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Crapo: Massive federal debt puts American dream on the line

Crapo: Massive federal debt puts American dream on the line

Idaho Freedom Foundation staff
August 21, 2012
Idaho Freedom Foundation staff
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August 21, 2012

A federal budget crisis is looming, with billions of dollars being added to the national debt every day, and drastic spending cuts are needed across the board to rein in the problem, said three members of Idaho's congressional delegation at a Statehouse meeting on Monday. Sens. Mike Crapo and Jim Risch and Rep. Raúl Labrador were joined by Idaho Lt. Gov. Brad Little and Maya MacGuineas, president of the Committee for a Responsible Budget, a nonprofit based in Washington, D.C., for a frank discussion of the nation's fiscal catastrophe.

"Clearly, in terms of an internal threat, there is no greater threat that we've ever faced, in my opinion," said Crapo of the rapidly mounting federal debt. "I do believe that the American dream is on the line. We are past the point where we can continue to simply try to tax and spend our way out of this problem." He emphasized the unsustainable nature of government expenses for entitlement programs like Medicare, Medicaid and Social Security, saying that these programs "are screaming at full speed toward insolvency."

Crapo, Risch and Labrador all had harsh words for the Patient Protection and Affordable Care Act (PPACA), commonly known as Obamacare, during the meeting's question and answer session, agreeing that it will only compound the existing strain on both the federal and state budgets. Although the provisions of the PPACA specify that the federal government will pay for the full cost of Medicaid expansion in each state for the first three years of its implementation, Crapo said he's skeptical that this would actually be the case.

"I don't think that anybody can trust that the federal government will continue to pay 100 percent of the increased cost that Obamacare puts out in its plan after that three-year period," Crapo said. "I think that states will have to assume that they're going to begin assuming increasing portions of that, if not all of it, rather rapidly." He said that most states are likely to be bankrupted by the massive increase in expenses that a Medicaid expansion would bring.

Risch pointed out that he did not vote for the PPACA, because he thought it was terrible legislation, but declined to provide firm advice to Idaho's state legislators in their own deliberations regarding whether to establish a state-based health insurance exchange, accept the federal government's proposed Medicaid expansion or actively resist both.

"I spent almost 30 years in the state Senate, and some time as governor and lieutenant governor," Risch said. "I always hated people from Washington, D.C., coming and giving me advice as to what to do in the state, so you've got a lot of state legislators in here—I'd lobby them. I didn't vote for it. I guess they can either follow my lead, or not, but I'm not going to tell them what to do. I don't think anybody from Washington, D.C., ought to come and tell the state what to do."

Labrador said that he believes the federal government is misleading states in their push to establish state-based health insurance exchanges. He noted that Utah, for example, had complied with the pending federal mandate to set up such an exchange, but now finds that its implementation does not meet federal approval. Because the federal government can strictly determine the characteristics that must be included in each exchange, in effect, they will all become federal in nature if not in name.

"I'm not going to tell the state what to do," Labrador added. "They can make their own decisions. But I've done the best that I can to let them know what is hidden in Obamacare, because there are some major problems."

In his earlier remarks, Labrador emphasized the need for public officials to consider every option when deciding how to pursue a solution to the debt crisis, despite the difficulty of cutting specific programs that cater to entrenched special interest groups.

"I say that everything has to be on the table, and we need to stop picking winners and losers in Washington, D.C.," Labrador said. "We need to stop doing the things that we protect our states at the expense of every other state, that we protect our districts at the expense of every other district. And I've taken some pretty tough votes in Washington, because I think everything needs to be cut, and everything needs to be put on the table."

For those who advocate greater wealth redistribution, one of the options on the table would be to increase the tax rate for higher income Americans. Risch pointed out, though, that if the Bush-era tax cuts were to expire, the federal government would collect only $100 billion in additional revenue per year, which translates to a mere nine days of governmental operating costs—a drop in the bucket compared to the billions in federal debt being generated every day. In order to make a real difference, he reiterated, sharp cuts in spending are mandatory.

Still, tax policy may prove to be an important part of the solution, said MacGuineas. She said that the current labyrinthine tax code leaves too many loopholes, rewarding the politically savvy and connected.

"If you are willing to truly contemplate how you're going to get rid of those tax breaks—the credits, the deductions, the exemptions and the exclusions—we can broaden the tax base and bring rates down so much lower," MacGuineas said. "If we're going to talk about real tax reform, that's exactly where we're going to need to look."

Labrador also pointed out that when some people exploit loopholes in the tax code, everybody else winds up paying a de facto higher rate.

"I believe completely that we need to get rid of all the tax breaks, and actually lower the rate significantly, and then we can have a debate about every specific tax break individually," Labrador said. "And people will know, if I give this group a tax break, that means everybody's taxes are going to be raised over here."

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