Press Release

March 21, 2011
Tax reform, entitlements, defense spending must be on the table

These are difficult times for our economy, and Americans want Congress to act now to develop a credible budget plan that will ensure our nation’s future growth and prosperity. It’s not an easy task, but it is one around which all of us — Democrats, Republicans, independents — must come together as a nation if we are going to deal with our budget deficit.

Recently, I gave a speech on the U.S. Senate floor outlining what I believe it will take to get control of our deficit while also ensuring our economic recovery and future prosperity. We did this before in the 1990s, under President Bill Clinton, and we can do it again. But we must face facts: A credible budget plan involves cuts to military and domestic spending, control of entitlement spending and reform of our tax code.

Republicans have focused solely on cuts in discretionary domestic spending, which accounts for only 12 percent of our budget. Cuts to domestic programs alone — education, job training and public transportation, among others — will threaten our recovery and cannot balance the budget.

Goldman Sachs has warned that Republican budget proposals to slash government spending by $61 billion in 2011 could reduce U.S. economic growth by 1.5 to 2 percentage points in the second and third quarters of the year. Mark Zandi, chief economist for Moody’s Analytics, also stresses that cuts of that magnitude would result in a loss of more than 700,000 jobs nationwide, including 13,500 jobs in Maryland.

In dealing with our budget deficit, any action we take must continue to move our economy forward — not add to our problems and reduce the chances of an economic recovery.

While I don’t agree with all the recommendations from the president’s National Commission on Fiscal Responsibility and Reform, I believe it took the right approach and can serve as a model for how we can control our budget deficit. The bipartisan commission recognizes that we cannot balance the budget by cutting domestic spending alone. Instead, we need a comprehensive solution that looks at all spending — including entitlements and defense — along with revenues.

President Barack Obama has begun to deal with the spending side by calling for a five-year freeze on domestic discretionary spending, and he has identified billions of dollars in cuts to defense spending over five years. I support achieving these savings.

We also have moved forward in reducing entitlement spending. Passage of the Affordable Care Act (ACA) health reform bill has given us the tools to control Medicare and Medicaid spending and produce significant savings. The Congressional Budget Office has estimated that health reform will reduce our deficit by $210 billion over 10 years; I believe the savings will be even greater.

Today, 25 years after we enacted the last real tax reform, loopholes, shelters, tax breaks, subsidies and other special provisions are causing us to hemorrhage more revenue than we collect. Today, if we eliminated all the tax breaks, corporate loopholes and special provisions, we could cut the tax rate in half.

As a member of the Senate Finance Committee, I have urged my colleagues to consider a progressive, consumption-based tax, one that is a fairer, more efficient way to raise revenue. Such a tax would replace some existing income taxes — for example, corporate income taxes and income taxes on those whose incomes are below a certain level — while simplifying and lowering others. And it would not have the loopholes, shelters or special provisions that riddle our current income tax system.

The beauty of a consumption tax is that we can decide how much revenue we need and adjust it accordingly. It’s progressivity lies in the fact that it can be structured to ensure that those who are low income — and who currently do not pay income taxes — are exempt from consumption taxes.

Finally, a consumption tax helps American businesses in a global economy. Because most other developed nations rely on a consumption tax, U.S. manufacturers are penalized because of our corporate income tax. A consumption tax would improve our international competitiveness by putting American producers on a level playing field with foreign manufacturers.

The challenges facing the U.S. economy are great, but we can overcome them if we, as President Obama says, “out-innovate, out-educate, out-build” the rest of the world. We need to balance smart cuts with smart investments that will help move our economy forward so that we can compete in the international marketplace. The key to reducing our budget deficit is to develop a credible budget plan that is fiscally responsible — and the only way to do that is to consider all options.

U.S. Sen. Ben Cardin is a member of five Senate committees: Environment & Public Works, Finance, Foreign Relations, Budget, and Small Business and Entrepreneurship. He can be contacted through his website: