TAX NEWS - June 2010

US Taxes: Hensarling, Johnson take opposite views of debt mess

WASHINGTON – Views of the nation's debt problem are rather different from Republican and Democratic congressional districts.

"The deficit is the symptom. Spending is the disease," said Rep. Jeb Hensarling, a Dallas Republican and self-declared fiscal hawk.

In a neighboring district, Rep. Eddie Bernice Johnson , a Dallas Democrat, agrees that overspending has been a problem, but mainly because Republicans insist on cutting taxes without giving up anything.

"When Democrats spend, they try to pay for it. When Republicans have been spending, they just spend," she said.

Hensarling, like other Republicans, concedes that the last time the GOP controlled Washington, fiscal restraint gave way to other goals.

Polarization in Congress has made it harder to tackle the debt problem, as the parties push conflicting agendas on entitlements and other areas.

Tax policy, for instance, has been a seesaw: Presidents Ronald Reagan and George W. Bush  cut taxes to starve the Treasury and force government to shrink. Bill Clinton and the elder George Bush raised taxes when deficit reduction became the imperative. Obama-era stimulus plans include tax cuts to spur economic activity.

For most lawmakers, there is little political incentive to budge ideologically. In 2008, Hensarling coasted to re-election with 84 percent. Johnson won with 82 percent.

To chip away at the $13 trillion national debt, Hensarling wants a balanced-budget requirement in the Constitution, two-year budgets instead of annual ones to promote planning, and a ban on earmarks.

"Until you change the culture, you're never going to change the numbers," said Hensarling, a designee to the White House fiscal commission that will recommend solutions in December.

Hensarling, a five-term lawmaker whose district stretches to East Texas, is consistently ranked among the top 10 lawmakers by groups that want to cut spending and taxes.

He notes that much of the budget gap could be addressed by slowing the growth of Social Security, Medicare and Medicaid, though the hardships some choices would inflict have kept Congress from acting for years.

As Hensarling views it, the public will have to stop rewarding politicians for "bringing home the bacon." "Clearly, the American people are going to have to be more involved in the dialogue," he said. And "there just might be a fight to political supremacy to see whose ideas get to be enacted."

Unlike Hensarling, Johnson, a nine-term lawmaker representing mostly southern Dallas County, hasn't made fiscal issues the focus of her career. But she does have some ideas. For a start, she's happy to let Bush-era tax cuts for the wealthy expire later this year.

 Ending the wars in Iraq and Afghanistan would be both good policy and a boon to the budget, she said. The tally since Sept. 11, 2001, is just over $1 trillion. "That would save a lot of money," Johnson said.

Tinkering with Social Security has long been seen as political suicide. But both Dallas lawmakers would be willing to raise the retirement age for younger workers. Johnson would also expand the payroll tax to cover higher incomes; currently, income above $106,800 is exempt.

"We're living longer and healthier," she said. "Whatever we do would not be easy. I wish the last president had thought about that. ...

"But we are where we are. Since the people know what shape we're in, there would be some willingness."

She hasn't given much thought to new taxes, though she'd start with employers that take jobs offshore. She doubts Republicans would cooperate on anything that violates their insistence on tax-cutting.

"No matter what is proposed, it is proved by experience that most of the Republicans aren't going to go along with it," she said.

Hensarling is unapologetic for fighting to hold down taxes.

The government envisioned by President Barack Obama or House Speaker Nancy Pelosi "is far more large, intrusive and expensive than the government I'm looking for," he said. "Why is the onus on me to vote for taxes to fund the social welfare state that they desire?"