WASHINGTON, April 22 /PRNewswire-USNewswire/ -- When the newly appointed Bipartisan National Commission on Fiscal Responsibility and Reform meets for its inaugural session next week members will have before them a legislative solution that carries out its mission: to find ways to reduce the nation's growing $12.8 trillion debt. Congressman Chaka Fattah (D-PA) has sent a letter to the commission asking the 18 member panel to give serious review and consideration to H.R. 4646, the Debt Free America Act.
The legislation is straightforward in its call for a "transaction tax" to be implemented as a 1 percent fee on all transactions, except for stock transactions. Fattah's bill directs the revenues generated from the fee be solely dedicated to paying off the national debt and reducing the deficit.
Once the bill is implemented, Fattah says the debt would be eliminated in just 7 years. The following seven year's proceeds from the fee would be directed to broad-based tax reform, including the elimination of personal income taxes.
A novel idea, Fattah says a better plan to purge the debt hasn't been presented. This is the only bill in Congress that offers a feasible answer to erasing the debt.
"The soaring national debt and rising deficits translate into bad outcomes for all Americans, it's time for thinking outside the box," Fattah said.
Below is the text of the letter Congressman Fattah sent to Commission Co-Chairs, Erskine Bowles, former Chief of Staff to President Bill Clinton and Alan Simpson, former Republican Senator from Wyoming:
April 22, 2010
Mr. Erskine Bowles and Hon. Alan Simpson, Chairmen
Bipartisan National Commission on
Fiscal Responsibility and Reform
The White House
1600 Pennsylvania Ave.
Washington, DC 20502
Dear Chairmen Bowles and Simpson:
As the Commission considers various proposals that address the deepening federal deficit crisis and the long-term fiscal stability of the nation, I commend your attention to H.R. 4646, the Debt Free America Act. By imposing a small penny on the dollar fee, the Debt Free America Act will: (1) raise sufficient revenue to maintain a fiscally responsible budget, (2) create a revenue stream solely dedicated to the federal debt, and (3) eliminate the federal debt in seven years by 2017.
The federal deficit, as well as the debt, can be eliminated through higher tax revenue, lower spending, or some combination of the two. The Debt Free America Act proposes a combination of cost reduction and revenue generation by mandating the federal government identify the factors that affect the long-term stability of the U.S. economy, and analyze potential courses of action with specific policy recommendations. In addition, the bill proposes a "transaction tax" that will implement a 1 percent fee on all retail and financial transactions, except for transactions involving stock. The revenues generated from the fee will immediately reduce the size of the national debt.
The transaction tax imposes a fee on a broad range of transactions involving any kind of a payment instrument, such as cash, checks, and credit cards. According to estimates from the Federal Reserve, the annual volume of transactions in the U.S. economy in 2008 was approximately $755 trillion. Raising revenues to cover the roughly $2.6 trillion federal budget would require a transaction fee on all transactions of up to one percent. By expanding the base of revenue collection to the broadest possible level, the percentage fee could be reduced to a near miniscule amount.
There is near unanimity in the consensus of economists, analysts, and policymakers that the U.S. debt is accumulating at an unsustainable rate. Similar to the mortgage meltdown that precipitated the worst financial crisis since the Great Depression, the easy money that is financing the exploding federal deficit will soon come to an end. As Federal Reserve President Richard W. Fisher underscored in recent comments to the Federal Reserve, the willingness of China and unstable European economies like Greece to buy American debt will eventually wane as the perceived risk of holding long-term U.S. Treasury debt increases.
The dollar amount of the debt, however large, may not capture the true impact of the fiscal strain placed on the economy. Expressed as a percentage of gross domestic product (GDP), the national debt reached a high of 108.6 percent of GDP in 1946. Recently released information from the Congressional Budget Office (CBO) projects the publicly held federal debt will double in nominal terms from $7.5 trillion at the end of 2009 to $15.0 trillion by 2020. At the current rate of spending, debt will increase from 53 percent of GDP to 67 percent.
Undoubtedly, revenue generation alone will not address the need for Congress and the President to create a credible plan for fiscal sustainability. There is no question the nation must begin to make some hard choices now. If the federal government fails to act, inflationary pressures triggered by staggering debt will create economic conditions unlike anything ever experienced in the history of this country, including the Great Depression. As the federal government considers future options that will lead the nation to fiscal stability, the Debt Free America Act will immediately impact the deficit and debt by a imposing a very low rate of tax on a substantially expanded tax base.
Attached with this letter, you will find a copy of the Debt Free America Act, along with a one-page overview of the bill. I am available at your convenience to provide further detail of my proposal in any form you wish, as well as to participate in formal discussions and provide expert testimony. I am confident the Commission will find value in evaluating the feasibility of my proposal.
Very truly yours,
Member of Congress
SOURCE Office of Congressman Chaka Fattah