May 21, 2011

Manchin supports federal spending cap | Charleston Gazette

CHARLESTON, W.Va. -- Sen. Joe Manchin says he supports a bill that would cap federal spending at a certain percentage of the nation's gross domestic product, because the nation's deficit has risen so sharply in recent years.

During the 16 years when Bill Clinton and George W. Bush were in the White House, spending as a percentage of GDP averaged 19.7 percent. It ranged from a high of 21.4 percent in 1993, Clinton's first year, to a low of 18.2 percent in 2000 and 2001, after Clinton eliminated the federal deficit.

In 2009, federal spending reached 25 percent of our GDP, higher than any year since 1944. In 2010, spending was 23.8 percent of GDP and is predicted to be 25.3 percent in 2011. (The nation's GDP is the market value of all finished goods and services produced within a year.)

Manchin, a Democrat who joined the Senate in November, points to those and other numbers from a database prepared by the federal Office of Management and Budget.

He says that's why he supports the Commitment to American Prosperity Act, co-sponsored by Sens. Bob Corker, R-Tenn., and Claire McCaskill, D-Mo.

Sen. Jay Rockefeller, D-W.Va., and a majority of Democratic senators disagree with the CAP Act and have written a letter to President Obama opposing the bill.

Rockefeller and other opponents of the bill say restricting federal spending by the amounts proscribed by the CAP Act -- 22.3 percent of the GDP in 2013, decreasing to 20.6 percent in 2023 -- would lead to deep cuts in Social Security, Medicare and Medicaid. Manchin has said he doesn't want to cut those programs.

The CAP Act's proposal to cut federal spending as a percentage of the gross domestic product to 20.6 percent by 2023 uses the average of spending-to-GDP ratios from 1969 to 2008, after entitlements were put into place.

Emily Bittner, Manchin's communications director in Washington, D.C, said Manchin "is frustrated that there has been little or no progress on this issue.

"If you want to be spending and living within your means, you have to make choices, and for Senator Manchin, programs that help our seniors, veterans and children -- especially programs like Social Security and Medicare -- must be protected as our highest priorities."

Bittner also pointed out, "Manchin has voiced deep and grave concerns with how much we are spending on wars," predicting Manchin will discuss his concerns in more detail "as the debate about Afghanistan begins to crystallize.

"He is very concerned with the level of spending," Bittner said. "Should we continue to spend $120 billion a year in Afghanistan?"

CAP Act opponents say supporters, like Manchin, who look at cutting federal spending are only looking at half the problem. The other half, they say, is that federal revenues are down as well.

"The current and projected federal deficits are largely due to the sharp drop in revenues resulting from the Great Recession and the Bush-era tax cuts of 2001 and 2003. To ignore the revenue side of the problem is to ignore the growing national debt," said Ted Boettner, executive director of the West Virginia Center on Budget and Policy.

President Obama and Republican congressional leaders fought over the Bush-era tax cuts in 2010. Obama wanted them repealed for people making more than $200,000 or couples making more than $250,000; Republicans didn't want to repeal them for anybody. They compromised, and agreed to a temporary, two-year extension.

Last month, Obama said he would not agree to another renewal of the cuts for those he termed "the wealthy." Republicans say they will not agree to what they call "tax raises."

"We must take a balanced approach to the federal deficit that includes the spending and the revenue side of the problem," Boettner said.

"You cannot protect seniors, veterans and working families without taking a balanced approach to deficit reduction that includes looking at revenues," he said.

Asked whether Manchin supports reversing Bush's tax cuts for those making more than $200,000 a year, Bittner said, "Manchin believes in a fair tax system. ... He would like to see it reformed."

Bittner said Manchin has "no specific proposals, but is open to conversation."

While Manchin does not specifically support revoking the Bush tax credits, he regularly cites two examples of what he calls the unfair tax system.

* Billionaire Warren Buffett said in 2007 that he paid a lower effective tax rate than his secretary paid.

* The New York Times reported on March 25 that General Electric made $5.1 billion last year in the United States, but paid no income taxes at all.

GE has since said it would pay 2010 taxes, but did not reveal how much. A follow-up report from Fortune magazine and ProPublica noted:

"It's been 25 years since the last big tax reform legislation, which cut the corporate rate to 34 percent from 46 percent and eliminated a lot of deductions and tax breaks.

"But a quarter-century of pushing by businesses -- of which GE has been among the most aggressive -- has left us with both the lower tax rate (now 35 percent) and lots more deductions and shelters and other tax-reducing tactics than the 1986 legislation envisioned." 

In recent years, the GDP has increased dramatically, rising from $6.6 trillion in 1993, the first year of Clinton's presidency, to a projected $15.1 trillion in 2011. The GDP is projected to reach $19.8 trillion in 2016, according to the White House statistics.

Sean O'Leary, from the West Virginia Center on Budget and Policy, wrote in an analysis, "The combination of tax cuts and the recent economic downturn account for over two-thirds of the 10-year projected deficit....

"The primary cause of the long-term deficit is the rising cost of health care. The U.S. spends nearly twice as much on health care, as a share of GDP, as most of its peer nations, a share that is predicted to grow."

Last week, the Economic Policy Institute, an independent Washington-based think tank, published a paper by Rebecca Theiss about factors causing the growing budget deficit.

The Bush-era tax cuts, Theiss writes, create 19 percent of the current deficit. "Spending on the wars in Iraq, Afghanistan and other overseas operations represent another 15 percent of the projected 2010 deficit," she wrote.

Economic recovery efforts, such as the American Recovery and Reinvestment Act, account for only 16 percent of the current deficit. And that calculation, she said, may be overstated since those federal expenditures have employed millions of workers who now pay taxes on their salaries.

By:  Paul J. Nyden