Congressional Record, Volume 150 Issue 28 (Monday, March 8, 2004)

[Congressional Record Volume 150, Number 28 (Monday, March 8, 2004)]
[Senate]
[Pages S2256-S2294]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

CONGRESSIONAL BUDGET FOR THE UNITED STATES GOVERNMENT FOR FISCAL YEAR
2005

The PRESIDENT pro tempore. Under the previous order, the Senate will
proceed to the consideration of S. Con. Res. 95, which the clerk will
report.
The assistant legislative clerk read as follows:

A concurrent resolution (S. Con. Res. 95) setting forth for
the congressional budget for the United States Government for
fiscal year 2005 and including the appropriate budgetary
levels for fiscal years 2006 through 2009.

The Senate proceeded to consider the concurrent resolution.
The PRESIDENT pro tempore. The chairman of the committee, the Senator
from Oklahoma, is recognized.
Mr. NICKLES. Mr. President, I ask unanimous consent that the presence
and use of small electronic calculators be permitted on the floor
during Senate consideration of the fiscal year 2005 concurrent
resolution on the budget.
The PRESIDENT pro tempore. Without objection, it is so ordered.
Mr. NICKLES. I suggest the absence of a quorum.
The PRESIDENT pro tempore. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. NICKLES. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDENT pro tempore. Without objection, it is so ordered.
Mr. NICKLES. Mr. President, as we begin consideration of the budget
resolution, I want to urge our colleagues to be prepared for a long,
busy week. Under the rules of budget law, we have 50 hours on the
resolution. Last year I am not sure how many hours we had, but it was a
lot more than 50. I believe we had 81 rollcall votes. It was a very
difficult and long week. It was actually longer than a week. It spilled
over into 2 weeks.
It is our intention to finish this week. That is going to take the
cooperation of all Members. The majority leader already announced for
Members to expect long nights, long days, and a lot of votes. I urge
our colleagues to be prepared for a long week. Please don't come up and
say, I have a plane reservation at 3 o'clock. I don't think you can
count on that. I think you have to assume you are going to be here for
very long evenings during long days--especially on Wednesday, Thursday,
and Friday--until we conclude this resolution. I want to make sure that
is known.
Saying that, I urge colleagues to work with my friend and colleague,
Senator Conrad, and myself. If you have amendments, please present them
to us. Give us time to consider them. Maybe we can accept them; maybe
we can't; maybe they will have to be objected to. But at least give us
a chance to review the amendments.
Last year we ended up in a very demeaning process. We called it a
vote-arama. But we had a lot of votes that were on sincere issues that
were considered with very little debate. I would like to--one of the
little legacy things--change the way we manage Senate budget
resolutions. By saying that, I would like to avoid the vote-arama, or
at least minimize it, and maybe have a certain number of votes on each
side. Sometimes last year we voted on the same thing several times. I
don't think that helps the Senate. I want us to represent the Senate
very well.
I want to warn our colleagues to expect a long week. Hopefully we
will conclude. I would love to have it concluded Thursday night. I
doubt that will happen. But we will work aggressively with all of our
colleagues. And when we get into votes, we are going to be very pushy
on trying to limit the time on those votes.
I am just making mention of a couple of those things to let
colleagues know they should expect a long week and late nights. It may
be that Senator Conrad and those who are proposing amendments will work
late and we will stack votes for the next morning. That might be my
preference. But I will work with Senator Conrad, who is a very good
friend and manager on the minority side, on this difficult challenge of
passing a budget.
Again, we have the budget resolution before us. I will be talking
about that momentarily. It cuts the deficit in half. Actually, we cut
it in half over 3 years. The deficits are far too high. Having $500
billion deficits is not acceptable to this Senator, nor do I think it
is acceptable to anybody. We charted a path to bring it down and bring
it down rather abruptly. It will take the cooperation of all people to
conclude this week, and also to make that happen. That is not easy
easily done.
Again, I urge the cooperation of all of our colleagues and look
forward to working with my colleague, Senator Conrad, for the remainder
of this week.
I yield the floor.
The PRESIDING OFFICER (Mrs. Dole). The Senator from North Dakota.
Mr. CONRAD. Thank you, Madam President.
I join the chairman of the committee in reminding our colleagues that
this

[[Page S2257]]

will be a long week with many amendments. I am very hopeful that we on
our side can find a way to get more amendments considered on the front
end more quickly--the chairman and I discussed this and I think we are
of like minds on this--rather than having a big crush at the end. Maybe
if we spent less time on amendments on the front end and more votes on
the front end we could eliminate some of that gridlock at the end. I
think the chairman is entirely correct. That would be good for the
Senate. It would be good for the disposition of these amendments and a
better way to reach a conclusion.
The President has sent us a budget. I want to talk about that in part
and then later on to talk about the chairman's mark.
First of all, I want to discus the budget the President sent to the
Congress. In the President's budget, it spends $991,000 a minute more
than it takes in. That is truly a stunning statistic. Every minute,
under the President's plan, this country spends $991,000 more than it
takes in.
In 2001, the President told us:

Tax relief is central to my plan to encourage economic
growth, and we can proceed with tax relief without fear of
budget deficits, even if the economy softens.

That is what he told us in 2001.
Let us look at the result. We have seen the deficits absolutely
skyrocketing. Here we are back in 2001, and we are still in the black.
But look at where we have gone. So the President was wrong when he
asserted that.
A year after the President's first budget, he said to us:

. . . [O]ur budget will run a deficit that will be small
and short term.

This is after we saw a return of deficits which the President said
would not happen.
In the second year, he told us:

. . . [O]ur budget will run a deficit that will be small
and short term.

That proved to be wrong as well. We don't see deficits that are small
and short term. We see deficits that are large and long term. In fact,
this chart shows the operating deficits under the President's plan from
this year going to the end of the budget period. You can see these are
massive deficits, by far the biggest we have had in our country's
history.
In the third year, the President told us:

[O]ur budget gap is small by historical standards.

Let us look at in fact what has occurred with respect to that claim.
You can see this goes back to 1969. It shows the deficits in dollar
terms. It shows these are record budget deficits, the biggest we have
ever had. So the President was wrong again.
The President said at the end of last year:

Now, we've laid out a plan that shows the deficit will be
cut in half over the next five years, and that's good
progress toward deficit reduction.

We have to ask, Is the President going to be wrong again?
This chart speaks to that. It shows, I believe, that the President
will be absolutely wrong again, and wrong by a big margin. The
President says in the fifth year the deficit will be $237 billion. But
that is only the case if you leave out lots of items. If you leave out
the $30 billion of additional war cost the Congressional Budget Office
tells us we will still be facing in that fifth year; if you leave out
the money needed to fix the alternative minimum tax, which was, as you
know when it began, a millionaire's tax. Now it is rapidly becoming a
middle-class tax. In fact, about 3 million people are now affected by
the alternative minimum tax. By the end of this period, we will have 30
million to 40 million people affected by the alternative minimum tax.
In addition, the President is not talking about the money he will be
taking from the Medicare trust fund, or the Social Security trust fund.
In that fifth year alone, the President will be taking $235 billion
from the Social Security trust fund. That is much bigger than his
entire projected deficit for that year. Every penny of this has to be
paid back, and the President has no plan to pay it back.
The same is true with the Medicare surplus--$22 billion he is
borrowing from the Medicare trust fund, again with no plan to pay it
back.
Of course, we have the Congressional Budget Office reestimate. They
have looked at the President's numbers and made a change. They think
the number will be bigger than the President anticipated.
If you add all of this up, instead of adding $237 billion to the debt
in that fifth year, we believe under the President's plan he will be
adding $600 billion to the debt.
What we have, I believe, is a consistent pattern by the President to
hide from the American people the full story of our fiscal condition.
Here is just a few of the ways he is hiding the full effect of his
plan.
The first way he does it is he provides no new funding for ongoing
operations in Iraq, Afghanistan, and the continuing war on terror, no
new money past September 30 of this year.
Does anybody seriously believe the war in Iraq, the war in
Afghanistan, and the war on terror are going to end on September 30,
which happens to be the end of the fiscal year? Does anybody believe
that? That is what is in the President's budget. When we ask the
President's representatives, they say: Well, it is hard for us to know
what the cost will be.
We can understand that. But the right answer is not zero, and the
President is telling us there is no cost for the war on terror, no cost
for the war in Afghanistan, no cost for the war in Iraq past September
30 of this year.
The Congressional Budget Office tells us that, instead of a zero, we
ought to be putting in $280 billion for these costs for the period 2005
to 2014. That is what they say the war cost will be going forward: $280
billion. The President has nothing.
But that is not the only place the President is failing to tell the
American people what we really face. The Bush budget also hides the
full story on the cost of extending the tax cuts. The President has
come before us and said: Make all the tax cuts permanent. I wish we
could do that. But look at what happens. This dotted line shown on the
chart is the first 5 years. The Bush budget only covers the first 5
years. But look what happens to the cost of the tax cut right beyond
the 5-year budget window. The cost of the tax cut explodes.
This is being hidden, in effect, from the American people. I think if
they have a chance to see this information, they will realize the
President has us on a fiscal course that simply does not add up. The
deficits and debt absolutely skyrocket as we approach the retirement of
the baby boom generation.
It is not just the war cost or the cost of the tax cuts, but we also
see the same pattern with the alternative minimum tax. The alternative
minimum tax was the tax that was designed to catch millionaires, catch
people who were filing and paying no taxes. Remember, back in the
1980s, we had that circumstance where Congress found there were a
number of people making, at that time, $200,000 a year, and there were
22 of them who did not pay a penny of tax.
In response to that, Congress put in place the alternative minimum
tax. It affected a very small number of taxpayers. But it has not been
adjusted since the time it was put in place, and now we have between 2
and 3 million people caught up in the alternative minimum tax.
But we have not seen anything yet because by the end of this 10-year
period, they are telling us 40 million people will be caught up in the
alternative minimum tax. The old millionaires' tax is swiftly becoming
a middle-class tax trap. The President deals with the problem only for
the first year in his budget. He does not deal with the soaring cost
over the 10 years, again hiding the full story from the American
people.
But perhaps the biggest place--the biggest place--the President is
hiding the full effect of his budget policies is with respect to Social
Security. The President, after pledging not to use Social Security to
pay for tax cuts or other expenditures of Government, is now using,
over the next 10 years, every penny of Social Security surplus. And
remember, the word ``surplus'' is not accurate because the money is not
extra. This is money that is needed when the baby boomers retire. It is
surplus for the moment. That is money that should be used to pay down
the debt or prepay the liability.

