On the very same day that House Democrats rolled out their trillion-dollar health care reform bill, the Associated Press reported that our country's budget deficit has topped $1 trillion for the first time in our nation's history, with every indication that it will reach nearly $2 trillion by this fall.
Our nation's debt stands near $11.5 trillion — another record for Uncle Sam. And to make matters worse, at the end of May, the U.S. government owed China $801.5 billion.
Meanwhile, unemployment numbers woefully surpassed administration estimates in June and now sit at 9.5 percent. The consensus among economists is that we're headed up to at least 10 percent.
As if to ice the cake, on the same day that these unprecedented numbers were released, the White House was acknowledging that its projections were based on too optimistic a reading of the economy. Next month, when the White House releases its new numbers in the regular semiannual review, they and economists agree, the numbers will be even worse. As former Clinton economic adviser Robert Shapiro stated, "They (the White House) used a rosy forecast, and that's understandable because a quick recovery makes the rest of the agenda possible. It creates the basis for the revenues you need for health care and climate change."
While the White House has been successful in pushing through its agenda — the cap-and-trade national energy tax has passed the House, the health care reform proposals are headed for votes, the $787 billion (plus interest) stimulus package breezed through, as did the $400 billion omnibus spending package — our economic options for addressing the recession are being quickly foreclosed.
As just one example, our rising deficit makes our debt a far less attractive purchase to other nations, which could force the U.S. to pay higher interest rates in order to sell our debt abroad. We will soon be confronted with the growing threat of higher interest rates, rising inflation, and a weakened dollar — all dismal economic scenarios.
Peter Morici, an economist at the University of Maryland, put it this way: "The spending required for health care, the tax on business with a cap-and-trade system, and the wasteful spending inside the stimulus will finish the job that the Chinese mercantilism began. We're headed for a disaster here."
Yet, we're actually hearing rumblings about a second stimulus because the $787 billion package was "a bit too small." And Congress is doing anything but reversing course on its gigantic spending spree. As noted above, they've just set the tone for the health care reform debate with a $1 trillion bill.
According to the Wall Street Journal, the House Democrats' health care plan released this month would raise taxes on individuals with adjusted gross income of more than $280,000 a year. The fact of the matter is that more than six out of 10 people who earn that much money are actually small business owners, operators or investors, according to a 2007 Treasury study. And what's worse, if they don't raise enough money at these new rates, they will adjust until they get enough money from the taxpayers to pay for their plans.
All things considered, if this plan were to become law and if President Barack Obama allows the tax cuts of 2001 and 2003 to expire in 2010 as he has promised, and various other deductions and exemptions are phased out, the top marginal tax rate in America would climb to 46 percent. Couple that figure with rising income tax rates on the state level, and the Tax Foundation finds that 39 states, including Minnesota, would have a combined state-federal tax rate of more than 50 percent.
Small businesses will be crushed, and with them our hopes for job creation. Small businesses are the middle class. They are the job creators. Any tax on small business is a blow to the economic engine that drives our nation. The true path to economic recovery lies not in massive spending.
Republicans in the House have introduced the REBOUND Act to reduce the deficit and promote real economic recovery. This fiscally responsible measure will recall the $460 billion in unspent "stimulus" money while leaving intact the package's tax relief and unemployment benefits.
Furthermore, instead of recycling money repaid from the Wall Street bailout into a new spending slush fund, as the Democrats recently introduced, the REBOUND Act will require all Wall Street repayments to go exclusively to debt reduction.
Every responsible American family knows that you pay back your loans before you take out new ones. Unfortunately, Washington needs to be reminded. It's time Congress stop talking about tough decisions and start making them.
Michele Bachmann, a Republican from Stillwater, represents Minnesota's 6th Congressional District in the U.S. House of Representatives.
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