just how much additional investment is induced by reductions in the cost of capital, but based on an extensive body of scholarly research, many economists believe that a 10% reduction in the cost of capital would lead to a 10% increase in the amount of investment. Simultaneously reducing the corporate tax rate to 20% and moving to immediate expensing of equipment and intangible investment would reduce the user cost by an average of 15%, which would increase the demand for capital by 15%. A conventional approach to economic modeling suggests that such an increase in the capital stock would raise the level of GDP in the long run by just over 4%. If achieved over a decade, the associated increase in the annual rate of GDP growth would be about 0.4% per year. Because the House and Senate bills contemplate expensing only for five years, the increase in capital accumulation would be less, and the gain in the long-run level of GDP would be just over 3%, or 0.3% per year for a decade.
Is this estimate of the growth effect realistic? According to one leading model using an alternative framework, the proposal would increase the U.S. capital stock by between 12% and 19%, which would raise the level of GDP in the long run by between 3% and 5%. Yet another model, this one used in the analysis of the “Growth and Investment Plan” in the 2005 President’s Advisory Panel on Federal Tax Reform, found that a business cash-flow tax with expensing and a corporate tax rate of 30% would yield a 20.4% increase in the capital stock in the long run and a 4.8% increase in GDP in the long run. More conservative estimates from the OECD suggest that corporate tax changes alone would raise long-run GDP by 2%. In short, there is a substantial body of research suggesting that fundamental tax reform of the type being proposed would have an important effect on long-run GDP. We view long-run effects of about 3% assuming five years of full expensing, and 4% assuming permanent full expensing, as reasonable estimates.
Another advantage of the corporate rate reduction embodied in the House and Senate Finance bills is that it would lead both U.S. and foreign firms to invest more in the United States. In addition, U.S. multinational firms would face a reduced incentive to shift profits abroad, which would raise federal revenue, all else equal.
In the foregoing analysis, we assumed a revenue-neutral corporate tax change. Deficit financing of part of a reduction in taxes increases federal debt and interest rates, all else equal. For the House and Senate Finance bills, this offset is likely to be modest, given that the United States operates in an international capital market, which means that the impact of changes in interest rates resulting from greater investment demand and government borrowing are likely to be relatively small.
Lowering Individual Tax Rates Also Offers Generally Positive Economic Effects
The House and Senate bills also contemplate a number of individual tax provisions that can affect economic activity and incomes. In recognition of the fact that non-corporate business income is substantial in the United States, both bills would reduce taxation of non-corporate business income and increase the amount of capital expensing allowed. While difficult to quantify, as the bills specify different effective tax rates, these provisions would increase investment and GDP above the level associated with the corporate tax changes discussed above. Also on the individual side, both the House and Senate bills reduce marginal tax rates on labor income for most taxpayers, increasing the reward for work. Increases in labor supply, in turn, increase taxable income and tax revenues. One should note, however, that some taxpayers would face increases in effective marginal tax rates because of base-broadening features of the bills, such as limits on the federal tax deductibility of state and local income taxes. On balance, though, we believe that the individual tax base broadening embodied in the proposals would enhance economic efficiency by confronting most households with lower marginal tax rates. In addition, fairness would be served by reducing differences in the tax treatment of individuals with similar incomes, and simplification by reducing the number of individuals who itemize for federal tax purposes.
Confirming a Pro-Growth Objective Is Important for the Path Forward
You have consistently stressed that the objective of tax reform should be to enhance prospects for increased economic growth and household incomes. We agree with this objective, which is consistent with the traditional norms of public finance going back to Adam Smith. We believe that the reforms embodied in the House and Senate Finance bills would achieve this objective. The increased growth, in turn, would lead to greater taxable income and federal tax revenues, which would reduce the static cost of lost federal tax revenue from the reform.
We hope these analytical points of support for the growth effects of tax plans being discussed are useful to you and to the Congress as you complete the important economic task of fundamental tax reform. We would be happy to discuss our conclusions with you at your convenience.
