Dear Member of Congress:
During negotiations between Congressional leaders and thePresident over raising the federal debt ceiling, many proposals that would affectfuture federal expenditures and revenues have been offered. As a foundingorganization of the Cut, Cap, and Balance coalition, the 362,000-memberNational Taxpayers Union (NTU) continues to recommend your support forimmediate program reductions, statutory spending caps, and a Balanced BudgetAmendment to the U.S. Constitution amid these discussions. At the same time,there are numerous debt reduction ideas – including tax increases and fiscalgimmicks – you should not support. Here, in random order, are some of the worstones to watch out for in the current deliberations.
Yet Another DeficitCommission. Seven short months ago, the National Commission on FiscalResponsibility and Reform (created by the President) became one of the latestpanels to report on solutions for achieving fiscal sustainability. Tellingly,the Commission’s most important proposals affecting long-term expenditures werealmost entirely ignored in President Obama’s budget and were instead relegatedto interesting debate-starters for newspaper editorial boards. In fact, theCommittee for a Responsible Federal Budget’s “Deficit Reduction Plan ComparisonTool” lists more than 30 recent, major proposals to tackle the nation’s fiscalproblems (including one developed by NTU and the U.S. Public Interest ResearchGroup). Surely this existing mass of information should be adequate to the taskof drawing up appropriate reforms that rule out tax increases and focus onoverspending.
Make no mistake: NTU believes that procedural mechanismssuch as sequestration, binding caps, constitutional balanced-budgetrequirements, and permanent “sunset review” bodies can be an important part ofrestoring discipline to the nation’s finances. So can a “fast-track” processstipulating up-or-down votes on specific expenditure reductions. However,creating a special advisory-type commission now, to make another set ofrecommendations that will likely reflect past ones, is not necessary. Such aweak proposal would be perceived as a delaying tactic that won’t magically makeother schemes – such as Senator McConnell’s debt-limit compromise plan –sufficiently palatable for NTU to endorse.
Government-Mandated“Rebates” on Part D Drugs. Likely the most deceptively-named scheme on thislist, proposals to boost “rebates” simply amount to federally-forced pricecontrols on prescription drugs to certain Medicare Part D beneficiaries (whowould see no financial gain even as Washington’s coffers got fatter). As thesystem’s Actuaries have noted, Part D plan providers have already negotiateddeep voluntary discounts of 20 to 30 percent from drug makers and pharmacies,saving both enrollees and taxpayers considerable sums. In addition,government-mandated “rebates” are now required for participants falling intoPart D’s so-called “coverage gap.” Although NTU opposed creation of theMedicare prescription drug program in 2003, attempting to generate illusory savingstoday through rebate requirements as drastic as those under Medicaid would depriveinnovators of the resources they need to continue creating new life-savingmedications – ones that can reduce the need for costly surgeries and hospitalstays. Current federal policies have done enough to erode the position of theUnited States as an island of drug-pricing freedom (and in turn drug development);further rebates could relegate this economically advantageous topography todesert status.
Higher Energy Taxes.Unlike tax credits whose refundable portions represent a direct drain on theTreasury, the tax-law provisions the President and his allies hope to repealfor the five largest oil and gas companies are not “subsidies.” Two of theirbiggest targets are, in fact, the Section 199 deduction for domesticmanufacturing and the “dual capacity” credit for taxes paid to foreigngovernments – both of which are widely available to all kinds ofindustries. Revisiting deductions andcredits with an eye toward broadening the base and lowering rates across theboard (i.e., systemic tax reform) could help U.S. competitiveness. However, singlingout certain firms in one sector for punitive treatment is simply a capricioustax increase – which will ultimately drive up prices at the pump, harmjob-creation, and hurt our business position abroad.
Dairy-Market Manipulation. None of theterribly flawed ideas mentioned here would be effective at easing long-termbudget woes or nurturing an economic recovery. However, advocates of aplan to allow government control over milk prices would, if successful, addcomplicated and contradictory fiscal ingredients to an already problematicmix. Based on the dairy co-ops’ “Foundation for the Future” tenets, thisploy would collect mandatory assessments against dairy farmers to fund a newfederal program that would manipulate milk prices by both limiting supply andpurchasing dairy products. The framework envisions devouring the entire federalspending baseline set aside for dairy as well as half the extra collections ondairy farmers, reportedly leaving a relatively minor “return” to the Treasury (bysome estimates approaching $100 million over ten years). Thus, in the name of“deficit reduction” the result would be a statist market-manipulation regimethat will greatly benefit co-ops but will raise prices (by billions) forconsumers, increase federal expenditures, discourage dairy manufacturers frominvesting toward expansion, and even lead to layoffs in industries affected byhigher costs for milk. As NTU has contended in the past, this isprecisely the opposite direction that badly needed dairy reforms shouldtake. Why would any lawmaker support federal micromanagement of dairymarkets – a policy with such devastating consequences – as stand-alonelegislation or in a debt-limit package?
Poorly-Disguised TravelTax Hikes. Air travel is already among the most heavily-taxed activities inAmerica today, yet some negotiators in debt talks seem content to heap evenmore burdens on airlines and their customers. Two options under discussion aredoubling the Transportation Security Administration segment fee on each airlineticket (applying it to one-way trips) and establishing a new $25 departure taxon each flight. But like similar schemes NTU has opposed before, such asincreasing the Passenger Facility Charge or boosting the Animal and PlantHealth Inspection Service fee on international arrivals, these latest proposalsdon’t suddenly become bearable to taxpayers simply by calling them “usercharges” or “revenue raisers.” The federal government has more than quadrupledits collections from airlines and passengers over the past two decades, leadingto a tax bite on a $300 round-trip domestic fare that often exceeds 20 percent.Policymakers should be seeking ways to reduce this bite rather than making itmore painful, by instituting reforms that allow more private sector-drivenmanagement and innovation for air traffic control and security.
NTU has produced analyses and commentaries on many ofthese threats to taxpayers. More communications will follow as other“disastrous debt reduction ideas” are concocted. For further information, pleasecall 703-683-5700 or visit www.ntu.org. Roll call votes on each issue listedhere will be significantly weighted in NTU’s annual Rating of Congress, and“no” votes will be regarded as the pro-taxpayer positions.
Sincerely, Pete SeppExecutive Vice President