Washington (CNSNews.com) – Rep. Gerald Connolly (D-Va.) says President Obama’s plan to raise tax rates for the wealthiest Americans won’t balance the budget by itself – but that’s not the goal anyway.
“Well, that (tax hikes) alone doesn’t balance the budget. It’s part of a broader plan,” Connolly said.
“A totally balanced budget is probably not what is being sought. What is being sought is stabilizing the debt in its ratio to the broader general economy -- bringing it down to a much more manageable level.”
Connolly said current efforts are aimed at making “a substantial dent” in the national debt –reducing it over a number of years, and reducing it as a percentage of the gross domestic product as well.
“In an ideal world,” Connolly said he would like to see the budget balanced now.
“But that’s impossible without completely – without creating, frankly, a depression,” he said. “I mean, if you’re looking at $12 trillion dollar debt, in a $16- to $17-trillion-dollar economy, you can send the economy way off a cliff -- if you did something precipitous that isn’t phased and balanced. So I think we are a long way from an actual balanced budget unless economic growth really picks up substantially.”
(As CNSNews.com reported earlier this week, some Republicans insist that growing the economy would be far more effective than increasing tax rates in balancing the budget.)
Connolly said that restoring consumer confidence and market confidence would produce a more “robust” economic growth pattern. “And those are good goals in the short-to-interim period,” he said.
As for the longer term, “it would be great to balance the budget if that makes sense at that time,” Connolly said.
“Managing debt is the key here,” he said. “It isn’t to be debt-free necessarily,” he continued.
“What household in America is debt free? Most households manage some debt --student loans, car loans, mortgages, you know, whatever. Credit card balances. Most American households aren’t debt free. But the key is do you manage it in such a way that you’re financially successful, you’re able to improve on your lifestyle, and you’re not bearing some crushing debt burden that forces you into bankruptcy.”
Since the end of World War II, the U.S. government, on average, has taken in about 18 percent of gross domestic product (GDP) as revenue. But from fiscal year 2009 through fiscal year 2011, outlays as a percentage of GDP exceeded 24 percent each year. When this was mentioned to Connolly, he said: “That’s what’s out of balance.”
“If you look at the last time we balanced the budget, that was under Bill Clinton. And they were roughly in parity. So spending was around 19, 20 percent of GDP, and revenue was around 19 percent of GDP, and we balanced the budget four years in a row,” he said.
“Where are we now? We are spending at roughly 25 percent of GDP – or almost 25 percent of GDP. That’s way too high. But revenue is in the 14 and a half to 15 percent GDP range. That’s way too low. So you have to lower one and raise the other and that’s what we’ve been saying for quite some time.
“And when you ask, ‘Well why don’t we do that?’ the answer is because the Republicans simply do not want to raise taxes on anybody for any reason, and if you don’t consider the tax structure, you’re going to starve yourself of revenue and that produces massive debt.”
CNSNews.com then asked: “Is there a percentage of GDP that you would like to see or an appropriate amount of GDP that you would like to see taxed?”
Connolly said he’d like the federal government to go back to taking in average revenues of 18 percent of GDP.
“Well, I’d at least like to see us return to average, because if we did, and we have to also rein in spending.”
But Connolly placed the blame for higher spending on the recession.
“Now, spending went higher than it has historically been because we’re in an unprecedented period of economic contraction -- the worst recession in 80 years. When that happens you lose revenue and your expenditures go up, not down, because more people need the safety net,” he said.
“Food stamps, Medicaid, unemployment insurance, and you’re taking in less revenue because fewer people are making profits, fewer people have jobs, and so that’s what happened here. And that’s why spending is at 25 percent,” he continued.
“Its needs to come down, but it needs to come down balanced with an increase in revenue however you can get it. So yeah, I’d like to see us return to the historical norm -- and if we did, the annual deficits would be much, much smaller, and much more manageable and we might even be able to make a dent in the long-term debt.”