When negotiations on the budget reached an impasse in Congress this summer, they came up with a bright idea: a Super Committee. They picked 3 members from each party and each chamber and tasked them with finding a solution to the federal deficit that Congress as a whole could not. As a motivation to find another $1.2 trillion in deficit reduction, unpopular cuts to the military and Medicare will kick in if the Super Committee doesnt find agreement. So far, at least, it doesnt appear that the new format has changed the old divide; The Republicans (led by Rep. Jeb Hensarling) are still pushing for all cuts, while the Democrats (led by Sen. Patty Murray) want a mixture of cuts, increased taxes and more stimulus spending.
But as shown by the downgrade of Americas credit rating shortly afterward, and rumors of further ratings downgrades this week, the immediate need for real, serious spending cuts has not changed. Higher taxes are not the solution. Whether taxing at high rates or low, the Federal government has never been able to raise revenues much higher than 20% of GDP, and that was during an economic boom! With current spending near 25% of GDP, it is obvious that a little tinkering with higher taxes will never get us even close to a balanced budget.
In fact, given our shaky economy, proposals to raise tax revenues are likely to do more far more harm than good. Increasing tax rates on higher incomes and capital gains will only discourage investment, which will lead to fewer jobs created. When more capital flows to tax shelters and less to creating jobs, the economy suffers. It wont shock anyone when these tax increases bring in a lot less revenue than anticipated; its always been the case in the past.
Even worse are proposals to raise taxes on oil and gas producers. America already suffers from a weak economy and high unemployment aggravated by high energy prices and a dependence on foreign oil. When Senator Murray and other Super Committee members suggest balancing the budget with higher taxes on oil and gas producers, they are insisting on exactly the wrong medicine for our economy; it will hurt energy production here in the US, costing us jobs and increasing prices to consumers.
The Super Committee should focus their attention on the real solution: cutting spending. And that means REAL cuts; not reductions in increased spending, not cuts that dont really kick in until three Congresses from now, not savings from programs we never intended to fund, and not hypothetical reductions in interest payments based on the previous phantom savings. Cuts that are actually made, not postponed indefinitely like the Doc Fix. If the Super Committee could find $100 billion in real cuts or reductions to wasteful, duplicative or lower priority programs in the 2012 budget, their mission to find a $1.2 trillion reduction to the deficit over ten years would be accomplished
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