Instead, the President is taking it to pay for tax cuts and other
things. He is

[[Page S2258]]

taking every penny of Social Security surplus, not just this year, not
just next year, not just for the next 5 years, but for the next 10
years under the President's plan--and all of that at the worst possible
time, right before the baby boomers begin to retire. Those funds will
be needed to keep the promise made to them.
Remember, in 2001, the President told us he was going to have maximum
paydown of the debt. He said he would virtually eliminate the debt.
Well, he was wrong again. Because we see the debt exploded. The gross
debt of the United States was $5.8 trillion in 2001 when he took
office. We now project--using his tax cuts, the alternative minimum tax
reform that will be required, and the ongoing war costs; just making
those three corrections--the gross debt of the United States will
skyrocket to $14.8 trillion in 2014.
You wonder, where is all that money coming from. We are running up
this huge debt. Where is this money coming from? Well, we have already
seen the President is borrowing $2.4 trillion from the Social Security
trust fund--$2.4 trillion; every penny of the Social Security surplus.
He is taking every penny available to borrow, and using it to pay for
tax cuts and other things.
But that is not the only place from which he is borrowing. He has
borrowed already $545 billion from Japan, $149 billion from China; he
has borrowed $69 billion from the so-called Caribbean banking centers;
he has borrowed $58 billion from Hong Kong; he has even borrowed $43
billion from South Korea. I do not think this makes us stronger. I
think this makes us weaker. And that is what has happened.
The President is very fond of saying it is the people's money; we
have to give it back to them.
Well, that may have made more sense when there was a surplus, but now
that you are in deficit, it is the people's money, certainly, but it is
also the people's debt. Where is the money coming from to finance this
debt? It is coming from borrowing. We are borrowing from ourselves. We
are borrowing from the Social Security trust fund, the Medicare trust
fund, under the President's plan, and we are borrowing from countries
all around the globe, money that will ultimately have to be paid back,
and the President has no plan to do it.
Here are the implications of this policy. This is from a story that
was in the Washington Post on January 26 of this year: ``Economists
Worry About Long-Term Effects of Weak Dollar and Heavy U.S.
Borrowing.'' Here is what it said in the article:

Currency traders fretting over that dependency--

The dependency they are talking about is our need to borrow all this
money, borrow from the budget deficit, now approaching $500 billion
this year. We are also, in effect, borrowing from the rest of the world
to finance our trade deficit, which is also about $500 billion a year.

Currency traders fretting over that dependency have been
selling dollars fast and buying euros furiously. The fear is
that foreigners will tire of financing America's appetites.
Foreign investors will dump U.S. assets, especially stocks
and bonds, sending financial markets plummeting. Interest
rates will shoot up to entice them back. Heavily indebted
Americans will not be able to keep up with rising interest
payments. Inflation, bankruptcies and economic malaise will
follow.

That is the risk the President is running with these enormous
deficits as far as the eye can see. We have a circumstance where we
have run deficits in the short term. That is more understandable. We
have been wracked by an attack on September 11. We have had an economic
slowdown. We have a war in Afghanistan and Iraq. I think we can all
understand that we would expect to run deficits in that circumstance.
The problem I see is the President's plan going forward. Because even
when he sees economic recovery continuing, we are running deficits that
are larger than anything we have seen in our country's history--not
just for the next few years but the next 5 years and the next 10 years.
When they said in the article that economists are worried about the
long-term effect of the drop in the value of the dollar, here is what
they are talking about.
The dollar has declined more than 30 percent against the euro just
since 2002. In other words, our currency has lost 30 percent of its
value against the European currency in the last 2 years. That has
enormous implications, both short term and long term.
In the short term, it helps us celebrate abroad. If our dollar is
worth less, it makes it easier for us to sell abroad. It makes it
harder for us to buy from other countries, so that gives a boost in the
short term to our economy.
The problem is, if it continues for an extended period, then people
who are investing in the United States in dollar-denominated securities
may decide it is no longer advantageous to invest in dollar-denominated
investments. They may decide it is time to diversify out of dollar-
denominated investments. That could have a very serious and negative
consequence on the American economy.
From the Washington Post this morning, I urge my colleagues to look
at the story about Warren Buffett--Warren Buffett, the second richest
man in the world, somebody who is a patriotic American--indicating that
he is betting against the value of the U.S. dollar. He has bet $12
billion against the value of the American dollar.
I was just with a financial adviser, one of the most prominent
financial advisers in America, who had a strategy meeting with one of
America's wealthiest families. For the first time at their meeting,
they decided to begin to invest in other than dollar-denominated
investments because they believe the threat to the value of the
American dollar to long-term American economic strength is being so
undercut by these budget and trade deficits.
We have to get serious about the long-term economic security of our
country. Do not take my word for it. This is from the President's own
budget document. It is the long-term budget outlook. If we adopt the
President's spending plan and if we adopt the President's tax plan,
this is what it shows. This is a very sobering chart. It tells us that
right now we are in the budget sweet spot. Even though this represents
a record budget deficit, the biggest we ever had, it shows things
getting somewhat better on a so-called unified basis when Social
Security money is being used to pay our bills.
Look what happens in the long term as the baby boomers start to
retire and the cost of the President's tax cuts explode: The deficits
go right off the cliff, deficits that are utterly unsustainable and
that fundamentally threaten the economic strength of the country. That
is from the President's own budget document. That is their outlook of
where this is all headed. This is a policy that cannot be justified
over the long term. It is utterly unsustainable.
If you do not want to trust the President's numbers--and I understand
that after we have looked at the previous claims of what would happen--
this is what the Congressional Budget Office shows. It is exactly the
same thing. This is their long-term budget outlook--again, a percentage
of GDP so the effect of inflation has been taken out.
They show, with the President's tax cuts, the need for alternative
minimum tax reform, maintaining current spending policies, and, of
course, the President is really increasing current spending because of
the increases in defense and homeland security. Look what happens. The
long-term deficits absolutely skyrocket.
All of this is happening at the worst possible time, as this chart
shows. This chart shows the tax cuts explode as the trust fund cash
surpluses become deficits. This chart shows, in green, the Social
Security trust fund. The blue is the Medicare trust fund. The red are
the tax cuts, both those already passed and those proposed by the
President.
What this chart shows is right now the surpluses in the Social
Security and Medicare trust funds are offsetting the cost of the tax
cuts. Look what happens when the trust funds go cash negative in 2016
and 2017. At the very time the cost of the tax cuts explode, that
combination drives us right over the fiscal cliff. This sets up a very
difficult set of choices for the future.
This is a joint statement by the Council on Economic Development, the
Concord Coalition, and the Council on Budget and Policy Priorities. In
the fall of last year, trying to help people understand what we will
face in the future as a result of digging the hole so deep now, this is
what they said:

To get a sense of the magnitude of the deficits the nation
is likely to face without a

[[Page S2259]]

change in policies, consider that even with the full economic
recovery that CBO forecasts and a decade of economic growth,
balancing the budget by the end of the coming decade would
entail such radical steps as:
Raising individual and corporate income taxes by 27
percent; or eliminating Medicare entirely;

We have had tough choices in the past. Wait and see what is to come.
Three very serious groups are warning where we are heading.
Continuing:

Raising individual and corporate income taxes by 27
percent; or eliminating Medicare entirely; or cutting Social
Security benefits by 60 percent.

We have just had the head of the Federal Reserve, Chairman Greenspan,
say we are overcommitted. He said we ought to consider cutting Social
Security benefits. But he has not said cut Social Security benefits by
60 percent. That is what these three organizations are saying would be
the options facing a future President and a future Congress if we stay
on this current course.

Or shutting down three-fourths of the Defense Department;
or cutting all expenditures other than Social Security,
Medicare, defense, homeland security, and interest payments
on the debt including expenditure on the debt--including
expenditures for education, transportation, housing, the
environment, law enforcement, National Parks, research on
diseases, and the rest--by 40 percent.

I hope our colleagues are listening. I hope they are paying
attention. We are on a course that is a reckless course. It is not a
conservative course. It is a radical course. It is a course that is
utterly unsustainable and will lead us into very serious trouble.
If we look at what has happened to spending, it is important to know,
again, if we look at total Federal spending, a share of GDP, and we go
from 1981, we reached a peak in 1983 of 23.5 percent of gross domestic
product going to the Federal Government and then it zigzagged.
In 1991, we put in place a 5-year budget plan that took spending down
each and every year as a share of gross domestic production. Then, in
1997, we passed a bipartisan plan that took us down even further, so
that in 2001 we were down to 18.4 percent of gross domestic production.
The Federal Government spending had come down very sharply in that
20-year period. Now we have had this tick-up, and this tick-up
primarily has been for defense, homeland security, and the response to
the September 11 attack, rebuilding New York, and bailing out the
airlines. Even with that tick-up, we see we are still well below the
spending levels of the 1980s and 1990s in terms of what the Federal
Government is spending.
If we turn to the revenue side, we see quite a different picture. On
the revenue side, we can see the revenue side of the equation has just
collapsed. In 2004, we now expect revenue to be 15.8 percent of gross
domestic production. The revenue has just collapsed. We will have the
lowest revenue as a share of gross domestic production since 1950.
Spending is down substantially from where it was in the eighties and
nineties, however up from where it was in 2001 because of the increases
for defense. Ninety-one percent of the increases have been for defense,
homeland security, and the response to the attacks of September 11.
Look what has happened on the revenue side of the equation. The
revenue side of the equation has collapsed. About half this is due to
the tax cuts. The other half is due to the economic slowdown. Again, we
have a real problem on the revenue side of this equation.
The President said last month in a speech in Louisville:

We've got plenty of money in Washington, DC, by the way.

