money People 'eager to raise taxes on anybody but themselves,' says fiscal watchdog
U.S. House Ways and Means Committee Chairman Richard Neal (D-Mass.) promises the $3.5 trillion budget reconciliation bill will, "both address our perilously changing climate and create new, good jobs, all while strengthening the economy and reinvigorating local communities." But Maya MacGuineas, the president of the nonprofit Committee for a Responsible Federal Budget, said politicians are punting on taxes and the promise to bring the bill in on budget.
"What we're seeing coming out of the Ways and Means Committee right now really indicates that lawmakers aren't willing to kind of back up all the things that they want to spend money on with a plan to pay for it," she told Yahoo Finance Live.
Democrats on the powerful committee are considering raising $2.9 trillion in taxes over 10 years to pay for President Joe Biden's Build it Back Better plan. Those increases include raising the corporate tax rate to 26.5% from the current 21%, and raising income taxes for the highest-earning Americans.
"People are very eager to raise taxes on anybody but themselves. And if we're going to be realistic, there's not enough money just from the very, very wealthy in this country to come anywhere close to financing the huge expansive agenda that's being discussed," MacGuineas cautioned.
'If something's worth doing, it's worth paying for'
MacGuineas said plans to tackle climate change, cybersecurity and create jobs are all worthwhile and said, "If something's worth doing, it's worth paying for. How do we want to pay for it?"
To help pay for his $3.5 trillion plan, Biden originally proposed much larger tax increases on the wealthy with a capital gains tax that would approach 39.6% for the highest earners. The Ways and Means Committee proposed a top rate of 25%. The current rate is 20%.
MacGuineas said it's easier for politicians to promise spending on items people like than it is to pay for them. "What's coming out of the committee is a lot more in tax breaks, and very importantly, a lot less than the actual revenue raisers," she added.
The Committee for a Responsible Federal Budget said the current fiscal situation in the United States is unsustainable with plans to borrow $12 trillion to $13 trillion over the next 10 years.
"Borrowing a trillion to $2 trillion every year, even post COVID, which is what we are on track to be doing, that's not going to strengthen us in any way, that's going to weaken us tremendously," MacGuineas said.
The current national debt is approaching $29 trillion. Annual interest payments on the debt total $330 billion but MacGuineas fears those payments will rise to $910 billion if Congress passes new spending without plans to pay for it. To help put that $910 billion interest payment into context, consider the Biden administration is asking Congress to approve $752 billion in defense spending for fiscal year 2022.
"Borrowing weakens the economy, leaves us vulnerable to new emergencies, leaves us vulnerable on a geopolitical stage, we're competing with other nations around the world, both in terms of national security, and to maintain our position as an economic superpower," MacGuineas warned.
She said the fiscal health of the country is the very foundation of our economic strength and warns that continued borrowing will chip away at the standard of living in the United States.
The decision MacGuineas said is clear, "If you want to grow government a lot, you're going to have to grow taxes a lot. If you want to have a smaller government, then taxes will be lower, but you're going to have to cut a lot of the spending," there is no way to avoid hard choices.
Adam Shapiro is co-anchor of Yahoo Finance Live 3pm to 5pm. Follow him on Twitter @Ajshaps
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