[Congressional Record Volume 149, Number 16 (Wednesday, January 29, 2003)]
[Senate]
[Page S1706]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      TAX CUTS ARE NOT THE PROBLEM

  Mr. BENNETT. Mr. President, throughout the day today there has been a 
lot of discussion of the President's State of the Union Message. I was 
interested in the comment that was in the press this morning that said 
the President gave two speeches.
  The first one has been virtually forgotten. The first one was on our 
domestic issues, on our economy, on what we need to do to deal with 
some of our problems at home. I think the Senator from Virginia has 
appropriately and properly addressed the question of the second speech 
which had to do with Iraq, but since much of the rhetoric we have heard 
today has had to do with the deficit and attacks on the President's 
first speech, I will take a few minutes to go back to that first 
speech, that forgotten speech, the first half of the President's 
statement on the state of the Union, and talk about some economic 
impact of what would happen if we were to do what the President wanted 
us to do.
  From the rhetoric we have heard today, all of our problems stem from 
one thing and one thing only, and that is the tax cut that passed very 
strongly in this Chamber and in the other body when the Presidency of 
George W. Bush began. If we had only not passed that tax cut, we would 
not have a deficit. If we had only not passed that tax cut, we would 
have enough money to fund everything. If we had only not passed that 
tax cut, somehow Medicare would be taken care of as far as the eye can 
see and Social Security would be secure forever. Everything stems from 
that terrible tax cut.
  I remind us once again of a few fairly basic, fundamental truths.
  We can choose, at least for a time, what level of expenditures we 
will have in the Federal Government. We can get carried away with our 
ability to make pledges for expenditures, and we can set the level 
wherever we want. We cannot choose, by legislative fiat, the level of 
revenue that will come to pay for that level of expenditure, because 
the level of revenue goes up and down as the economy prospers or 
falters.
  I have seen examples of countries in Africa that laid out a budget of 
expenditures that was absolutely marvelous in all of the benefits that 
would come from their government spending on this and that and the 
other thing. Anything that anybody wanted, the government promised to 
take care of them. But they discovered the fundamental truth I have 
just stated: They could set the level of expenditures pretty much where 
they wanted, but with their economy not producing any money their level 
of taxation came nowhere near the level of expenditure. We must ask 
ourselves, what is going to happen to the economy if the proposal that 
the President's tax cut be repealed should pass? That question was put 
to Alan Greenspan, the chairman of the Federal Reserve Board, and he 
answered in a way that requires a little careful attention, because 
some people picked up on his answer and said: Aha, Greenspan has said 
there will be no economic impact if the tax cuts are repealed.
  This is what he actually said--I do not have his exact words to 
quote, but in effect he said the markets have already assumed the tax 
cut will stay and indeed will be made permanent. Therefore, there is no 
further stimulus to come out of these tax cuts.
  So everybody says the tax cuts were not stimulative. However, he went 
on to say--and this paragraph they do not quote--if they were now 
repealed, the markets would react negatively. Having made the 
assumption that they will be permanent, the market would react 
negatively and the economy would be hurt.

  I raise that bit of history because I ask this rhetorical question: 
If the market has already assumed the tax cuts and acted favorably and 
positively to that assumption, what would happen if those tax cuts were 
not repealed, as some people in this Chamber charge, but were produced 
more rapidly, accelerated, rather than repealed? I think the market 
would respond positively. Say our first assumption that says they are 
going to remain permanent is not only proven valid by this but we will 
have the permanence come more rapidly than we thought.
  If the markets as a whole respond positively, if the economy as a 
whole responds positively, what does that do to tax revenue? It 
increases tax revenue so we can begin to have enough dollars to deal 
with the challenges of the expenditure side.
  I am a member of the Appropriations Committee. I remember attending 
the conference on the final appropriations bill--not this year because 
this year we did not get one until the new Congress convened; we did 
not have a final conference at the end of the last Congress. It was the 
final conference the year before where Senator Stevens came in and said 
this is the number that we have all agreed on for total appropriations 
and expenditures. It was substantially higher than the number where we 
began. He laid it on the table and said: This is the number. Even 
though it is significantly higher than we thought we would have and 
expenditures more than we thought, this is where we will be. Mr. Obey, 
the ranking member on the House side, said that number is not high 
enough.
  The number was a very significant increase over the previous year, 
substantially more than the growth in the population, substantially 
more than any inflation, but that became the number. We finally passed 
it this way in order to get out, and then we started the next year.
  At that period, Democrats were in charge of this Chamber and the 
spending went up significantly from that number. That is the new 
baseline. We have seen in this Congress attempts made to take that 
baseline even higher.
  The most significant thing the President had to say about our long-
term economic health in last night's speech had nothing to do with the 
tax proposals. The most significant thing he had to say is: My budget 
will hold the spending increase to 4 percent. If we can hold the 
spending increase to 4 percent after years of 7 percent and 9 percent, 
one on top of the other, to establish a very high baseline for further 
increases, it will be something of a miracle. But it will be far more 
important than all of the other rhetoric we have heard on the tax side. 
If we can't get the spending under control, we cannot under any 
circumstances raise the taxes to cover it. That is a fundamental truth 
that we should remember over and over again.
  In concluding, I repeat something I have said here many times, but I 
have discovered in the Senate there is no such thing as reputation. 
Everything is said as if it is brand new. But it is a fundamental truth 
we should understand over and over again. Money does not come from the 
budget. Money does not come from legislation. Money comes into the 
Government from the productivity of the American economy. If we can 
make the economy strong, if we can make the economy grow, we will have 
the tax dollars that we need to pay for our expenditures. If we ignore 
the health of the economy and then get carried away with our desire to 
increase our expenditures, we will end up in fulfillment of the dire 
predictions we are hearing. That is not what the President is 
proposing, but what some of his opponents are proposing. I think the 
President was responsible in his first speech last night on the 
domestic economy. We ought to pay attention and act accordingly.

  I yield the floor.
  The PRESIDING OFFICER. The Senator from New Hampshire.

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