We do not have plenty of money to pay the bills. There is a lot of
money here, there is no question about that, but we cannot pay our
bills and we cannot come anywhere close to paying our bills. So when
the President says we have plenty of money here, he certainly is right,
these are very big numbers with which we are dealing, but we do not
have enough money to pay the bills.
We are going to hear from the other side that the President has done
a good job with his budgets getting the economy growing again. If we
look at the economic record of this President, what we see is, in terms
of creating private sector jobs, this administration is the first one
in 70 years to lose private sector jobs. It is pretty stunning. If you
look back, every single President--President Roosevelt, President
Truman, President Eisenhower, President Kennedy, President Johnson,
President Nixon, President Ford, President Carter, President Reagan,
President Bush 41, and President Clinton all had positive job creation
in the private sector. We have to go all the way back to Herbert Hoover
to see a President who has lost private sector jobs. That does not tell
the full story because as we look at what has happened and compare it
to history, what we see should be of concern to all of us.
I asked my staff to go back and look at what has happened in the
previous times when we had an economic slowdown. I asked them to look
at the last nine recessions we have had since World War II and compare
job recovery out of those recessions to what is happening now because I
think this should alert all of us. Something is wrong, and we have to
diagnose what it is. I have some ideas. I am sure my colleagues will
have some ideas, but there is something very wrong happening.
This is a chart of a fit line looking at what happened in the last
nine recessions. We have a dotted red line, the average of nine
recessions since World War II coming out of recessions. The bottom of
the chart is the months after the business cycle peak. What we see is
about 17 months after the peak, there is typically a strong job
recovery. That is about 17 months after the business peak.
Look at what has happened this time. We are now 35 months or 36
months past the business cycle peak, and still we see no substantial
job recovery. In fact, we are now 5.4 million jobs short of the typical
recovery.
If we were comparing to just one time, I would be less concerned, but
this is every recession since World War II, nine recessions, and if we
compare what has happened in each of those to what is happening this
time, something is wrong. Something is radically wrong. Typically in
these other cases, 17 or 18 months past the business cycle peak, we
started to see very strong job recovery. Here we are 37 months past the
business cycle peak and we still do not see job recovery. As I
indicated, we are 5.4 million jobs short of the typical recovery. In
fact, it is not just of a typical recovery; it is of every other
recovery since World War II. In the nine previous recessions, every
other time, by this time, we would have been strongly recovering. It
has not happened.

Again, we are going to hear from the other side that things are
pretty good. What we see here is the smallest share of the population
is at work since 1994. Again, this is a warning signal to us. Madam
President, 62.2 percent of the population is employed now. We see the
percentage of the population employed down very sharply from 2000 to
now--down very sharply. Only 62.2 percent of the population is
employed. We have to go all the way back to 1994 to see a number that
weak.
It is not just that statistic which ought to concern us. We also see
the longest average duration of unemployment in over 20 years--that is,
if we look at how long people are unemployed, we find they are staying
unemployed for a longer period than any time in the last 20 years. In
other words, people are not finding jobs quickly when they become
unemployed. When they are laid off, they are not finding jobs for
extended periods of time.
This side of the graph is over 20 weeks people have been waiting to
find a new job. Again, that takes you all the way back to 1984 to see
people having to wait so long to find other work.
I also asked my staff to look at what has happened to real wages
during the Bush administration and compare it to the previous
administration. Here is what we found.
If we go back to 1996, the average wages in the country were $485. By
the end of the Clinton administration, it got up to $530. During the
Bush administration, average wages have only gone up $8 a week. That is
very weak in historical comparison. Again, it is another warning sign
that the set of policies which are in place are not working
appropriately.
I know we will hear the other side talk about the stock market
recovery that has taken place, and that certainly has been welcomed. It
is much

[[Page S2260]]

better than where we were. We need to remind ourselves where we are now
compared to where we were.
As this chart shows, the market recovery still leaves stock prices at
1998 levels. We have to go back 6 years to find the stock market at
this level.
Another point we have heard from the other side--and I am sure we
will hear again--is don't worry, it is the surveys that are at fault;
that is what is misleading us as to what is going on in terms of
employment. They will say over and over that the household survey--we
heard this in the Budget Committee debate--the household survey is the
one to which we ought to be paying attention, but that contradicts
their Commissioner of the Bureau of Labor Statistics in testimony
before the Joint Economic Committee. The Commissioner said:

The payroll survey is the best indicator of current job
trends.

That is what we have used here in these statistics. I am sure we will
hear the other side argue, as they have in the Budget Committee, that
the household survey is better. But the person who is in charge of the
Bureau of Labor Statistics contradicts that and says the payroll survey
is the best indicator of current job trends.
If we look at the President's economic report that was issued on
February 9, just a month ago, they said in that report:

[W]e expect sort of an average jobs in 2004 to be 2.6
million more than jobs in 2003.

This is the President's economic report. This is his prediction of
what is going to happen, that there are going to be 2.6 million more
jobs this year than last year. From here going forward, that would
require the creation of 520,000 jobs a month.
Let's do a little reality test. Here is what happened in February:
The increase in jobs was not 520,000 for that month. It was 21,000. In
the private sector, there were no new jobs. Every one of these jobs was
a Government job. Of the 21,000 jobs created in February, every single
one of them was a Government job. There were no private sector jobs
created.
The President's report says there are going to be 520,000 jobs
created if we are going to meet their claim that there are going to be
2.6 million more jobs by the third quarter of 2004 compared to the
third quarter of 2003. For that to come true, they would have to
generate 520,000 jobs a month. In February, it was 21,000 jobs and not
a single one of them was in the private sector. Every single one of
these new jobs in February was in the Government.
So the President's plan is not working. He told us in 2001 this plan
would not create deficits. It has created the biggest deficits in our
country's history. He told us it would create jobs. Here we are 3 years
later. Where are the jobs?
This is what consumers believe is happening. Consumers believe jobs
are hard to get. Eighty-eight percent believe jobs are not plentiful or
are hard to get. Only 12 percent believe jobs are plentiful. It is not
just with respect to recovery. It is not just with respect to job
creation. It is not just with respect to people having an opportunity
to find a new place if they lose their old job. We are also seeing the
wage growth of production workers starting to fall behind inflation.
This green line shows the average hourly earnings of production of
nonsupervisory workers. Let's look at this because it goes back to
2001. This is the 12-month percentage change. Back in 2001, we saw an
average hour of earning increasing at a rate of over 4 percent. Since
that time, it has been almost a steady downward pattern. We see now
average wages are going up between 1.5 percent and 2 percent. The red
line shows consumer prices, and this year we have now seen the lines
cross, so that hourly average earnings are not keeping up with
inflation. We are not seeing them keep pace with the increases in
consumer prices, another warning sign this is a policy that is not
working.
This is our initial take on the President's budget. We think it is
taking us in the wrong direction. Let me be clear. When the President
came into office in 2001, on our side we proposed a much larger tax
reduction in the near term than did the President. I know many people
will be surprised by that, but it is a fact. We proposed a budget that
had much bigger tax cuts in the short term, to give lift to the
economy, than did the President. But we had much less in tax cuts over
the 10-year period, about half as many, to avoid going into this
deficit swamp.
In retrospect, we were right. It was right to have tax cuts on the
front end to give lift to the economy. The economy clearly needed it.
It was a mistake for the President to propose these massive tax cuts
going out for years into the future when we had the baby boom
generation about to begin retiring. It is the combination of policies
the President has pursued that we believe is a mistake. We believe,
yes, we should have had tax cuts in the short term to give lift to the
economy, although we would have chosen a different mix of tax cuts than
the President did.

Interestingly enough, the President adopted some of our suggestions,
the 10-percent rate, the child care credit, reducing the marriage
penalty, and we salute him for that. Those are policies many of us on
this side agreed with. But the President also adopted dramatic cuts in
capital gains and dividend taxation. These are taxation policies the
Congressional Budget Office told us would give us very little bang for
the buck in terms of job creation and economic growth. I think the
Congressional Budget Office was right. I think that particular mix of
tax cuts the President chose was not the right mix to give maximal lift
to the economy in the short term.
As we see going forward, the President's tax cuts are so large they
fundamentally threaten our long-term economic security. That is where
we have the significant difference.
I am pleased to see members of the Budget Committee in the Senate and
the House have not adopted the President's full tax cut proposal going
forward. Now maybe it will occur in later years, past the 5 years. None
of us can know that now, but at least in this budget cycle they are not
endorsing the President's plan to have another trillion and a half
dollars of tax cuts when we already have the largest deficits in the
history of our country and we are about to have the baby boomers begin
to retire, which will dramatically increase the expenditures of the
Federal Government, because that is one thing we know. The baby boomers
are not a projection; they are out there. They have been born. They are
alive. They are eligible for Social Security and Medicare, and we are
faced with a circumstance in which we have to start making very tough
decisions.
My own belief is we have to be tough on the spending side of the
equation and we have to be tough on the revenue side of the equation.
We have to slow the growth of Federal spending. On the other side of
the equation, we have to do something about the revenue mess because
the revenue this year is the lowest as a percentage of gross domestic
product since 1950. When the revenue was high as the share of gross
domestic product, the President said we needed tax cuts. Now that it is
the lowest it has been since 1950, the President's answer is, more tax
cuts.
It does not matter what the problem is, this President comes up with
the same answer: Tax cuts, tax cuts, and tax cuts that primarily go to
the wealthiest among us.
I have a chart with me which I will use later on that shows 33
percent of the tax cuts this President has proposed and those that have
been enacted have gone to the wealthiest 1 percent, those earning over
$337,000 a year. That is not a fair distribution of the tax cuts in
this country. It is one reason we have a very weak job recovery,
because the tax cuts that were selected were tax cuts that primarily
went to the wealthiest among us rather than being targeted at middle-
income people who would spend the money. So much of this money has gone
to high-end people who save it.
As meritorious as it is to save money, and I try to remind my
daughter of this from time to time, that saving is a good thing, but
when talking about getting an economy moving we need that money to be
spent, we need that money to be moving in the economy. If we look at
this economic recovery that has occurred, to the extent it has
occurred, there are many factors. One of the biggest factors is the
monetary policy of this Nation.
The Federal Reserve has the most accommodative monetary policy in 40
years. It is a key reason this economy has recovered. We have combined
debt in this country of over $20 trillion.

