RELEASE: CAPAF’s Michael Ettlinger’s Testimony on Deficit Reduction Before Senate Finance Committee
Read the full testimony here.
Today, Michael Ettlinger, Vice President for Economic Policy at the Center for American Progress Action Fund, testified before the Senate Committee on Finance regarding practical solutions to the nation’s long-term deficit problem, including both spending cuts and revenue increases. In May, the Center for American Progress produced a long-term budget-balancing plan called “Budgeting for Growth and Prosperity ,” offering a plan to balance the budget by 2030, 10 years sooner than the House-passed budget resolution.
As the projected long-term deficits that would result from maintaining current policies are unsustainable and highly problematic, the Center for American Progress proposed a plan would lower spending by 4 percentage points of GDP compared to the baseline, while revenue would be just half a percentage point of GDP above the baseline. This lower spending can be achieved while still making important investments in the economy and strengthening the social safety net, and also preserving important middle-class programs and the current average level of taxation on the middle class. While our plan would raise taxes on the wealthy, the level is well within the range of historic norms.
In fact, the analysis Michael Ettlinger provided in his testimony dispelled a number of myths concerning the tax burden on the wealthiest 1 percent of Americans. In actuality, top marginal tax rates and capital gains tax rates are at historically low levels, the incomes of the wealthy have risen dramatically while tax rates have gone down, and the economy has seen stronger job growth during years with higher top tax rates.
- Between 1979 and 2007, the richest 1 percent saw their before-tax incomes more than triple, adjusted for inflation.
- Just between 2001 and 2007, this same group’s before-tax income went up by more than 50 percent.
- In 1993 President Bill Clinton raised taxes on the wealthy. Nevertheless, over the next seven years, the income of the richest 1 percent almost doubled.
- The economy during the 1990s grew at a historically high rate after taxes on the well off were raised under President Clinton.
- Economic performance under the progressive tax policies of President Clinton far outstripped economic performance during the supply-side eras of Presidents Reagan and George W. Bush.
It is important to point out, however, that tax rates are not the be-all and end-all of economic growth. Other factors, including what the government does with the taxes it collects, whether it makes important investments that help the economy, and myriad other private-sector trends and phenomena, are critical to economic growth. The House budget also makes draconian cuts to key areas of public investment, like education, transportation, and scientific research. Education funds would be slashed by 53 percent, transportation and infrastructure by 37 percent, and Medicaid funds, two-thirds of which are spent on the elderly and disabled, would be cut to the bone.
The American people want a responsible balance that provides for our current needs, not a plan dictated by past levels of taxation and spending like the House budget proposal. With an aging population, rising health care costs, and taxes at historic lows, important middle-class programs can be reformed and important investments can still be made by raising taxes on the wealthy—well within the range of historic norms—trimming the defense budget, and wringing efficiencies out of the day-to-day operations of the federal government.
Read the full testimony here.
See also from the Center for American Progress:
- Budgeting for Growth and Prosperity by Michael Ettlinger, Michael Linden, and Seth Hanlon
- Infographic: Obama Bends Over Backwards for Conservatives on Debt Ceiling by Michael Linden
- Infographic: ‘60s Retro Budget Plan by Republicans Unfit for Today by Sarah Ayres and Michael Linden
- What U.S. Creditworthiness Means for You by Adam Hersh
- Sensible Defense Cuts by Lawrence J. Korb, Laura Conley, and Alex Rothman
To speak with Michael Ettlinger, please contact Christina DiPasquale at 202.481.8181 or email@example.com.