President Barack Obama’s proposal to raise taxes by $600 billion as part of the debt ceiling talks will only harm the economy, Republican Sen. Charles Grassley tells Newsmax.TV in an exclusive interview.
And the deficit problem that the country now finds itself in is the ultimate result of the fact that Congress can’t stop itself from spending tax money, the senior senator from Iowa added.
“An increase in taxes isn’t an answer to our problems because people are not undertaxed,” said Grassley, who sits on both the Finance and Budget committees. “Congress overspends. That’s all it ever does.”
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Grassley, who has been a senator for 30 years, said the only way to boost the economy is to have lower taxes. “Increasing taxes at least in a time of inflation or high unemployment like this, would worsen the economy not help it,” he said.
He pointed out that the current rate of inflation brings in around 15 percent of the country’s gross national product, lower than the 18.2 percent average over the past 50 years. But he said the Congressional Budget Office says that if this rate is maintained over a 10-year period, more revenue would be raised than if tax rates are increased.
“This is the solution to the deficit problem,” he insisted.
Grassley was speaking as bipartisan talks on raising the $14.3 trillion debt ceiling appear stalled. Obama wants his tax increases which will hit some corporations and some wealthy Americans, but Republicans say any tax hikes must be off the table.
He said he does not agree with Mitch McConnell, his party’s leader in the Senate who says a short-term increase in the debt limit might be necessary to avoid an economic meltdown. “He’s suggesting that because I think he thinks that we are in trouble on August 2 with a default. I don’t believe that.
“I don’t agree with Senator McConnell, but I’m not going to reject out of hand exactly what he’s saying for the simple reason that there is some benefit, both politically as well as economically, to keeping this issue alive as long as you can and that would accomplish that goal."
But Grassley gave qualified support to Rep. Ron Paul’s idea that the country should declare bankruptcy as a way to solving the debt crisis, saying it would all depend on how the country came out of bankruptcy.
“If you come out of it with a good result from the standpoint of people believing that you are a fiscally and financially sound country and we don’t get a reputation of not honoring our debts, the answer is yes,” he said.
“But if we were to end up like Argentina – 10 years ago they defaulted on their debt and it’s been very bad for their country and I don’t want to end up like they are.”
Grassley said Obama should have taken a lead on the debt ceiling talks instead of putting Vice President Joe Biden in charge. He said the president needs to get involved personally because otherwise lawmakers will not agree to make any cuts in Medicare, Medicaid or Social Security because of the political risks.
“Nobody wants to work on entitlement reform and saving money there if the president isn’t on board,” he said. “You could pass something, but if he vetoes it, you’ve got zilch. You want to make sure you’re going to be successful and it’s got to be done in a bipartisan way.”
But he said compromise still can be reached. “Let’s say there is a big bipartisan agreement between Democrats and Republicans in the Congress and Biden on saving well over $1 trillion. Now that’s not enough to get us out of the budget hole,” he said. “But we ought to agree to that and move on.”
When asked what his Number One message to the president is, Grassley said it has to be to listen to the voters who elected a Republican House at the elections last year.
“It became very clear that the legacy of debt that we’re leaving to our young people is morally wrong and economically bad,” he said. “If you listen to the voters, we’re going to do what needs to be done and the grass roots of America, are saying Congress spends too much; get the spending down.”
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