[[Page S2261]]

So an accommodative monitoring policy, the lowering of short-term
interest rates from 6.5 percent down to 1 percent, has been a key
reason for the lift of this economy. The second key reason for the lift
of this economy has been the stimulus both on the tax side and the
spending side. The two of them are about equal over this 3-year period.
If we look at the increased spending that has occurred--and it has
been substantial since 2001--from 2001 to 2003, the Federal Government
has increased expenditures by 20 percent. Of course, the tax cuts--
especially those geared to the middle class--have helped give lift to
this economy.
A third factor helping economic recovery has been the decline in the
value of the dollar. That can have negative long-term consequences; but
in the short term, a decline in the value of the dollar makes it easier
for us to sell abroad, which helps our manufacturing industry and all
those that export. It holds down imports because imports become more
expensive. So that has helped give lift to the economy in the short
term as well.
Madam President, the bottom line is that I believe the fiscal course
the President is taking us on--not so much in the short term, although
that is of increasing concern, but the longer term proposals by the
President are truly dangerous to the economic security of our country.
The deficits are too large. They are too long lasting. They explode as
the baby boomers retire and the full cost of the President's tax cuts
become clear.
I believe we have a responsibility to alter that course. I believe it
will become more and more clear in the months ahead that the course we
are on is utterly unsustainable and fundamentally reckless. That is why
we simply must change course.
I thank the Chair and yield the floor.
The PRESIDING OFFICER. Who yields time?
Mr. CONRAD. Madam President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. NICKLES. Madam President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. NICKLES. Madam President, I ask unanimous consent that the time
during quorum calls be equally divided.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. NICKLES. I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. CONRAD. Madam President, I ask unanimous consent the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. CONRAD. Madam President, the chairman has indicated to me he will
return in a few minutes and begin his presentation at that time. Rather
than have the time be lost, I will say a few words now.
In addition to being concerned about the President's plan to explode
the deficits and the debt, as I look at the President's plan I also see
what I believe are misplaced priorities. Let me discuss just a few.
As this chart shows, the Bush plan cuts No Child Left Behind, but
that cut saves very little in comparison to the cost of the tax cuts
for that same year going to the most wealthy 1 percent. Let me just be
very clear. The President's plan shorts No Child Left Behind by $9.4
billion in this fiscal year, 2005. We passed legislation here that gave
increased responsibility to the States, increased the expenses of the
States, and in exchange we said we would cover the costs. The
President's budget fails to do that. It fails to do it by $9.4 billion
for 2005.
But in that same year the cost of the President's tax cuts for the
most wealthy 1 percent, those who earn over $337,000 a year, are $45
billion, five times as much as the money needed to keep the promise of
No Child Left Behind.
I must say I am in this category. My wife and I are in the top 1
percent. I would be happy to give up part of my tax cut. I would be
happy to have it reduced by 20 percent to keep the promise for No Child
Left Behind.
The same is true in other categories--veterans medical funding, for
example. The President's budget is $521 million short of providing
funding for veterans medical care in 2005 that should be in place to
fund it at the same level as last year. It would take $521 million to
bring it up to what we did last year for veterans medical care.

In that same year, the President's tax cuts cost $45 billion for the
wealthiest 1 percent, those earning over $337,000. That is 90 times as
much as the money necessary to restore the funding for veterans medical
care. I must say I don't understand these priorities. It doesn't stop
there.
This is President Bush's plan for cutting firefighting funds. It
would cost $246 million to restore the money. Again, in 2005, in
comparison, the President has $45 billion in tax cuts going to the
wealthiest 1 percent, those earning over $337,000 a year. That is
almost 200 times as much as the money necessary to restore the cuts to
the firefighters.
We talked a lot about homeland security. Firefighters who are the
first responders, the police who are first responders, ought to be high
up on the list of our priorities, and certainly veterans health care.
We have just sent thousands of men and women half a world a way to
defend this country. Then we cut their medical care. I don't think
these are the priorities of the American people.
It doesn't stop there. The President plans to cut COPS funding to put
police on the streets. The COPS program has put 100,000 police on the
streets in this country. The President proposes deeply cutting COPS
funding. It would cost about $700 million to restore that funding for
2005. Instead, the President says it is more important to have $45
billion of tax cuts for the wealthiest 1 percent. I do not think that
is the priority of the American people.
When we look at these programs individually, we can see the Bush
budget cuts the COPS program by 94 percent. This is the amount of money
we provided in 2004. We provided $742 million to put these police on
the streets. The President proposes cutting that down to $44 million.
He is cutting it by almost $700 million at the same time, saying, No,
it is more important to have $45 billion of tax cuts for the wealthiest
1 percent, those earning over $337,000 a year.
My own belief is the COPS program ought to be funded. I believe we
are safer because there are 100,000 more police on the streets. The
President, with these deep cuts--cutting the COPS program 94 percent--
is going to take police off the streets. When we have a terrorist
threat in this country, as we do, why would you take police off the
streets? Why would you take police off the beat? It makes no sense to
me.
As I say, it doesn't stop there. Here is the President's plan for
firefighters. He cuts that program 33 percent. Again, firefighters are
first responders.
I can remember well September 11 when the Pentagon was attacked. I
remember watching the television. I remember seeing all those first
responders. Who was it we asked to respond to the disaster?
Firefighters, police, and EMTs. Those are the people who were there to
help those who had been hurt.
The President's answer is cut the COPS program 94 percent, cut the
firefighters 33 percent, and cut port security 63 percent. We provided
$125 million last year for port security. The President wants to cut
that by almost two-thirds, down to $46 million. We know we are only
inspecting about 4 percent of the containers that come into our ports.
We know we need to do more. We know we need to do more to secure the
ports. In fact, those who are involved with the ports of the country
say we ought to have $5 billion for port security. Obviously, we can't
afford $5 billion. But on the other hand, does it make any sense to cut
what we are doing now by 63 percent? I don't think that makes much
sense in the light of what we face in terms of a terrorist threat to
the country.

Earlier I was talking about the tax cuts the President put in place
and the distribution of those tax cuts. Again, I want to make clear I
proposed in 2001 much bigger tax cuts on the front end than the
President proposed. You will recall the President's initial two
proposals would have very small tax cuts in the initial years, and much
more in

[[Page S2262]]

the outyears. I thought he had it upside down and backwards. I thought
we should have more tax cuts on the front end to give life to the
economy and much less in the long term so we could prepare for the
retirement of the baby boom generation and not undermine Social
Security and Medicare and national defense. The President largely got
his way, with some exceptions.
Here is what we see as beneficiaries of those income tax cuts. Of the
income tax cuts, 68.7 percent of the benefit goes to the top 20
percent, and 33 percent of the benefits--almost a third--go to the top
1 percent. Those are people earning over $337,000 a year.
I believe one of the reasons we are not seeing the kind of job
creation we might have otherwise seen is the President shows the wrong
mix of tax cuts. He has it much too weighted to the top end and not
enough to the middle class who are the ones who would spend the money
and really fuel the economy.
This next chart shows in a little different way who benefited from
the 2003 tax cut. Net tax cuts under the tax act passed in 2003 for
upper-income individuals was 67 percent of the benefit, according to
the Joint Committee on Taxation. Low- and middle-income people got 29
percent, and businesses 3 percent. Again, I think the President chose
the wrong mix of tax cuts.
There is no question that stimulus is what the economy needs when you
have that kind of slowdown. Stimulus can be either spending or tax
cuts. I believe we ought to do both. We have economic weakness and we
spend more money--a 20-percent increase from 2001 to 2003 in Federal
spending, most of it for defense and homeland security and responding
to the effects of September 11, but we also cut taxes. That is a
strategy that makes sense at a time of economic weakness. The problem
with what was put in place is the taxes were so directed to tax
reduction, so directed at the wealthiest among us, the highest income,
that we didn't get the same bang for the buck in terms of economic
growth and job creation we would have gotten had we targeted more to
middle-income individuals and lower-middle-income individuals who would
more likely have spent the money.
This is a very interesting chart. I hope my colleagues will have a
chance to see a lot of this chart in the coming days. This is how the
tax benefits stack up--the average tax cut in 2006. Middle-income
people got an average $566. This is the combined effect of the 2001 and
2003 tax cuts. Middle-income people got an average of $566.
But look at what happened. Those earning over $1 million a year got
$140,000 on average in tax cuts. If these bars were proportionate, the
bar showing what the people earning over $1 million get would have to
go 35 feet higher. I don't know how high the Chamber is here, but 35
feet would be a long way up in the air to show the comparable tax cuts
going to those earning over $1 million compared to what the middle-
income people get. Middle-income people got $566. People earning over
$1 million got $140,000 in tax cuts on average in 1 year.
If we were going to have the comparison done in a proportional way,
the bar showing what those earning over $1 million are receiving for
the year would have to go 35 feet high compared to this little bit at
the middle income.
Again, I believe one of the reasons we are not seeing the job
recovery all of us would like to see is the President simply has the
wrong mix of tax cuts.
This chart shows it a different way. A typical taxpayer, one right in
the middle of the income distribution in the country, under this
scenario got $685. This is from the Center on Tax Policy, the average
tax cut in 2004. In 2004, those earning over $1 million got $127,000 in
tax cuts. That is a stunning difference. The Bush income tax cuts give
three times as much benefit to the top 1 percent as the middle 20
percent.
Looking at the middle 20 percent of the people in the income
distribution in this country, they have 11 percent of the benefit of
the President's tax cuts. The top 1 percent got almost three times as
much. In fact, they did get three times as much for those earning over
$337,000 a year.
I asked my staff to go back and look at how the top 1 percent of our
country has done compared to the rest of the American people. Here is
what we found looking at increases in average aftertax income from 1979
to 2000. Those in the top 1 percent improved their condition by
$576,000, the middle 20 percent, $5,500. That is 100 to 1.
The people who have benefited by the economic growth are the top 1
percent. That is fine. I am all for that. We all want people to be able
to succeed. That is what opportunity is about. That is what freedom is
about, the ability to do better, do better for your family, do better
for yourself. Great. But when we come along and make tax policy and we
look at those people having been the greatest beneficiaries of what has
occurred on a basis of 100 to 1 and we in this tax policy say that is
not good enough of a difference, we want to turn around and give those
earning over $1 million a year a $140,000 tax cut on top of it in 1
year and the middle-class people get $500.
How is that fair? It eludes me how that is fair. I don't think it is
fair. Not only is it not fair, but it is not good economic policy. Why
not? Because the middle-income people are the ones who spend the money.
We need people to spend money to get the economy moving. People in the
higher income categories are the least likely to spend it. They are
much more likely to save and invest, which is good to do, but that is
not what primes the pump. That is not what gets the economy moving.
When I look at who got the biggest benefit, many times friends on the
other side of the aisle say, Hey, wait a minute, the wealthiest folks
pay most of the taxes. That is exactly right. That is true. The wealthy
people do pay more of the taxes. We have a progressive tax system, so
higher income people pay a greater proportion of taxes, but they do not
pay the same share. They do not pay as much more as we gave in the tax
cut side of the ledger. As I indicated, they got 33 percent of the
President's tax cuts, but they paid 23 percent of the income and
payroll taxes. This is the wealthiest 1 percent. They got 33 percent of
the benefit, but they paid 23 percent of the taxes. I don't think it is
fair on any basis what the President chose as the mix of tax cuts and I
don't think it is good economic policy either.
It is stark when we look at the top 1 percent, those earning over
$337,000 a year. They got 33 percent of the benefit of the tax cuts.
The bottom 60 percent in this country got 15 percent of the benefit.
Our friends on the other side will say, Hey, wait a minute, the
higher income people pay more. Yes, they do, but they do not pay 33
percent of the taxes. Our friends on the other side want to talk about
income taxes. They forget that people do not only pay income taxes;
they pay income taxes; they pay payroll taxes. The fact is, three-
fourths of the American people pay more in payroll taxes than they pay
in income taxes. Yet all of the relief has been to income tax payers
and done in a way that gives an overwhelming benefit to the highest
income tax payer, those earning over $337,000 a year.

