Monday, July 25, 2011

Letter to my Congressman on the national debt

Honorable Representative Scott,

I voted for you last November, trusting that you would represent the best interests of my family, my district, and indeed my nation. You represent *all* of us--not (just) the Tea Party, not (just) Republicans, not (just) Democrats, not (just) businesses, not (just) union members, not (just) natives, not (just) immigrants, not (just) Christians, not (just) Muslims. I'm confident that you believe this and do your best to put this into practice.

My foremost concern is coming to a viable strategy for dealing with the national debt. I must confess that I am *extremely* concerned by your statement that that the federal government does not need to raise the debt ceiling at all. Such a statement is the height of irresponsibility. When businesses get into serious financial trouble, do they announce that the only strategy they will consider is to cut expenses? NEVER. Here's the common business plan:

1. Cut expenses

2. Increase revenues

3. Secure new financing for short-term debts so that creditors and employees get paid while #1 and #2 (expense management and revenue enhancement) take place.

It would be the height of irresponsibility for a business to ignore 2/3 of the solution. And in so doing, the business would be irresponsible in its commitments to those to whom it currently has obligations.

I'm not asking you to support a plan that has only revenue enhancement. Or a plan that only raises the debt ceiling. I'm simply asking you to show courage, and to be a responsible leader, by taking every measure that needs to be taken: cut expenses, enhance revenue, and make provisions for short-term borrowing.

Second, as a representative of all of us--not just those who share your philosophy--I want to encourage you to take the high road of compromise. That's right, it's a high road. It's called win-win in the business world I live in. Those who insist on not negotiating don't get very far in real life. Believe strongly, but also act wisely. Be willing to help our nation to work out a deal that everyone of every political persuasion can support. That means that no one gets everything they want, and frankly...that's a good thing. When my children were young, they believed they could get everything they wanted. Helping them realize that was not the way life worked helped them to grow into effective, productive citizens. I'm sure it works the same way in Washington, DC as it does in American families like mine.

Finally, I want to bring to your attention a couple of facts that cut against common political philosophy in the United States. I trust you will not say, "What are you going to believe? Your hard data or my philosophy?" Instead, I trust you will ponder the data and their implication for policy. So here are the facts:

Fact 1. When taken as a percentage of the gross domestic product, US tax revenues are quite low compared to the taxes of most industrialized nations.

"The broadest measure of the tax rate is total federal revenues divided by the gross domestic product. By this measure, federal taxes are at their lowest level in more than 60 years. The Congressional Budget Office estimated that federal taxes would consume just 14.8 percent of G.D.P. this year. The last year in which revenues were lower was 1950, according to the Office of Management and Budget.

The postwar annual average is about 18.5 percent of G.D.P. Revenues averaged 18.2 percent of G.D.P. during Ronald Reagan’s administration...."

Source here

Of the 33 OECD countries, only 3 have a lower total tax burden (federal, state, local, and corporate) as a percentage of GDP than the US. The OECD average is 34.8%; the US percentage is only 26.1%. Source here

Fact 2. Corporate tax burden in the US is the *lowest* among industrialized nations.

"The United States actually has the lowest corporate tax burden of any of the member nations of the Organization for Economic Cooperation and Development....The statutory tax rate [is not relevant because it] applies only to the last dollar earned ... the effective tax rate is substantially lower even for the richest taxpayers and largest corporations because of tax exclusions, deductions, credits and the 15 percent top rate on dividends and capital gains."

Source here

Fact 3. The percentage of US national revenues devoted to cash entitlement programs, though they are certainly growing, are actually quite low compared to most industrialized nations.

"Cash transfers — for unemployment insurance, pensions, benefits for children and the like — amount to only 9 percent of household disposable income in the United States. Among the industrialized nations of the Organization for Economic Cooperation and Development, only Korea provides less."

Source here

Thanks for listening. Rest assured that you and our other national leaders will be in my prayers these next few days.

Respectfully yours,

Chris Falter

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