Rep. Schmidt: "Its Time to Balance the Books"

Via email:

This past week, news reports about our nation's strong economy filled the airwaves as the Dow Jones Industrial Average hit an all time high, The Federal Reserve announced it was going to leave interest rates unchanged, and President Bush made the first presidential visit to the Stock Exchange during trading hours in more than two decades.

Many experts claim that unemployment cannot sink much lower. With historically low unemployment and the strongest growth of any industrialized nation, our nation's economy is undisputedly robust, resilient and roaring. As I've said many times before, we owe this good news to sound pro-growth economic policies and historic tax relief legislation that continues to fuel our economy.

Now, with a new Congress, the challenge will be keeping our economy on this path of continued growth. Fiscal discipline coupled with record increases in federal tax collections will soon lead to budget surpluses rather than deficits. Without fiscal discipline and pro-growth policies that are filling our federal coffers, the future instead is one of compounding deficits.

In fact, I got a call this week from a local reporter asking me if I were authoring the President's budget, what programs would I cut? I thought it was a fair question. Answering it requires a quick look at how the government spends money.

There are two basic categories of federal spending - mandatory and discretionary. Money that we are required to spend is mandatory spending. This type of spending funds programs such as Social Security or obligations such as paying interest on the national debt. Discretionary spending would include programs we choose to fund, such as education programs, NASA, crime programs, and Foreign Assistance.

In very rough terms, discretionary spending, the money we choose to spend but are not required to spend, makes up about a one-third of all federal spending. Defense spending takes up a little over half of all discretionary spending. This means that we spend one of every five dollars on discretionary programs. So, where does the Federal government spend the other two-thirds of the taxpayers' money? In 2005, mandatory spending accounted for almost two-thirds of federal expenditures.

So as the 77 million baby boomers begin to retire, mandatory spending will eat up more and more of the budget. By 2030, 75 percent of federal budget will be spent on mandatory programs.

While we need to continue work to stop wasteful earmarks and reduce discretionary programs that are duplicative or have outlived their purpose, I believe that the President's top priority must be slowing the growth of mandatory spending. Providing the President with line item veto authority will be a valuable tool in cracking down on waste, but it won't balance the budget. Unless we hold the line and limit the growth of mandatory spending, there is little hope of ever balancing the federal budget.

One thing is certain: raising taxes is a very bad idea. Now is simply not the time to consider a tax hike on the American people. Increasing taxes will put the brakes on a thriving economy that has created 7.2 million new jobs since 2003 and kept our national unemployment below the average of the last four decades. More importantly, the tax cuts have led to federal revenue growth. Since enacting tax cuts in 2003, federal revenues have grown 35 percent! If we want to balance the budget, we must keep the current pro-growth policies in place.

I look forward to beginning work on the President's budget proposal in the coming days. I am hopeful that we can work together to address our priorities and agree on a plan that balances the budget - by acting wisely and most importantly, without raising our taxes.

One might ask where this priority was during that last Congress...