The disparity is even bigger when we look at those who earn over $1
million a year. As I showed, those earning over $1 million a year got
the cake. We talk about the crumbs and the cake. Here is the cake.
Those earning over $1 million a year, for 2006, will get a $140,000 tax
cut in that year alone. Here is what the middle-income folks in the
country are going to get: $566. There is something wrong with this
plan.
Again, when we look at what has happened from 1979 to 2000, the
change in share of pretax income, this chart is quite stunning. It is
the reason there is a lot of anger in the country, I believe. There is
much more anger in the country than I think is generally understood by
people in Washington. The reason is middle-income people in this 20-
year period have actually lost ground. They are worse off in their
share than they were in their pretax income shares in that 20-year
period. The middle-income people have actually lost share, 15 percent.
Their pretax incomes have gone down. Look what has happened to the top
1 percent. Their pretax income has gone up 91 percent.
We heard Senator Edwards from North Carolina in his Presidential
campaign talking about two Americas. The reason that got such a
tremendous response is because there is a lot of truth in what he is
saying. There are two Americas developing: those who are well-to-do,
those who are secure, those

[[Page S2263]]

who are fully competitive in this global environment; and then middle-
income people, who all of a sudden are finding themselves in
competition with people who are earning 25 cents an hour in some other
part of the world. We are faced with a circumstance that is changing
very dramatically.
I met a man who is involved with one of the major industries in the
country at a breakfast I attended several weeks ago. He said, Senator,
something is changing structurally in this country. Something is
happening that is very dramatic. In the business I am in--he is in the
machine tool business--at this stage of an economic recovery, we should
find our order books filled. We should see dramatic increases in
orders. Senator, that is not what we are finding. Yes, economic growth
has improved. We saw 4 percent the last quarter, 8 percent the quarter
before that. But, he said, our order books are not filling up in the
machine tool business. Something structurally is changing here.
There are jobs being created, but not jobs in this country. There is
business being created, but it is not business in this country. The
jobs are being created in China. The jobs are being created in Mexico.
Jobs are being created in India. Business is being created to some
extent in this country because we see strong economic growth here, but
it is not as it should be in this stage of recovery.
I believe part of it is we have adopted a flawed policy. We have
helped with tax policy the very people who have already done extremely
well in the last 20 years. Those who are the most educated, the best
trained, are doing extremely well. That is great. I am all for that. I
hope very much everybody gets into that category. That is what
opportunity is about. Through our policies, we are helping the very
people who have already done the best, and we are not doing much for
the people who are falling behind.
Chairman Greenspan says we ought to focus on education because if we
are going to compete in this global environment, we must have the best
trained, best educated workforce. Yet in this budget, the President
cuts No Child Left Behind $9 billion.

Does that make sense for our country? Does it make sense to cut
education for what was promised by $9 billion when in that same year we
are giving the top 1 percent a $45 billion tax cut? Does that make
sense? Is that good judgment to strengthen our country for the future?
I do not think so.
If we look at what has happened, again, from 1979 to 2000, to those
in the middle 20 percent, their share of pretax income has dropped.
Look at what has happened to the top 20 percent. Their share has almost
tripled.
If people are not paying attention, they are going to get swamped.
There is anger in this country because when Senator Edwards talks about
two Americas, he is exactly right. Those at the top are doing better
and better. I am delighted they are doing better. But those in the
middle, they are falling behind.
Why? Because this global economy is great for the people who are the
best educated and the best trained. That is why we, as a society, ought
to make certain we are doing everything we can to make Americans the
best educated and the best trained because if you are not, you are not
going to be able to compete. You are not going to do well in this
global competition, and your share of the national income pie is going
to get cut. Those who are well educated and well trained are going to
prosper. They are going to soar. We have to somehow fashion a policy
that gives all Americans a chance to compete and to do well and to be
winners.
We hear a lot from the other side that the biggest beneficiaries of
the top rate cut are the 23 million small businesses; that is where
most of the jobs are generated. I agree, most of the new jobs are
generated by small business. But I do not agree that the top rate cut
benefits most businesses. In fact, only 2 percent of businesses qualify
for that top rate. Ninety-eight percent got no benefit from the top
rate cut.
I hope very much as this debate goes forward that we think very
carefully about what we are doing because it is abundantly clear, while
there is economic recovery underway, it is an uneven economic recovery.
It is a recovery that is not generating jobs in the same way we have
seen in the nine previous recessions. We are 5.4 million jobs behind
where we typically have been in other recoveries since World War II.
Something is wrong. Something is not going right. I believe one part
of that is the tax policies that have been put in place that have
benefited primarily the top 1 percent. The top 1 percent got a third of
the benefit--those earning over $337,000 a year. Those are the very
people who have done the best in the last 20 years on every scale. They
have increased their incomes by over half a million dollars. They have
seen their pretax income go up 91 percent, while those in the middle
have seen theirs shrink.
I think that is right at the heart of why we see a jobless recovery
underway. The people who are the very ones who would spend the money
are not getting the money. The people who are getting the money, under
the President's plan, are the wealthiest among us. They are the least
likely to spend it. They are the most likely to put it in the bank. And
while savings is a good thing, and I am delighted to always see people
save because that helps investment for the future--and we need to have
more savings in order to have more investment, to have more growth for
the future--in the short term, to get people back to work and to fuel
the economy, you need people spending money. The people most likely to
spend money are the people in the middle class.

Of course, we have also seen somebody else spend money. That is Uncle
Sam. Uncle Sam has been spending a lot more money. From 2001 to 2003,
Federal spending went up 20 percent. From 2001 to 2004, Federal
spending has gone up almost 30 percent.
Where is the increased spending going? Ninety-one percent of the
increased spending is going in just three areas. Most of it is defense.
The next biggest is homeland security. The third biggest was a response
to the attacks of September 11--rebuilding New York, bailing out the
airlines, and the international programs that have been adopted to deal
with the crisis in Afghanistan and Iraq. That is where the increased
spending has occurred.
We will hear a lot from the other side that spending is out of
control. It really is not. We have seen a big bump up in the 3 years of
this President, but where has it been? The increases have been for
defense, homeland security, and the response to the September 11
attack.
The place where the deficits have really opened is on the revenue
side. It is the revenue side of the equation that has collapsed. We are
going to have the least revenues as a share of gross domestic product
since 1950. So if we are going to be honest and straight with the
American people about diagnosing the problems we have, we have to
address the circumstances as we know them, as we face them.
Let me just quickly say, on the revenue side of the equation, I know
a lot of people's impulse is, well, if you are talking more revenue,
you are talking tax increases. That would not be the first place I
would look for more revenue. The first place I would look for more
revenue would be the tax gap, the difference between what is owed and
what is being paid.
I met with the head of the Revenue Service in the last 2 weeks, and
he told me the tax gap, as of 2001--the difference between what is owed
and what is paid--was $255 billion in that year alone. We ought to have
a concerted effort to go after those who are not paying what they
legitimately owe under this Tax Code--those companies, those
individuals who are dodging what they legitimately owe, to the tune of
$255 billion in 2001 alone. It is totally unfair to the rest of us who
pay what we legitimately owe to let others--a small percentage--escape
what they owe.
A previous Revenue Commissioner did an analysis and said the rest of
us paid 15 percent more because of that small group of companies and
individuals who are not paying what they legitimately owe.
I hope we shine a bright light on this tax gap because I believe it
is the first place we ought to look to start to fill in this revenue
hole that has been created. Instead of going to a tax increase, the
first thing we ought to do is close the tax gap so everybody can be
assured everyone else is paying what they fairly owe under the law.

[[Page S2264]]

