Smith "Leadership" On Debt Mercifully Ends

Steve Novick

To borrow a phrase from that very fine and much mourned man, President Ford, our long national nightmare is over.

President Ford was speaking of Watergate. I refer to Oregon Senator Gordon Smith’s chairmanship of the Senate Finance Committee Subcommittee on Long Term Growth and Debt Reduction.

Oh – you weren’t aware of Senator Smith’s leadership on the issue of reducing the national debt? Don’t feel bad. In the last Congress, the Senator never issued a single press release about his work on the subcommittee.

In theory, this should be a very important subcommittee. Our nation’s long-term fiscal situation is grim. Most of the Federal budget goes to Social Security, Medicare, Medicaid, defense and interest on the debt. We are already running huge annual deficits. In a few years, when the baby boomers start retiring, the rising numbers of Social Security and Medicare recipients, plus rising health care costs, will force the nation to make very difficult choices.

On September 28, 2006, Robert Bixby of the respected, bipartisan deficit-watching Concord Coalition told Smith’s subcommittee:

Federal tax receipts have hovered in the range of 18 percent of GDP over the past half century. If retirement and health care entitlements are allowed to grow on autopilot pushing total federal spending to 30 percent of the economy, and Americans' intolerance for taxes above 20 percent of GDP holds true, the resulting deficits will rapidly escalate to dangerous levels. A deficit equaling 10 percent of GDP in today's terms is the equivalent of $1.3 trillion. That amount is roughly half of today's total government expenditures. The prospects of being able to carry that amount of new debt, year after year, without stifling the economy are nil.

The real choices require scaling back future benefit promises, raising taxes to pay for them or some combination of both. Economic growth alone will not be enough, nor will trimming everyone's favorite target -- waste fraud and abuse.

Senator Smith’s contribution? He led off the hearing by praising what he called “the success of the Bush tax cuts,” which he claimed had “increased tax revenues.”

Of course, as President Ford recognized, tax cuts do not increase tax revenues, any more than eating more ice cream reduces your weight. In his 1975 State of the Union address, Ford proposed a tax cut, but admitted: “Unfortunately, it will increase the size of the budget deficit.”

Recent experience has confirmed Ford’s wisdom. Income tax revenues normally grow with the economy. Under the first George Bush, who suffered a worse recession than his son did, they grew from $445 billion to $509 billion. Under Clinton, they grew to $1 trillion by 2000. But after the Bush II tax cuts, income tax revenues collapsed to $783 billion. Only in 2006 did they recover to the $1 trillion level – and adjusted for inflation, were still lower than in 2000. As the same Robert Bixby said last month: “The idea that tax cuts have led to higher revenues is pernicious.”

If Senator Smith had taken his subcommittee seriously, he could have put it to good use. He could have joined people like Bixby and Comptroller General David Walker in trying to educate the American people on the looming fiscal crisis and the tough choices that will be required to avert it.

But when it comes to the Federal budget, facing up to tough choices has never been Senator Smith’s cup of tea. In 2002, Project Vote Smart asked candidates for their views on a variety of tax and spending issues. His response showed that our junior Senator has what we might almost call a touching faith in a budgetary Santa Claus. Senator Smith supported increasing or maintaining spending in EVERY area, and supported cutting or holding even EVERY kind of tax except cigarette taxes.

The Senator's voting record has been consistent with his free-lunch beliefs. Even six years ago, when President Clinton was running surpluses rather than deficits, the long-term fiscal picture was worrisome. But by supporting Bush's tax cuts and Bush's war, Smith and his fellow Republicans have dug us a deeper and deeper hole.

So putting Senator Smith in charge of “debt reduction” was always a joke in
very bad taste. But the joke was on us. We can only hope that whichever Democratic Senator takes over the subcommittee on debt reduction is someone who favors green eyeshades over rose-colored glasses.

By Steve Novick Jan. 04, 2007