My Turn: In Washington, two signs of progress
As an architect who served as a U.S. congressman, I recognize the difficulty that accompanies the creation of any kind of structure, whether it is a building or a comprehensive policy.
Just as we try to build an edifice that is beautiful, functions well and will last for years, we should strive to build public policy that looks to the future, does what it is intended to do and can survive the harsh winds of public opinion. Two recent developments in Washington suggest we are at least thinking about how we construct policy that takes on problems that may be painful now but nothing compared to the pain we will feel if we do nothing and just wait.
With that in mind, House Ways and Means Chairman Dave Camp, who entered Congress the same year I did, recently released a comprehensive tax reform discussion draft. The draft is a large step forward, deserving much praise, as it is the first comprehensive proposal from a tax-writing committee in many years. It also delivers on two key points: deficit reduction and the promotion of economic growth that increases the size of the economy from 0.1 to 1.6 percent annually while dedicating revenue gains to deficit reduction rather than relying on uncertain revenues to reduce rates before economic growth has actually taken place.
Instead of adding to the deficit, the Ways and Means Committee found permanent solutions to the expiring tax provisions. Simply put, the proposal would generate $560 billion more in revenue than if lawmakers were to continue various tax extenders and refundable credit expansions without offsets. There’s more – chained CPI, a more accurate measure of inflation, is included in the draft as part of its across-the-board savings. The number and size of deductions, credits and other preferences are also significantly reduced.
These are two fundamental elements of the proposal that have to be laid to support the work that follows, and for starting at the foundation level Camp and his policy “edifice” deserve a great deal of praise.
My concerns lie mainly with how the policy draft contributes to the long-term deficit and, in turn, our national debt, which is the largest it has been since the close of World War II. Instead of using some of the new revenue generated by broadening the base to improve our budgetary situation, all of the revenue is allocated toward reducing rates. Furthermore, some of the revenue generated could actually add to the long-term deficit because of timing shifts and temporary revenue provisions that come along with it.
After the tax plan, President Obama submitted his budget for next year. On one hand, it is encouraging that the president builds on deficit reduction enacted to date. Debt would decline as a share of GDP under the budget. But on the other hand, it will be far too high and could be even higher if the economy doesn’t grow as the budget assumes.
On one hand, the president wisely identified specific offsets to pay for his priorities without adding to the debt. On the other hand, he should be keeping an eye on the long-term fiscal situation and embrace a budget deal to put the debt on a sustainable path and grow the economy.
Our national debt is not an untenable abstraction; it causes interest rates to rise. Payments on those interest rates will continue to increase, resulting in the crowding out of other key public investments, slowed wage growth and an increased cost of living. Furthermore, rising interest rates make it less likely that businesses will have the kind of economic confidence necessary to invest in new equipment and hire new workers.
The progress made deserves some applause, but we still have not built a structure that will last long enough to secure the futures of our children and grandchildren. That’s why I continue to be a member and supporter of Fix the Debt.
(Dick Swett of Bow is a former congressman, a steering committee member of the New Hampshire chapter of Fix the Debt and a licensed architect.)