Daniels urges federal policymakers to focus on deficit reduction

Former Indiana Gov. Mitch Daniels is leading an effort to persuade Congress to focus on reducing the federal budget deficit as a means of taming inflation, bolstering the economy and slowing the growth of the national debt.

In a letter sent Wednesday in his role as co-chairman of the Committee for a Responsible Federal Budget, Daniels urges Democratic President Joe Biden, congressional leadership of both political parties and rank-and-file federal lawmakers to prioritize enacting deficit reduction legislation in the weeks and months ahead.

“There was a strong case for borrowing earlier in the COVID-19 pandemic, when the country faced a public health crisis, the economy was underperforming and inflation was not a problem. However, that time has passed,” Daniels says in the letter signed by more than four dozen current and former elected officials and budget experts, including former U.S. Sen. Dan Coats, R-Ind.

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He continues, “As President Biden has explained, ‘Bringing down the deficit is one way to ease inflationary pressures.’ Thoughtful deficit reduction would also have a number of economic, budgetary and geopolitical benefits. Deficit reduction could come from reducing spending, lowering health care costs, raising taxes or some combination.”

Daniels, who is slated to end his 10-year tenure as Purdue University president Jan. 1, does not endorse any specific legislation to reduce federal spending relative to revenues, which already has plummeted from a deficit of $3.1 trillion in 2020 under Republican President Donald Trump to an estimated $1 trillion for the current budget year that ends Sept. 30.

However, the Committee for a Responsible Federal Budget notes the pending Inflation Reduction Act that’s backed by Biden would reduce deficits by nearly $2 trillion over two decades, in part by setting a 15% corporate minimum tax, reforming prescription drug pricing and stepping up IRS enforcement of the nation’s tax laws.

“With debt headed to 140% of GDP in two decades, much more would need to be done to put it on a sustainable path. But the Inflation Reduction Act would be a step in the right direction,” the committee said.

Nevertheless, U.S. Sen. Todd Young, R-Ind., and Jennifer-Ruth Green, the Republican candidate seeking to represent Northwest Indiana in the U.S. House, remain unconvinced — notwithstanding the deficit reduction advice by Daniels, a two-term Republican governor and former director of the U.S. Office of Management and Budget under Republican President George W. Bush.

Young declared Wednesday he considers the Inflation Reduction Act an “anti-Indiana bill” because he claims it will raise taxes on low-income Hoosiers despite Biden’s pledge not to increase taxes on Americans earning less than $400,000 per year.

“This is really bad politics back where I live. We have the worst inflation, certainly, in memory. And they’re trying to revive this massive tax and spending initiative?” Young said. “We will fight against this ill-advised public policy.”

Green likewise declared the legislation “a massive spending bill that raises taxes on Americans at a time when inflation is at a 40-year high and our economy is entering a recession.”

According to the Committee for a Responsible Federal Budget, the new spending and tax cuts in the Inflation Reduction Act total $900 billion from 2023 to 2042.

The Congressional Budget Office projects the federal government will spend approximately $150 trillion over the same 20-year period, meaning just 0.6% of federal spending over the next two decades would be tied to the Inflation Reduction Act.

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