I thank the Chair and yield the floor.
I ask the Senator, are you ready to proceed or should I put in a
quorum call?
The PRESIDING OFFICER (Mr. Enzi). The Senator from Oklahoma.
Mr. NICKLES. Mr. President, I thank my friend and colleague, Senator
Conrad, for his remarks. I agree with some of them, not necessarily all
of them. Let me make a few comments on the budget. And I, again,
appreciate his patience in waiting for me so I could have a bite to eat
and also get prepared for this presentation.
The budget is a difficult challenge. To write a budget for the United
States of America, the largest government in the world, the largest
economy in the world, is not easy.
President Bush has written a budget. We produced a budget out of the
Budget Committee. I hear a lot of complaints about how bad the
President's budget is or how bad the resolution on which we will be
voting on the floor is, but I have not seen alternatives. I would urge
people, show me your alternative. Show me how much money you would
spend, how much money you would tax. That is basically what a budget
outline is: how much money we are going to spend and how much money we
are going to tax. What is our objective? How are we going to achieve
it?
We use assumptions. A lot of times the assumptions are wrong. I have
heard a lot of complaints: Well, President Bush missed the assumptions
big time. In 2001, we projected enormous surpluses, and now we have
enormous deficits--trillions of dollars of difference. What happened?
We don't understand.
Well, a lot of things happened. Let me just say there have been a lot
of inaccurate assessments made. And I go back to the year 2001. In
January 2001, everybody missed--everybody missed--big time, not just
President Bush. President Clinton, the Congressional Budget Office, the
Office of Management and Budget all missed more than you can imagine.
I will just make a couple comments on a little history.
The NASDAQ collapsed in the year 2001, and it continued to decline a
little bit in 2002. But a big collapse was really in the year 2000.
I might mention that President Clinton was still President. Yet I
will show you the next thing. His forecast for 2001--this was given in
January of 2001--estimated about an additional employment of almost 2
million jobs.
Frankly, the economy was already falling into recession, which was
shown by the fact that NASDAQ went down by almost 50 percent in 2000.
Yet the budget experts, Democrats and Republicans, CBO and OMB--CBO is
the Congressional Budget Office and OMB is the Office of Management and
Budget--projected that revenues would continue to climb, employment
would continue to climb, as President Clinton did. They all missed it.
They missed it by an enormous amount. They were forecasting trillions
of dollars in surpluses. They were way wrong. Of course, they also
didn't know, and could not have expected, the hit we had in September
of 2001. But there were enormous mistakes that were made.
The market collapse, or the crash of the market and NASDAQ declining
by that much was missed. They didn't estimate what the impact would be
on revenues and to the economy.
We had trillions of dollars in market value that was lost in the
collapse. If you look at the NASDAQ chart again, in March, that
collapse started in March of 2000. Individuals, investors know that.
They remember that is when the bubble popped. NASDAQ was almost 5,000.
Then all of a sudden it was going down to 4,000, 3,000, and it ended up
that year at 2,500. So there was an enormous decline of market value. A
lot of it was inflated. Chairman Greenspan called it ``irrational
exuberance,'' and he was probably right. It flowed through as a real
loss and decline of revenue coming into the Federal Government.
In the year 2000, we had over $2 trillion of revenue. That declined
to last year's $1.78 trillion in revenues. Part of that was tax cuts,
but the bigger part of it was the recession.
Look at this chart. Where did the deficits come from? Most of the
deficits came from economic and technical changes. That is 40 percent,
from the assumptions made in 2001. New spending comprised 37 percent.
So you had economic and technical changes of 40 percent; new spending,
37 percent; tax cuts, 23 percent.
Again, this is comparing 2001 to the forecast of today. My point is,
I want to give people a perspective of what happened. The new
spending--we had big supplemental changes--changes were made as a
result of the war. We had two very large supplementals to fight the
wars in Afghanistan and Iraq, and a big supplemental to help New York
City and Virginia. That totaled almost $250 billion in new spending
just to take care of those who were injured and to rebuild New York
City and fight the war on terrorism.
That is kind of what we inherited last year. Last year, the previous
year, we didn't have a budget. Last year we had to pass a budget, and
the economy was still rather flat. Besides, Democrats and Republicans
said we needed a stimulus package, we needed to grow the economy. We
had different ideas of how to do it. I think some of what we did last
year helped a lot.
I have heard criticism. I will make a couple of comments. I think the
changes we made last year did grow the economy, did make a difference.
If you look at the GDP, gross domestic product, you can see what we
were looking at last year. It was rather stagnant. The economy started
dropping in 2000, a negative quarter in 2000, and in 2001 it was
still pretty negative.

Then we started to have a growing economy. When we passed the tax
bill last year--when we started talking about it, we started to notice
the GDP started rising dramatically.
The last three quarters were very positive. The third quarter of last
year is the largest economic growth period we have had in any quarter
in decades--not in years but decades. So the tax bill changes we made
were positive.
Some people say I think we want to make changes to grow the economy.
We did. We basically accelerated the tax cuts that were already in
progress and moved the rates to the rates they are today. That was
positive, in my opinion, and very beneficial. We cut in half the tax on
dividends. Chairman Greenspan and others said we should go to zero.
The Senate passed a bill that would take the tax on dividends to
zero, i.e., they should only be taxed once. We found out then in
comparing it that we taxed the contribution distributions from
corporations higher in the U.S. than in any other country in the world.
We tied with Japan for the highest tax rate on taxing proceeds from
corporations, higher than anybody else in the world. We cut that tax in
half, to 15 percent.
We cut the capital gains rate from 20 percent to 15 percent. It has
made a big difference. You see these economic growth figures--GDP going
up by 4, 5, 8 percent. Those are very positive and good numbers.
If you look at what was done in the stock market, there was over a
$4.5 trillion increase, almost on a straight line basis, since the tax
bill we passed last year. That is astronomical--great, good news. That
is good news for all Americans.
Some people say, well, that only benefits the Warren Buffetts or the
wealthy people who invest. That is not correct. It benefits the entire
economy. That means the wealth of these companies is growing. These
companies are owned by, frankly, almost all Americans. I think over 50
percent of the households have direct ownership, if you looked at the
investments they have, such as the teachers public employee trust
funds, all kinds of retirement plans, 401(k)s, almost all of which have
investments in the stock market. That means instead of having declining
market value in their retirement accounts, they have increasing ones,
escalating amounts. That is all good news. We want to continue that
good news.
The point is, very seldom can you say--we passed a budget last year
and, if we had not done that, we would not have had a growth package,
we would not have cut the tax on dividends to 15 percent, or reduced
the tax rate on capital gains 25 percent, from 20 to 15 percent. That
would not have happened. But we passed a budget and it made it possible
for that to happen. As a result, I think we have good news to share.
When people think about whether budgets make a difference, they make

[[Page S2265]]

a world of difference. Can you impact the economy? Yes. We proved that
and we did.
If you look at the unemployment rate, for example--and we have heard
a lot of discussion on it--it is now 5.6 percent. It was up to 6.3
percent. It has been declining ever since we passed the bill. We made
some good progress. We have not had the increase in employment
certainly that I would like to see, but it is moving in the right
direction.
As far as the employment rates or the number of people employed, we
are making progress. I think one of the reasons it has not been as good
as we would like in many cases is because productivity has escalated
rather dramatically. That is good for consumers, certainly good for our
economy. That keeps us competitive. That means we produce more goods
per hour and that is all positive. We will see a rise, hopefully, in
the employment rates as we continue.
The unemployment rate is down and employment rates are up. If you
look at the number of people employed, it is an all-time high. It all
happened because we passed a budget last year. So I encourage people
who are very critical of this budget to come up with their own. This is
not an easy job. So I welcome the discussion.
I also wish to talk a little bit about tax rates. I have heard a lot
of complaints about the wealthy benefitting so much from these tax
cuts, and how terrible it is that they were disproportionately
benefiting from this proposal--either the tax cut of 2001--and there is
a lot of discussion and confusion about the 2001 tax cut and the 2003
tax cut. I was one of the principal authors of both. Primarily, I was
very involved with it. Let me defend it.
One, for those people who say it didn't benefit the low-income
people, that is not correct. In the 2001 tax cut, we accelerated the
tax reduction for low-income people and made it effectively
retroactive. Maybe some people forgot that, but we did that.

Again, we passed the tax cut in 2001, and we reduced every tax
bracket--every tax bracket, not just the tax brackets for the higher
brackets. We reduced every tax bracket, and we reduced the lower tax
bracket more than any other bracket.
The lowest tax bracket at that time, other than zero, was 15 percent.
We made it 10 percent, and we did it retroactive to January. So we took
the lowest bracket, cut that tax rate by 50 percent, and we made it
retroactive.
We took the maximum rate, which was 39.6 percent, and we reduced it
by 1 point to 38.6 percent for 2 years. Last year we finally got it
down to 35 percent. It took us from 2001 to the middle of 2003 before
we got it down to the 35-percent tax bracket. It was 39.6 percent under
President Clinton. We took it to 35 percent. It is still much higher
than it was under President Bush 1 at 31 percent. Thirty-five percent
over 31 percent, it is almost 20 percent higher than it was under
President Bush 1. But we made the lower income tax bracket reduction
effective immediately and we did it all in 1 year. We did not phase it
in over 3 years.
We also did some other things. We made the tax cut more refundable. I
don't happen to agree with that, but we did, so we write a check to
people who do not even pay taxes. In many cases, we write them a check
much greater than their payroll taxes.
I hear some people say: You need to include payroll taxes. I
understand there are income taxes and payroll taxes combined, but for
low-income people, in many cases we would write a check to them that
greatly exceeded their 2001 tax bill. Maybe some people forgot that
point.
Then we also increased the $500 per child tax credit to $1,000. Last
year, we took it from $700 to $1,000. That is a $1,000 tax credit per
child. If we do not extend it this year, it will go back to $700. We
assume in our budget that we are going to extend it.
When people say we did not do anything for low-income people, if you
have 4 kids, that is $4,000--4 times the $1,000 tax credit on which you
do not have to pay taxes.
The net impact of that is a lot of people do not pay income taxes
because if you look at the child tax credit and you look at the earned
income tax credit and so on, we have a lot of programs for low-income
people, so maybe they do not pay taxes.
Then we hear the argument of distribution, the class argument: The
wealthier are the ones who are benefiting. Frankly, people in the upper
5 percent of income pay half the income tax. Think of that. The upper 5
percent of the American people pay half the income tax. Sure, if you
are going to cut income taxes, they are going to benefit. The point
being, how much should the rate be? What is the right level? I happen
to think when we talk about a 35-percent rate--that is over a third, if
my math is somewhat accurate--that is a lot. Why should the Federal
Government take over a third of anybody's income for any reason? Why is
the Government entitled to take half?
When I was first elected, the rate was all the way up to 70 percent.
The Government could take 70 percent of any additional dollar you
earned. I think that is wrong. We have gradually reduced it to 28
percent, and it went up to 39.6 percent. Frankly, it is even higher
than 39.6 percent because there is a tax on all income of 2.9 percent
to pay Medicare. So you actually add 2.9 percent for these income tax
figures. Add 2.9 percent, so the maximum percent is 37.9 percent today.
Maybe people don't realize that. How much money should the Federal
Government take? The power to tax is the power to destroy. Where do you
destroy an individual's or company's incentive to produce more? At some
point, I can tell you from my experience in the private sector--I used
to be in the private sector; I will be returning before too long--at
some point, when you work more for the Government than you work for
yourself, you lose a lot of your incentive to grow, build, and expand,
and when I say expand, I am talking about hiring more people.