Robert J. Barro, Paul M. Warburg Professor of Economics, Harvard University
Michael J. Boskin, Tully M. Friedman Professor of Economics, Stanford University; Chairman of the Council of Economic Advisers under President George H.W. Bush
John Cogan, Leonard and Shirley Ely Senior Fellow, Hoover Institution, Stanford University; Deputy Director of the Office of Management and Budget under President Ronald Reagan
Douglas Holtz-Eakin, President, American Action Forum, former director of the Congressional Budget Office
Glenn Hubbard, Dean and Russell L. Carson Professor of Finance and Economics (Graduate School of Business) and Professor of Economics (Arts and Sciences), Columbia University; Chairman of the Council of Economic Advisers under President George W. Bush
Lawrence B. Lindsey, President and Chief Executive Officer, The Lindsey Group; Director of the National Economic Council under President George W. Bush
Harvey S. Rosen, John L. Weinberg Professor of Economics and Business Policy, Princeton University; Chairman of the Council of Economic Advisers under President George W. Bush
George P. Shultz, Thomas W. and Susan B. Ford Distinguished Fellow, Hoover Institution, Stanford University; Secretary of State under President Ronald Reagan; Secretary of the Treasury under President Richard Nixon
John. B. Taylor, Mary and Robert Raymond Professor of Economics, Stanford University; Undersecretary of the Treasury for International Affairs under President George W. Bush
Read more at The Wall Street Journal.
As recently as 2007, our gross federal debt was 63 percent of the economy but has risen to over 100 percent this year and is projected to continue to exceed the size of our entire economy for some time if we don’t act. By the end of President Obama’s tenure in office, the United States will have added over $9 trillion to the national debt. It will require leadership to change course, and the current presidential campaign is an ideal forum to discuss this dangerous trend and to propose serious solutions.
Unfortunately, the discussion so far has not focused on our national debt. In fact, it has barely been mentioned. With over 70 questions in over five hours of debate in the first two Republican presidential debates – not one single question has been about fixing the debt.
We need a substantive national conversation about our red ink, and the next presidential debate on October 28 among the Republican presidential contenders is a prime opportunity to address this issue. After all, the winning candidate won’t be able to escape the debt. The next president will inherit a gross federal debt of about $19 trillion.
We are well past the point of being able to ignore this immense problem. If interest rates were to rise only to their 30-year average of 5.5 percent, we would be paying almost a trillion dollars in interest alone by the end of the budget window. That’s almost twice what we currently spend defending our country, and it’s just not workable.
The consequences of such high debt aren’t abstract; they are real and will affect the pocketbooks of working individuals and middle-class families. Rising debt will slow economic growth and could reduce projected annual income by up to $6,000 per person by 2040. Interest rates will rise on everything from credit cards to mortgage loans and car payments.
Decades of fiscal mismanagement from both political parties have led to where we are today. We need real leadership – not just from elected officials, but also from those seeking office. They need to tell voters the hard truth: Washington has burdened the next generation with empty political promises, and this debt crisis threatens our national security as well as the future of our children and their children.
In this election cycle, most of the presidential candidates have not shown the boldness to address the debt in a meaningful way. There are some who subscribe to the false belief that our debt problems are over because deficits – the difference between federal spending and revenue in a given year – have been falling in recent years. But as the Committee for a Responsible Federal Budget points out, trillion-dollar deficits are projected to return in the next 10 years largely due to an aging population, increased healthcare costs and rising interest costs.
Washington can ignore the problem and point fingers, or it can get serious about adopting comprehensive reforms that will put the country on a sustainable fiscal trajectory.
Our fiscal challenges will require a long-term solution. We have significant opportunities to responsibly cut government spending, but instead of the blunt sequester, we should eliminate or reform programs that are outdated and don’t work. As we have seen, hacking away mindlessly at all discretionary spending is not the right approach.
With an aging population, we need to save and restructure our entitlement programs so we can guarantee these programs will exist for future generations. The Social Security disability trust fund will run out of money next year; and the retirement portion will be depleted in the next 20 years.
In addition to cutting expenses and saving Social Security and Medicare, our next president needs to put the right policies in place so we can grow our economy. Candidates should put forward proposals to reform our outdated tax code and modernize our energy and regulatory policies in order to lift wages and create jobs.
Finally, we need to enact common-sense policies that incentivize businesses to create jobs and individuals to invest in the economy. This requires lawmakers who are willing to make tough choices and compromise to reach the goal. We need a “man-on-the-moon” national effort to solve this long-term debt crisis.
Getting our fiscal house in order should be a top priority for all the presidential candidates and discussing how best to do this should be front and center in each debate.
The Republican presidential candidates have a week before the next debate in Colorado. We cannot afford for the national debt to be absent again. Candidates shouldn’t act surprised if the moderator’s first question is: What will you do about our national debt?
And Americans expect – and need – our next president to hit this question out of the park.