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Letter to BEA President Joe O'Sullivan form Senator John Kerry, D, Massachusetts
Thank you for writing to me about the President's budget request and tax cut proposals. I appreciate hearing from you on this important issue.
As you know, the federal government's fiscal position has dramatically deteriorated over the past two years. According to the Congressional Budget Office, since January 2001, the 10-year on-budget forecast has plummeted from a $5.6 trillion surplus to a $1.7 trillion deficit. The squandering of the first budget surpluses in a generation is all the more alarming now that the retirement of the Baby Boom generation is just over the horizon. Given our situation and our obligations at home and abroad, we must ensure that our tax and budget policies are both fiscally responsible and economically sound.
The Bush Administration claims that both the tax cuts of 2001 and those included in the President's so-called "economic growth" package will spur the economy enough to pay for themselves, that reductions in federal spending will make the tax cuts affordable, and that the deficits will be relatively small and have a minimal negative impact on the economy.
None of these arguments withstand scrutiny. First, the President's own Council of Economic Advisors finds that the tax cuts will not stimulate the economy enough to pay for themselves. The Office of Management and Budget acknowledges that the Administration's budget will cause permanent deficits. These deficits will increase interest rates, reduce national investment, and add to the national debt. Second, President Bush's proposed 2004 budget deficit, excluding the Social Security surplus, is larger than the entire non-defense discretionary budget. Thus, it is implausible that spending restraint would make additional tax cuts affordable. Lastly, in a statement opposing the Bush tax cuts, 450 economists, including 10 Nobel laureates, agreed that the deterioration in the budget outlook caused by the President's proposals will reduce the federal government's ability to finance key programs like Social Security, Medicare, education, health care, and basic research.
The Bush Administration has also overstated the benefits if its tax cuts to American families. President Bush has said that the "average" family of four will receive a tax cut of $1,100. This statement is misleading since half of all taxpayers will receive less than $200. The President also neglects to mention that over the next 10 years his tax cut proposals would increase the share of national debt for this same average family by more than $36,000.
History has shown the merits of fiscal responsibility. In 1993, my colleagues and I enacted a deficit reduction package that cut spending, raised tax rates on a small percentage of wealthy individuals, and set our nation on a course of fiscal discipline that resulted in the longest economic expansion in American history. I will continue to push for fiscally responsible legislation that invests in education, protects programs like Social Security and Medicare, spurs economic growth, and ensures that our children will not be burdened by a crushing national debt.
Thank you again for writing to express your concerns about tax cuts and the federal budget. Please do not hesitate to contact me again regarding this or any other matter of importance to you.