I found out earlier when I had a janitor service that I was almost in
a 40-percent tax bracket. Why in the world should I get up early every
morning or work late at night if Uncle Sam and the State--combined
between the two--are going to take about half? It is a real
disincentive to grow. I had several employees and could have had
several more. I had the same situation when I ran a manufacturing
company in Oklahoma. Marginal tax makes a difference.
I mentioned the top rate today is 35 percent. If you add the 2.9
percent because of Medicare, that is 37.9 percent, and you have not yet
paid any State income tax. A lot of States have 6 or 7 percent, so you
add that. Now you are at 45 percent. Some cities have an income tax.
You add that and you are at the 50-percent rate.
Why does someone want to continue building and growing and expanding?
Expanding is where jobs are created.
Mr. SARBANES. Will the Senator yield for a question?
Mr. NICKLES. No, I will not yield. I am going to make a fairly
significant statement.
Mr. SARBANES. I want to clarify one point.
Mr. NICKLES. Not at this point.
Some people say that is a big benefit for the wealthy. I say why in
the world should the Government take half? I don't think they should.
Maybe some people believe they should. I disagree.
What we have assumed in the budget is we are going to continue
present law; that we are not going to have a tax increase. Some people
don't want that to be in there. We assume we are going to continue
present law, where we have several provisions that are due to expire at
the end of this year. Some of those, frankly, are targeted toward low-
or middle-income people. They would expand the child tax credit. As I
mentioned, if we do not extend it, the child tax credit will go from
$1,000 to $700. There is a $1,000 tax credit today. If we do not extend
it, as assumed in the budget, it goes to $700. So they will lose. If
they have 4 kids, they are going to have to pay $1,200 more in taxes
next year than they pay this year.
What about the marriage tax penalty? We assume we are going to extend
the marriage penalty relief we put in last year's bill. That is very
significant for middle-income tax relief.
I heard my good friend Senator Conrad talk about the middle-income
class does not get anything. That is not accurate, in my opinion. The
middle-income class people do very well. If you have a taxable income
of $58,000, your tax bracket is 15 percent. We want to keep it at 15
percent. If we do not pass the extension, it is going to revert

[[Page S2266]]

down and people will be paying 25 percent if they make $58,000. As a
matter of fact, the savings on that income category is about $900. So
if a married couple and their combined, joint taxable income is
$58,000, the marriage penalty relief we passed last year which we want
to extend is $900. So you have $900 there. If they have 4 kids, that is
another $1,200 difference. That is $2,100 of tax relief for a couple
with 4 kids. That is a rather typical American family. I happen to have
four kids. I don't qualify for this, but most American families have
taxable incomes of $58,000 and would qualify for it. My kids are too
old. My point being, this is real tax relief for American families.
We also expand the 10-percent bracket, and we continue that
expansion, or we assume that will be continued under our resolution.
That is another $100.
If you look at the savings, we have $900 on marriage penalty relief
we would extend; we have $1,200 for the child tax credit we would
extend; another $100 for the 10-percent expansion. We expand the amount
of income that would be taxed at 10 percent. By continuing those
provisions, we save the American family which has $58,000 in taxable
income and 4 kids about $2,200. That is real relief. Percentage-wise,
on the amount of taxes they pay, it is probably a greater percentage
relief than anyone. It is very significant. So I want to put some of
the tax equity arguments in perspective.

I will make just a couple of other comments about the budget. I
mentioned what we assume on the tax side. I tell my colleagues if they
are bent out of shape, we have a reconciliation package instruction
that would make all of those things I just mentioned be extended
throughout the 5-year window of this bill.
This is a 5-year budget. I am assuming all those things would be made
permanent, or at least be extended through this resolution. Things
cannot be made permanent in budget resolutions. A lot of people say we
want to make those tax cuts permanent. I said fine. We just have to do
a tax bill outside of reconciliation.
I am happy to do the tax bill, I tell my friend and colleague. I
think he knows that. I have the pleasure of serving with him on the
Finance Committee. This Senate has done many tax bills, many inside
reconciliation and many outside. By definition, if they are inside a
reconciliation they are terminated. I do not like that. Frankly, I want
to do something this year on the death tax or the estate tax. If we are
going to do something on the death tax, it ought to be done outside of
reconciliation so it is not temporary, so it is permanent, so tax
planners and others can figure out what they want to do and they can
count on it. So maybe we will have the opportunity to do that if we do
bills outside of reconciliation.
I have looked at it more or less as a fallback, and I told Senator
Grassley, who is the very able chairman of the Finance Committee, that
we might have this as a fallback but hopefully we could do these things
outside of reconciliation. That would be a couple of options.
That is $81 billion that we are assuming in reconciliation. We assume
about $12 trillion in the next 5 years in revenues. So the amount of
money we are trying to direct through the reconciliation process is
very small in proportion to the total amount of money that is expected
to be raised under current law. So I just mention those things on the
revenue side.
What about on the spending side? I showed the chart where spending
has gone up and revenues have gone down, mostly because of the economy,
somewhat because of the tax cut. Expenditures have gone up rather
dramatically.
We believe it is time to be responsible. We think it is time to make
some reductions, to at least cap the growth on spending. So the
resolution we have makes some tough choices. In many cases we have not
made tough choices in the past.
I am sure I am going to hear from my colleagues: Well, too much is
cut, too much is assumed. Basically, we still assume spending will
grow, but it is going to grow by less. In some cases, for the
assumptions we have that defense would grow about 5 percent, I have
already heard--very strongly I might add from Chairman Stevens and
Chairman Warner--that they want 7 percent. The President requested a 7-
percent growth in defense. We have assumed 5.1 percent, and I expect
there will be efforts to--I might even say I know there will be efforts
that will be coming to increase that level.
We assume the President's number in homeland defense. I have heard
people say that is not enough; he did not do enough on first
responders; he did not do enough for port security, and so on. But we
assumed a 15-percent increase in homeland security, according to CBO.
If we take out the bioshield, which was actually funded last year, it
is about a 10-percent growth. Again, 10 percent when looking at the
rest of the budget, nondefense, nonhomeland security grows by basically
a freeze. We could say .5 percent or a freeze. The President's budget
said it would grow by about .5 percent. Our budget is very close to a
freeze.

These programs are not used to a freeze. I can show program after
program, going all the way back since 1990, that has been growing in
annual expenditures in double digits continually. They are addicted to
that kind of spending growth.
If we try to say, I am sorry, you may have to live with a freeze,
that is not going to be easy. I know a lot of the appropriators are
looking at it and saying: Whoa, we are used to having a lot more money
than that. I know this will not be easy. I tell my friend and colleague
from North Dakota, it will not be easy because I know there is a lot of
demand to spend somebody else's money. Frankly, I do not think $500
billion deficits are acceptable.
The administration estimated the deficit for this year at $521
billion. I hope they are incorrect. We use the Congressional Budget
Office. There are differences and they are legitimate. There are
professionals both at the Congressional Budget Office and OMB, and I
respect them all. They have different estimates, for different reasons.
We can spend a lot of time on that, but the Congressional Budget Office
estimates that this year the deficit will be about $477 billion.
The President said he wanted to get the deficit down by half over 5
years. That is very significant. The President is estimating $521
billion. To try and get that in half over 5 years is a very significant
deficit reduction, not easily obtained.
Since we use the Congressional Budget Office, we start at $477
billion. Under our budget resolution, next year the total deficit will
be $338 billion. That is a reduction of about $140 billion--actually
$139 billion in 1 year. That is a very significant decline. The next
year goes down again about $80 billion, a very significant deficit
reduction, not easily done.
If we are successful in doing that, we will be very close to the
halfway mark in 2006. We will be there in 2007. So we are bringing it
down.
Looking at it as a percentage of gross domestic product, the estimate
today of the deficit is 4.6 percent of GDP. In past years, even in the
early 1980s or 1990s, we had deficit figures of as much as 6 percent of
GDP. We are bringing it down in a couple of years to 2 percent, which
is much more sustainable. In the year 2007, it will be 1.7 percent of
GDP. So we are making significant progress in deficit reduction. We
would meet this target either nominally through dollars or through a
percentage of GDP in 3 years.
I know there are going to be a lot of amendments that say we are
cutting too much too fast. Frankly, we are not cutting. We are saying
we should allow defense spending to grow as much as necessary, but
other than that we need to tighten our belts. We have not done that in
the past. As a result, I know people are going to say we need more
money, and we will be happy to look at the requests. In many cases we
can fund more money, but we may have to cut other places to do it.

I have heard some people say, well, we need money for veterans, for
education, for first responders, for defense, or the COPS Program, or
whatever. Fine. They can have more money, but between us on the Budget
Committee and the appropriators, we are going to have to reduce some
money or spending in other areas to pay for it. That is making tough
choices. We have not done that.
I remind our colleagues, and I think Senator Conrad would join me, in
this budget we do not micromanage where

[[Page S2267]]

the money is going to be spent. We can assume that money will be spent
in education or it might be spent for the COPS Program, but, frankly,
we give a number to the appropriating committees and they have to live
with that number.
They can change the number. So we might assume one thing for
education--actually, we have assumptions in this bill for significant
increases in several areas in education. We assume fairly significant
increases in veterans programs. Somebody else could assume it
differently, or they could say well, we want more money for veterans.
Fine. They may have to make some reductions in housing or make
reductions elsewhere in the budget to make it equal that total number.
I mention this for our colleagues' information. Doing this budget
will not be easy. I am sure we will have lots of amendments. I concur
with Senator Conrad, I would prefer to manage it in a way that we would
be more direct in handling the amendments, trying to have more
amendments throughout the course of the budget debate and not have so
many stacked up at the end. I do not think that speaks well for the
Senate and our management of this challenge.
This is a challenge. This is not easy.
I yield the floor, and I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. CONRAD. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. CONRAD. Mr. President, the very able chairman of the Budget
Committee has just given his review of his proposal on both the revenue
and the spending side. Let me put up this chart which shows a bit of a
different perspective.
The chairman put up a chart which shows the deficit being cut in half
over the next several years. This is the problem I have with that
chart. I think it fundamentally misleads the American people about the
fiscal condition of the country.
The chairman's chart is entirely accurate about the unified deficit.
What does that mean? That is when you put all the money in the same
pot, all the income tax collections and all the payroll tax collections
to support Social Security, Medicare, and then you take all the
spending out of that same pot. That is how we have done the budget here
for years.
The problem now is we are in a different situation. The different
situation is Social Security, in the 1980s, was changed to run large
surpluses during this period in preparation for the retirement of the
baby boom generation. So when you put all the money in the same pot, it
gives a misleading result. It misleads you as to your true fiscal
condition.
Let me take this chart from the chairman's own budget. It shows, for
2004, that the overall debt is going to increase by $612 billion
between 2004 and 2005. It is going to increase by $612 billion.
Let's go out. Under the chairman's mark, I think he is saying that
the deficit will be cut in half in--Mr. Chairman, 4 years or 3 years?
The deficit will be cut in half in 3 years.
But look at this. When you look at the total picture, you see a
different result. You see, between 2004 and 2005, the debt being
increased by $612 billion; in the next year, $569 billion; in the next
year, $553 billion; and in what was supposed to be the third year,
where it is supposed to be cut in half, the debt is increasing by $563
billion. There is almost no difference here in how much the debt is
increasing. In fact, in the 5 years the debt is increasing $2.86
trillion under the chairman's mark.
The chairman is putting the most positive complexion on this budget
he can, and I understand that. But when you look at what he is
proposing, he is talking about the unified deficit, he is talking about
jackpoting all the money, he is talking about the so-called unified
deficit being cut in half. To me, that does not give an accurate
picture of the fiscal condition of the country.
Mr. SARBANES. Will the Senator yield for a question?
Mr. CONRAD. I will be happy to yield.
Mr. SARBANES. I understand this point the Senator is making is
compounded by the fact that what we are looking at with this budget is
just a 5-year projection.
Mr. CONRAD. That is correct.
Mr. SARBANES. It is my understanding it includes within it the idea
of making these tax cuts that were passed permanent instead of
temporary. Of course, the people who put the tax cuts in place were the
ones who made them temporary. Now they are coming back, seeking a
change in the law to make them permanent. They, in effect, are changing
the tax structure. Otherwise, they would expire.

