Toomey Warns of “Fiscal Train Wreck”

Senator tells Lehigh Valley Chamber that government spending is hurting, not helping, the economy.

If members of the Greater Lehigh Valley Chamber of Commerce were looking for sunny news from the nation’s capital, U.S. Sen. Pat Toomey’s luncheon speech Monday may have caused some indigestion.  

Toomey, of Upper Milford Township, offered up grim statistics on the growing federal budget deficit and debt and warned that government spending will dig the country into a deeper hole rather than aiding the economic recovery.  

“It is hard to overstate the extent to which we’ve got a fiscal train wreck happening in Washington,” Toomey, a Republican, told the large crowd at the Hotel Bethlehem. “We’ve got to fix this, we’ve got to fix this soon.”

He suggested that he’d need to see budget caps and structural changes in the federal budget process before he’d support raising the federal debt limit, which Congress will be faced with before long.

From 2000 to 2010, federal spending doubled – for which both parties are to blame, Toomey said. In 2007, the federal budget deficit was less than 2 percent of Gross Domestic Product but by last year it was up to 10 percent of GDP, he said.

“We have a government that’s borrowing fully 40 percent of everything it spends,” Toomey said. “Debt is piling up at an absolutely unprecedented rate.”

“It gets worse,” he said. “I would argue that the [Federal Reserve] is disguising the magnitude of the problem through its behavior. The fed is essentially printing money, creating money out of the clear blue sky and using it to buy the very debt that the government is issuing.”

He favors a balanced budget amendment to the U.S. Constitution that over time would require Congress to erase federal deficits.  

“The more that government spends… the less that’s available in the private sector, and the private sector tends to invest money much more wisely than politicians do,” Toomey said. “If just growing government would solve our economic problems then I guess Greece would have the best economy in the world and they sure don’t.”

“I think we can have a strong economic recovery but we need to have the right kind of policies,” he said.

That free-enterprise-is-the-answer message was a continuation of his campaign themes from last year’s election when he beat Democratic Congressman Joe Sestak to win the Senate seat of longtime incumbent Arlen Specter, who lost in the Democratic Primary to Sestak.  

Toomey, who with his brothers started Rookie’s restaurants in Allentown in the 1990s, served three terms as Lehigh Valley’s congressman before making an unsuccessful bid for Senate. In 2005, he took over as president of the Club for Growth, a Washington, D.C.-based group that advocates for free markets and limited government.  

His pro-business message found a receptive audience Monday, with Chamber members giving Toomey two standing ovations – at the start and finish of his speech.

To really stimulate the economy, government should cut the corporate tax rate and capital gains taxes, he said. Congress also needs to curb “over reaching” by federal regulatory agencies such as the Environmental Protection Agency and Food and Drug Administration, he said.  

Toomey briefly took questions from reporters afterward and was asked what Congress could do for the school districts that are struggling with funding cuts. He said with the No Child Left Behind law coming up for reauthorization, Congress should consider lifting some of the mandates and regulations that can cost school districts lots of money.

Asked what changes he would favor on entitlement programs such as Medicare and Medicaid, Toomey said he would advocate that Medicaid money be turned into block grants for all the states.

“Let the states devise their own systems and let the 50 governors and legislatures figure out better ways to provide health care to poor people,” he said.

Jennifer Moyer March 30, 2011 at 07:28 PM
Core inflation is a concept developed to confuse the public. There is an overall realignment of pricing going on at present. Housing pricing is still collapsing as a result of the ending of a financing mechanism for a large portion of the American public. The price of most other items is rising. Core inflation excludes the most important items of all... food and energy. What kind of measure of inflation is one that excludes food and energy? One designed to fool the public... Keep this in mind going forward...as inflation begins to take off, the economy will appear to look as though it is recovering from recession.
Limeport Resident March 31, 2011 at 12:14 AM
Toomey is advocating the Club for Growth position that has been wrong for the past decade. The fact is the housing bubble reduced the amount of money that people can spend, especially for those who spent above their means. If people don't have money to spend- unemployed, can't get credit, decides to reduce debt (voluntarily or not)-- then why would the private sector invest. They have over capacity now! The Republicans have plan to cut deficit by cutting government spending. Examination of their assumption for an economic recovery because of debt reduction is that people will take on a lot more debt than they had before 2008. Pretty dumb idea. The stimulus never was. Cuts by states offset federal spending (stimulus). So it didn't fail except that Obama had no guts to push through real stimulus. If spending is 70% consumer, exports will not work. We need more government spending to get jobs and hence money back in the economy to support Toomey's masters. Otherwise they will invest elsewhere. Why should they invest in USA when there is no market?
Jennifer Moyer April 02, 2011 at 01:48 AM
Obviously my comment about the Weimar strategy being successful was sarcastic although the strategy was successful in the sense that it was an inflation strategy that caused inflation. More accurately the Weimar Republic strategy was a strategy of paying bills today with new money creation without a thought to the outcome. Within a year the inflation was out of control. I find your comment/belief that the Fed "is perfectly capable of setting a higher inflation target or price level target and hitting it without overshoooting" simply beyond anything I would contemplate addressing because it appears to me that magnitude and pace of events in the next 18 months will outpace the range of actions available to the Fed.
Building Self Esteem April 02, 2011 at 09:39 AM
Its not a Republican democrat or any party problem its a slow and steady destruction of our constitution. Toomey hasn't always done things that make me happy but I'm willing to give him the chance to make some changes <a href="http://www.buildingself-esteem.com">Building Self Esteem</a>
Building Self Esteem April 02, 2011 at 07:32 PM
Toomey hasn't always done things that make me happy but I'm willing to give him the chance to make some changes. I'm a conservative, but not a radical like Jim would like to see happen. <a href="http://www.buildingself-esteem.com">Building Self Esteem</a>


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