Cut, cap and balance federal budget

Winningreen Issue Alert              A070611

Republican plan is to “Cut, Cap and Balance” the federal budget

By Gretchen Randall

Date: July 6, 2011

Issue:
Conservative Republicans in the House Republican Study Committee (RSC) have proposed a plan for dealing with the budget deficit now and in the future called “Cut, Cap and Balance.”  It would impose immediate spending reductions to cut the deficit in half next year and include statutory, enforceable caps on spending so that it doesn’t exceed 18% of GDP.  Federal spending has now reached about 25% of GDP and the plan proposes reducing spending over 10 years to reach the lower amount of GDP that it’s been at for many years.

The plan also call for passing a balanced budget amendment to the Constitution before the debt ceiling is lifted.  One such amendment has been introduced in the Senate  by Mike Lee of Utah (R) which would require a two-thirds vote in both houses of Congress to raise taxes and a three-fifths vote to raise the debt limit in the future. The president would also be required to submit a balanced budget to Congress each year. A similar balanced budget amendment (HJResolution 56) has been introduced in the House by Rep. Joe Walsh (R-IL).   Presidential candidates, individuals and members of Congress can sign the pledge to “cut, cap and balance” at a website supporting the RSC effort: http://cutcapbalancepledge.com/

Democrats, on the other hand, are proposing tax increases on corporate jet purchasers similar to what was imposed on the sale of yachts in 1990.  It was only after that action decimated the marine industry that the tax was rescinded. 

A recent Rasmussen poll finds only 24% of likely voters think the country is headed in the right direction and a generic Republican candidate runs even with Obama among likely voters.  When it comes to raising the debt ceiling, 63% of likely voters see more long term fiscal problems if spending cuts aren’t made than if the government defaults. (Rasmussen)

Comment: If Democrats are really serious about tax reform, this should be a separate subject focused on lowering the rates and removing loopholes and subsidies such as the ethanol subsidy.  However, we shouldn’t just pick and choose a few tax breaks and not revamp the entire tax code.

Comment: Liberal Democrats will have to face the fact that their mental model of the world does not reflect the real world that mainstream Americans deal with every day.

Background and links: Read more about the plan at: http://rsc.jordan.house.gov/Solutions/debtceiling.htm
George Will noted the yacht tax “destroyed 1470 jobs in the aircraft industry and 7600 in the boating industry” as well as a loss in federal tax revenue since prospective buyers simply purchased new yachts overseas.  http://www.jewishworldreview.com/cols/will102899.asp

Contact: Gretchen Randall
Winningreen LLC
Chicago, IL
Phone: 773-857-5086
e-mail: grandall@winningreen.com