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Public Statements

The President's Budget by U.S. Representative Kenny Hulshof

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The President's Budget by U.S. Representative Kenny Hulshof
February 2004 Columbia Business Times

Obviously, federal budget deficits are unwanted as they impose a burden on future generations of taxpayers. Within certain limits, economists are less concerned with deficits in a particular year depending on the ratio of debt to the national economy's output. This fiscal year's projected deficit of $477 billion is 4.2% of our Gross Domestic Product, which economists believe is manageable.

President Bush recently submitted to Congress the Administration's budget for 2005 as required by law. The response has been - well - predictable. Various groups have already begun to sound the alarm due to "insufficient funding levels." Others are decrying the large deficits and are urging their federal representatives to "tighten their belts."
Are federal deficits harmful? How did we get into this situation and how do we return to the days of budget surpluses we experienced in 1998-2001?

Obviously, federal budget deficits are unwanted as they impose a burden on future generations of taxpayers. Within certain limits, economists are less concerned with deficits in a particular year depending on the ratio of debt to the national economy's output. This fiscal year's projected deficit of $477 billion is 4.2% of our Gross Domestic Product, which economists believe is manageable.

There are several factors that have contributed to the federal government's books being in the red. Our national economy was heading into a recession even as President Bush was sworn into office. Corporate scandals from the 1990's came to light and undermined public confidence in our markets. The September 11 attacks rocked our economy both directly and indirectly.

These multiple shocks caused a significant reduction in federal revenue. Add to this equation spending associated with relevant federal priorities - such as increased investment in homeland security and the war in Iraq - and you have an accurate explanation of why deficits now exist.

The question then becomes what to do about this troubling situation. The first, most responsible step is to pursue a strong economic recovery in the private sector. For this reason, Congress passed broad-based tax relief in 2001 and 2003. We are now seeing the positive results of these acts. Unemployment is heading in the right direction. The economy is showing strong signs of growth. Businesses are making capital investments. The stock market has recovered. Interest rates and inflation remain at record lows.

The federal government will see increased tax revenues as the economy begins to fully recover and more Americans return to work. This will help reduce the deficit, but this alone will not be enough to get the budget into balance. It will take spending restraint combined with a strong economy to achieve balance. We must eliminate fraud, waste and duplication in the federal government. And like a family sitting around the kitchen table with its monthly budget, we must establish realistic, fiscally prudent spending priorities.

Some have suggested rolling back the tax relief. I disagree. I believe that raising income tax rates would stymie our economic recovery and weaken the incentives that drive long-term growth.

The course I am prescribing is a proven one. In my freshman term in Congress, we passed the Balanced Budget Act of 1997 and the Tax Relief Act of 1997. It was the combination of private-sector economic growth (spurred in part by tax relief) and spending restraint prescribed by these bills that led to record federal surpluses. If we pursue a similar course, we can overcome the current deficit challenges.

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