The nation should follow the advice financial planners give families: Get out of debt. The recent charade of touting surpluses and contemplating tax cuts overshadows the fact that the country is $6 trillion in debt. The federal government has previously shifted money between accounts, and declaring "surplus" when only one account is in the black. In a sense, Hollings argues that the government is essentially paying off its Visa with its MasterCard and celebrating the balance of once credit care while the other balance continue to rise. Like a family managing its household budget, the government needs to eliminate its debt first.
The interest on the debt is the worst tax on the American people and the one that we should eliminate first. The interest on the national debt is currently $365 billion per year – roughly $1 billion per day. Tax cuts should not come at the expense of debt reduction, and to lock in Bush's $1.6 trillion tax cut over 10 years relies too heavily on long-term, precarious budget projections. Additionally, future tax cuts would likely increase the debt and related interest costs, pushing the total price tag to close to $3 trillion.
The U.S. Treasury has not seen a true surplus since 1969. According to the Treasury Department's report, the government borrowed $143 billion last year. It is not mathematically possible to have a national debt that continually increases and a surplus simultaneously. Hollings has contended that if we had truly achieved a surplus, the debt would have decreased, not increased as it has for decades.
The federal government manages its accounting books differently than any other business or institution. By borrowing from trust funds such as Medicare, Social Security, Military Retirement and Civilian Retirement, the federal government taps into those funds as if they were for operating expenses. In a private business, if you use the pension fund to pay for operating expenses, you go to jail, but that is precisely what the government is doing.
Ten-year budget assumptions project too far into the future and cannot be relied on for tax cuts or assured debt reduction. Sen. Hollings believes that budget projections have gotten out of control. Predicting what the economy is going to do in ten years is plain, foolish speculation. Consider the discrepancy between predictions between January 2001 and January 2002 – they differed by nearly $4 trillion! Those that have previously claimed massive surpluses base their perspectives on CBO's ten-year projections, which are highly speculative and, by their own admission, could be off by as much as $3 trillion in either direction.
Sen. Hollings has offered legislation that would return the federal government to a one-year budget process, just as governors and mayors are required to do to maintain their state or city's credit rating. President Bush's tax cuts only released minimal amounts in 2001, providing no stimulative benefits, while saving the big tax cuts for later in the ten year period when budget projections are much less certain.
Making matters much worse, the President continues to dig the nation into a ever-deepening deficit hole by insisting on more tax cuts, despite growing federal expenditures for the military, homeland security, education, and other national needs. The result: the nation's deficit and debt continue to reach historically high levels.
We need to learn from our mistakes in the early 1980's. It is widely understood that the U.S. government has an enormous national debt. However, Chairman Greenspan's January 2001 testimony created a "stampede" on Capitol Hill toward massive and irresponsible tax cuts despite the nation's $5.7 trillion debt at that time (NOTE: the debt is now $6.5 trillion). Recent history provides a very clear example of what happens when the federal government combines massive tax cuts with equally large increases in defense spending. President Bush's tax proposal was nearly identical to President Reagan's tax cut in 1981, which subsequently produced a $4 trillion debt that we're still paying off today.
Senator Hollings has consistently sought prudence, responsibility, and discipline in fiscal policy. He helped make the difficult economic policy choices in 1993 that brought about the "unprecedented period" of economic growth in the late 90s. In Hollings view the current Administration's irresponsible fiscal policies have squandered the nation's previously favorable financial condition. Instead of maintaining fiscal discipline to pay off the debt and prepare for Social Security and Medicare's future needs, the Administration has advanced tax cuts that are causing a long-term explosion in the nation's deficit and debt -- dramatic fiscal problems that will burden future generations of Americans.
