U.S. Sen. Pat Toomey spoke to members of the Greater Lehigh Valley Chamber of Commerce at a breakfast gathering Monday at DeSales University and neither the eggs nor the message was sunny side up.
The Pennsylvania Republican and well-known deficit hawk addressed the so-called “fiscal cliff” the U.S. government is facing Jan. 1 if Congress and the Obama administration cannot make a deal to avert tax increases and spending cuts that will automatically kick in.
But Toomey, whose family lives in Upper Milford Township, said that the across-the-board spending cuts slated for Jan. 1 look mild compared to future actions that will be needed if the nation doesn’t start shrinking the federal deficit and paying down the debt.
The fiscal cliff would precipitate spending cuts that would be less than 2 percent of total federal spending, he said.
“In my view it’s trivial in the scheme of things,” Toomey said. “It’s trivial as a percentage of the $3.7 trillion budget, it’s trivial in the context of a $16 trillion economy...That’s not going to harm the economy. We actually need much more than that.”
But, he said, the cuts have been “badly designed, falling disproportionately on our defense budget.”
The fiscal cliff was set in motion in August 2011, when Congress and the president ended a standoff over increasing the nation’s debt limit with a budget agreement that would cut spending by $1 trillion over 10 years and identify another $1.2 trillion in reductions by January 2013, according to a New York Times story.
Without a deal, more than $500 billion in tax hikes and across-the-board spending cuts are to take effect Jan. 1 unless Congress and the president can reach an alternative solution.
“The real problem is we have a completely unsustainable fiscal path that we’re on,” Toomey said.
Federal spending in the last decade has doubled so it is now almost 25 percent of Gross Domestic Product (GDP), he said.
Entitlement programs such as Medicare, Medicaid and Social Security and the interest on the federal debt are growing so fast that in 10 years they will consume 90 percent of government revenue, Toomey said.
Spending on food stamps has doubled in the past four years, he said. “This is not because so many more Americans have fallen into poverty,” he said. “We’ve changed eligibility, we’ve expanded it dramatically.”
If the government grows faster than the economy, “eventually it will consume everything in its path,” he said.
With the Bush-era tax cuts slated to expire in January, capital gains and estate taxes are scheduled to increase and that will discourage investment in businesses, he said.
Toomey said the budget problems can’t be solved by a tax increase on the top 2 percent of taxpayers, which the president favors. “The folks in the accounting for the federal budget have told us that will reduce the projected deficit over the next 10 years by 8 percent,” he said.
“It’s a very cheerful message this morning,” Toomey added to chuckles from the crowd.