Senator Gregg Says Obama Administration's Record Debt Run-Up Intentional Prelude to Value-Added Tax

In an interview by Larry Kudlow, Senator Judd Gregg (R-N.H.) explained why the Obama Administration and the Democratic Congress are not worried about the huge run-up in the deficit and rising national debt.

In his September 9 program host Larry Kudlow pointed out that the Obama Administration has increased the national debt by more than all prior Presidents from George Washington through Ronald Raegan. When Senator Gregg suggested this was going to bankrupt the nation, Larry Kudlow disagreed.

“Senator, instead of going bankrupt, you know what will happen?” Kudlow said. “It's a massive tax trap. That's what's going to happen. It's going to be a gigantic humongous, massive tax trap that will doom us to subpar, stagnant, slow economic growth and high unemployment. Isn’t that really the issue?”

“Larry, you're absolutely right,” Gregg responded. “This is a very important point for your viewers to understand. This spending is being done intentionally. The reason the GDP –the spending-to-GDP ratio has gone from 20 percent to 24 percent, it’s heading to 27 percent of GDP is because the present government, the present presidency and the present Congress genuinely believe that you create prosperity by radically growing the size of government and they genuinely believe that our society is fundamentally under-taxed and they want to fill the gap between what has historically been our tax revenues, which have been about 18 to 19 percent of GDP and the spending, which they put in place at 24 percent.”

“They want to fill it with a value added tax,” Gregg continued. “That is the plan. They're trying to run the government into the ditch so that the options will be so few and so Draconian and so inappropriate that the only choice that would be left would be to go down the European social welfare mode. Remember, every European country has an income tax, a sales tax, which is their VAT tax, and what they see is the United States only has an income tax. So they say, ‘Well, we can obviously take the European model. If we go down the European road of expanding our government dramatically,’ which is what they’re planning to do and what they’ve actually done with the health care bill specifically, ‘Then we can fill that gap without going down the European model of a VAT tax.’”

“That of course reduces the productivity of society, because the more you put a tax burden on society, you basically reduce productivity,” he said. “That costs you jobs and makes you less competitive.”