Today, Jack Kemp applauded efforts by Congressmen Pat Toomey (R-PA), John Shadegg (R-AZ), Jeff Flake (R-AZ), Paul Ryan (R-WI) and others to broaden and deepen tax rate reductions with the introduction of the Economic Recovery and Growth Act (ERGA).
Kemp said, “I commend the co-sponsors of The Economic Recovery and Growth Act for their vision and their appreciation of the need for broader and deeper tax rate reductions under current circumstances.
“We at Empower America enthusiastically support the across-the-board tax rate reductions proposed by President Bush, but those proposals were formulated almost a year ago under much different circumstances. Since then, budget-surplus projections have almost doubled and economic growth has stalled. ERGA recognizes that broader and deeper tax rate reductions are not only possible today but also necessary if we hope to put the economy back on a non-inflationary high-growth trajectory after the current economic slowdown is over.
“Now is an ideal time for the Bush Administration to work with the co-sponsors of ERGA to craft a tax bill consistent with today’s altered circumstances.
“In 1993, immediately upon assuming the presidency, Bill Clinton re-evaluated the circumstances in which he found the nation, and in light of larger-than-anticipated budget deficit projections determined that he must ask Congress to increase taxes rather than cut them as he had proposed during the campaign. The former president not only was justified in re-evaluating his meager tax proposals, but also obliged, in light of altered circumstances, to do so. His mistake was significantly increasing tax rates rather than revising the small, narrowly targeted tax cuts he had proposed during the campaign into broad-based tax rate reductions across the board. Had he prevailed upon Congress to cut tax rates, economic growth would have increased and the deficits would have shrunk of their own accord. Instead, the Clinton tax-rate increase merely perpetuated the sluggish economic recovery for three more years, turning it into the slowest economic recovery since the Great Depression, and consequently, large budget deficits persisted.
“Circumstances are now almost totally reversed. As President Bush enters the Oval Office, he confronts budget surpluses almost twice the size anticipated—almost $6 trillion vs. $3 trillion—when he first formulated his tax-rate-reduction proposal last year. With record budget surpluses projected to mount into the future as far as the eye can see, even with a temporary economic slowdown, it’s appropriate and necessary to think bigger on tax rate reductions, not smaller. In fact, since economic growth is causing the debt burden to fall relative to the size of the economy without actually retiring debt, it is time to reject the fiscal austerity of debt retirement and return to a long-term fiscal policy of balanced budgets, devoting the entire surplus to tax rate reductions and personal Social Security accounts.”