Welcome Secretary Geithner.
I want to start by acknowledging the very serious challenge you face: solving our banking crisis, and stabilizing our financial markets is critical to our economy and job growth.
There is no perfect solution to this grave problem.
While I have concerns with how the past and current Administrations have handled TARP, the best thing we can do for our economy is get credit markets functioning again – and I genuinely appreciate your efforts on that front.
That said, you won’t be surprised to hear that I have profound disagreements with the President’s budget. It is an historic expansion of the tax, borrow, and spend philosophy – which concentrates resources and power in Washington, and smothers the freedom and resources of the very entrepreneurs and small-business owners needed to turn this economy around.
Of particular relevance to you and this hearing are the tax- and debtincreases called for by this budget.
Let’s begin with taxes. The budget proposes $1.4 trillion in tax increases – in other words, a tax hike that totals roughly 10 percent of the entire economy today.
That would be bad enough in itself. But there is no economist on the planet – whether Keynesian, supply-sider, or somewhere in between – who would recommend raising taxes in the midst of the one of the most painful recessions in generations.
Now, your colleague, Budget Director Orszag, says reassuringly that these tax hikes won’t start until 2011 – when an economic recovery could be well under way.
But business are forward looking – and make investment and hiring decisions today, based on expectations of future after-tax returns. And nothing affects a business’ bottom line more than taxes.
If you’re running a business right now, why would you start expanding or hiring – the kinds of activities this economy desperately needs – with the threat of a huge tax increase in just a year and a half?
Now, let’s take a look at some of these specific tax increases:
You raise taxes on what the President calls “the wealthiest Americans.” But many of these “wealthy” people are small-business owners – the people who create nearly 80 percent of the jobs in this country.
Then there’s the “cap-and-trade” proposal, which will effectively impose an additional tax burden of more than $800 billion on everyone who uses gasoline, natural gas, home heating oil, or electricity. I think we can argue that covers most Americans.
You penalize people for buying houses, making charitable contributions, and building up savings to leave to their families.
You would also tax U.S.-based international companies, making it harder for them to compete with their foreign counterparts – directly contrary to what we should be trying to accomplish.
Then there’s also the deficits and debt resulting from this budget.
The 2009 budget deficit swells to $1.8 trillion – more than triple the previous record. The budget would also double the national debt in the next 8 years.
In addition to all these things is the budget’s staggering failure to control spending. It even adds more than a trillion dollars to entitlement spending – worsening the most severe fiscal problem we have.
As I said earlier, this is a challenging time, and no economic or fiscal plan is going to be perfect. But the President’s budget tries to spend, tax, and borrow our way into prosperity – a economic recipe that simply doesn’t work.
Nevertheless, I do want to work with you to stabilize financial markets, get our economy back on track in the short term, and address the greatest challenge to our longer-term growth: the looming entitlement crisis.