A Conversation With Gang of Six Member, ID. Sen. Mike Crapo

By ICB Today I had a chance to speak with Idaho Senator and Gang of Six member, Mike Crapo.

ICB: I appreciate you taking a couple of minutes for us. There has been a lot of talk about what’s going on with you and the Gang of Six proposal and the debt ceiling debate and my understanding is these are two separate issues are they not?

Crapo: Absolutely yes, the gang of six proposal was developed in an effort to latterly change the fiscal policy of the United States in a very comprehensive way to help us deal with our much broader issue, the debt crisis. You know once we pass the debt ceiling battle we will still have a debt crisis and ours is a much broader, larger, more comprehensive change of American policy.

However, given the fact that we have a debt ceiling battle going on right now all or part of it could be used as a part of the ultimate solution if the negotiations turn that way but it doesn’t necessarily have to.

ICB: I think part of the confusion came when the House voted on Cut, Cap, & Balance the same day the Gang of Six proposal was released then the President came out and tried to downplay what the House had done and said that the Gang of Six proposal was an alternative.

Crapo: Yes, that was never intended to be the case. As a matter of fact I’m a co-sponsor of the Cut, Cap, & Balance bill in the Senate and voted for it. And frankly the two bills are not inconsistent at all as a matter we need the Cut, Cap, & Balance bill which includes a balanced budget amendment and then we also need to do something along the order of the Gang of Six bill and then we need to do another 4 trillion dollar bill after that to truly get a handle of our over spending.

ICB: I think that a lot of reason why people are panicking is because, and correct me if I’m wrong in the Gang of Six proposal is discusses the elimination of some deductions, the mortgage interest deduction, the charitable contribution deduction, and the child deduction. Is that accurate and are those scare tactics or what’s going on there?

Crapo: I’m glad you asked for that clarification because actually what we do, we do mention those but we mention them to make it clear they are NOT being eliminated. So the mortgage interest, retirement contributions, charitable giving and so forth those tax preference items would be maintained and protected under our approach and some people have reported it the opposite. They have said we were trying to get rid of them. There’s one other clarification I’d like to make, there is a lot of attack out there saying that our approach is a tax increase and that also is not correct. Our approach is to eliminate some of the tax expenditures in the code yes, but to use that in order to reduce rates and we reduce income tax rates dramatically. We cut the corporate rate as well and we totally repeal the alternative minimum tax and then we expect that this very pro-growth reform of the tax code by flattening the code, condensing its six rates into three rates and dramatically reducing those rates is going to have a huge simulative impact on the economy and the revenue that will come from stimulating the economy, from growing the economy is the revenue that we allocate in our plan to deficit reductions.

ICB: And I believe that top bracket of 35% is dropped to 23 – 29% correct?

Crapo: That’s correct, let me tell you the rates because what we do is we give a range of rate alternatives to the finance committee and it puts together the bill that we mandate that they do. What we do is we drop the top rate from 35% down to a range of 23 to 29% and then the middle rate goes down to 14 to 22%, and the bottom rate goes down to a range of 8 to 12% and these are dramatic reductions, you can see in the top bracket that it’s a minimum of a 6% point reduction and maybe a 12% point reduction in the tax rates.

ICB: Some have criticized that the proposal cuts too deeply into military spending.

Crapo: Well, we tried to achieve a balance because, when I say military, the term we used was security spending and the reason I say that is because that’s broader than just our national defense it includes Homeland Security and other departments like that but the securities spending is about half of the discretionary spending and so we said that it should bear its pro rata share, about half of the reductions and that is what we are proposing in our plan, now we can debate whether we have the room to find those kind of savings in defense, I believe we can and I believe that to do it on a pro rata basis in terms of its percentage of the budget is the fairest approach to approach it but we may need to adjust that if we move forward and if analysts show that we cannot maintain our national security at equal or better levels then we certainly can adjust that. There is a tremendous amount of waste that we have been able to identify in the DOD contracting process and we believe we can have a significant effect in finding savings and actually increasing the efficiency of our defense department through some of these reforms.

ICB: Some are saying that a lot of this is going to end up being meaningless because if it comes about it might make this fiscal year’s budget being negotiated, it may have impact there but in the long term when we’re looking at cuts that won’t take place for another 3,4,5,6 even 10 years down the road, it’s going to be null and void because come next budget season next year and the year after that because it will all have to be re-negotiated over again. Are there any securities in your plan that locks your changes in place if they pass?

Crapo: Yes, as a matter of fact that concern is a completely valid concern about all of the plans that are being negotiated and discussed right now to re-state it, the only thing you can count on in the current congressional budget enforcement system is the first year. Every year after that is nothing more than a projection and if history is any kind of a guide it will not happen and congress will not honor those targets. What we do in our Gang of Six proposal is we establish what I consider to be the most powerful enforcement mechanism that congress has ever had. We stop congress dramatically from using emergency designations to get out of meeting budget targets. We also force a process of identifying what Congress does when it does declare emergencies. And then we provide that even if Congress somehow breaks the caps that there’s an automatic sequester of funds across all government to bring the spending back to the cap levels and that sequester is protected and enforced with a mandate that you can’t break it without bringing a separate individual statute that must pass with 67 votes and that 67 vote protection on a separate statute to protect the sequester in my opinion will hold and that will assure that we will be able to keep Congress on target. Notwithstanding the attacks out there, our plan cuts taxes, grows the economy, and uses economic growth as the revenue part of the solution.

ICB: Thank you Senator Crapo for taking the time.


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