But they are only projecting a 5-year period. As I understand it, if
you do the 5-year period, this is the increase in the deficit here,
just this amount. But the full brunt of this doesn't hit home until the
subsequent period. So if you take a 10-year period, which we have done
in the past--we have used 10-year projections rather than 5--if you
take the 10-year period, look what happens to the cost. There is a
deficit explosion. It is just staggering.
Of course, we are only being shown this part of the picture instead
of being shown all of the picture, which shows a $1.6 trillion 10-year
cost. There is a $1.6 trillion 10-year cost to extending the tax cuts
over this next 10-year period.
So the Senator is making one point about the understatement of the
situation we are moving in, but this also dramatizes another very
important point. We are being set on a fiscal course that spells
disaster for the country, and we need to recognize that. It is one of
the reasons I joined with the Senator in the Budget Committee in voting
against this budget. This is not a sound, solid, steady course to be
on, in terms of the Nation's fiscal policy.
Mr. CONRAD. The Senator makes a very powerful point. As you can see
just on the tax side of the ledger, the President's tax cut proposal
explodes right beyond the 5-year window.
Mr. SARBANES. That is right. Exactly.
Mr. CONRAD. If the Senator will put the chart up again, what that
shows----
Mr. SARBANES. You see it runs along here like this. This is as far as
the chairman's budget projects it, right to there. Then it stays on
that line a little bit and then look what happens to it--it is
incredible. It is the shooting star deficit, the way this thing is
going.
Mr. CONRAD. It is truly stunning. It is not just the tax cuts that
have that same pattern. Fixing the alternative minimum tax, which was
the original millionaire's tax, is rapidly becoming a middle-class tax
increase that has that same pattern.
In addition, they are hiding the cost of the war. The war, they say,
has no additional cost. The war in Iraq, the war in Afghanistan, and
the war on terrorism has no additional cost past September 30. Who
believes that? We know right now they are preparing a request for
additional funding, a vote to be held after the election in which they
are going to ask for another $50 billion.
Mr. SARBANES. At least.
Mr. CONRAD. At least. The Congressional Budget Office tells us the
true ongoing cost of the war over the 10-year period will be $280
billion. There is not a dime of it in the President's budget.
The Senator is quite right. It is this pattern of hiding from the
American people the full cost of these budget proposals that is a great
concern.
Mr. SARBANES. Will the Senator yield further?
Mr. CONRAD. I am happy to yield.
Mr. SARBANES. I would like to pick up on the Senator's point about
the cost of adjusting the alternative minimum tax. Of course, the
alternative minimum tax was put in place in order to tax wealthy people
who are using various deductions and exemptions, and so forth, not to
pay taxes. The idea was, at a minimum you ought to pay a certain amount
of tax. There was a huge public outcry about that--justifiably so in my
opinion. So we put it into place. Of course, as the economy evolves,
you have inflation and so forth and so on, and you have to keep
adjusting it; otherwise, it is going to work its way down further into
the middle class. It was never intended to do that. So it has been
adjusted from time to time.
In fact, the President is proposing in his budget, as I understand
it, a 1-year

[[Page S2268]]

adjustment--not projecting it out. Of course, that raises the question
immediately in your mind: Why a 1-year adjustment? I think it is
obvious why, if you do this, because it shows if you really adjust it
as it ought to be adjusted, you are projecting out $658 billion in a
10-year cost to reform the alternative minimum tax. There is a $658
billion 10-year cost to reform the alternative minimum tax. Here you
have $1.6 trillion to extend and make permanent the existing tax cuts,
the sum total of which is $2.2 trillion.
Mr. CONRAD. Real money.
Mr. SARBANES. You are telling me it is real money. Absolutely. The
Senator is absolutely right. This budget is kind of you see this, but
you do not see what is behind the scenes, what is coming. We cut off
the picture and look at a certain point. It works pretty good. You cut
it off here before this line takes off. You see what we are showing--
this part. It is an exercise in prudence to come along and say: Wait a
second; let us see how that works in the outyears. All of a sudden, you
see it just takes off like that.
The Senator is absolutely right.
Mr. CONRAD. You have the same pattern on the alternative minimum tax,
as the Senator showed. Interestingly enough, that costs $658 billion
over the 10 years. The President only provides for 1 year in his
budget--$23 billion. He shows the $23 billion necessary to keep this
thing from cutting more and more into the middle class. In fact, we
have 2 million or 3 million people affected by the alternative minimum
tax. By the end of that 10-year period, 40 million people are going to
be caught up in the alternative minimum tax. Boy, are they in for a big
surprise. They thought they were getting tax cuts. They are going to
get a whooping tax increase. What the President's budget does, and the
budget from the Republican side in the Budget Committee, is just deal
with this problem for 1 year.
Mr. SARBANES. Will the Senator yield?
Mr. CONRAD. Yes.
Mr. SARBANES. It is interesting. If you deal with the first year of
the 10-year period, it is $23 billion, as I understand it. But you
can't assume, well, we will just project that out at $23 billion a
year, each year. So the cost over 10 years would be $230 billion, which
is what someone just coming to it at first blush might assume. The fact
is that the cost escalates rapidly. So over the 10-year period, it is
not 10 times $23 billion, or $230 billion; it is $658 billion, almost
triple what you might suppose it would be.

Mr. CONRAD. The reason for that is, as the Senator knows, more and
more people are getting sucked into this alternative minimum tax
designed to catch millionaires. Now it is going to be catching middle-
class people. In fact, there was an excellent article in the Washington
Post this weekend by a young journalist whose family just got sucked
into the alternative minimum tax. It cost his family over $2,000 in
this year alone to get sucked into this alternative minimum tax
problem.
Our friends on the other side are saying they have tax cuts for the
middle class which they want to continue. I support continuing those
middle-class tax cuts. But they are not dealing with the alternative
minimum tax that used to be the millionaires' tax and rapidly becoming
a middle-class tax trap. They only deal with that for 1 year.
They have tax increases, as well, built into this budget that are
very disguised. It is going to affect millions and millions and
millions of people.
Mr. SARBANES. Will the Senator yield for a further question?
Mr. CONRAD. Yes.
Mr. SARBANES. The Senator enumerated the three concerns: a 10-year
projection of the cost of the tax cut, the alternative minimum tax; the
Senator mentioned the failure to reflect in the budget any cost for our
involvement in Iraq or Afghanistan. I want to be clear on this point.
Am I correct in understanding that the budget which the President sent
to the Congress for the next fiscal year beginning on October 1 of this
year, 2004--the budget he submitted to the Congress, the spending
blueprint--has zero for the cost of Iraq and Afghanistan? Is that
correct?
Mr. CONRAD. Yes. It is hard to believe, but it is true. The President
is telling us he has put nothing in the budget because he says it is
hard to estimate how much it will be. I have said to these
representatives, the thing we know is the right answer is not zero.
That is the thing we know for sure. Zero is not the right answer.
Mr. SARBANES. Absolutely. Yes.
Mr. CONRAD. The Congressional Budget Office tells us that the 10-year
effect of the war in Iraq, the war in Afghanistan, the war on terror is
$280 billion. But the President's budget has nothing for it.
That is part of the reason I have said this budget doesn't reveal to
the American people our true financial condition. You have the
exploding cost of the tax cuts beyond a 5-year window, you have the
cost of fixing the alternative minimum tax to prevent it from sucking
in more and more middle-class taxpayers, you have the cost of the war
that is not in the President's budget, then the biggest one of all, the
President is going to take over the next 10 years $2.4 trillion from
Social Security. He is borrowing it from Social Security with no plan
to pay it back. If you were running any other enterprise, if you were
running a private company, you could not take the retirement funds of
your employees and use it to pay the other expenses of the enterprise.
You would be in violation of Federal law if you did that.
That is what this chart shows under the President's budget and under
the chairman's mark. Here is a chart that shows it very well. This is
what is entirely hidden from people's view with respect to what is
happening to our fiscal condition. This shows the Social Security
surpluses by year. You can see the surpluses are exploding. The reason
for that is to get ready for the retirement of the baby boom
generation. But what our friends on the other side of the aisle are
doing with their plans is taking all of this money and using it to pay
for tax cuts and other expenditures now, leaving the cupboard bare for
the future. How are they going to pay back this money?
Mr. SARBANES. They are already talking about that around town. The
other day, the Chairman of the Federal Reserve himself talked about
cutting back on the benefits under Social Security.
Here is what has happened. It needs to be understood. There is a
direct connection.
These large tax cuts that primarily benefit very wealthy people--
there is some benefit for others, no question. The chairman talked
about that today, but in the total picture of where the benefits are
going, that is a relatively small portion. Most of the benefits go
right up to the top group in society by income and wealth. They say we
are running deficits, so to cover the deficits they have to use up the
Social Security surplus. Then they say to correct the using up of the
Social Security surplus, we have to cut Social Security benefits.
It must be understood, these things are linked. The reason they have
the deficit which now says they must cut Social Security benefits is
because they gave the very large tax cuts to the elite, producing the
deficit, which resulted in drawing down the Social Security surplus
which then leads them to say, we have to cut the Social Security
benefits.
These are choices. This administration has made a choice. The choice
the administration has made is to put tax cuts for the elite ahead of
sustaining Social Security benefits. That is the choice they have made.
It needs to be understood.
Does the Senator agree there is a direct connection in this regard?
Mr. CONRAD. Yes. I knew we were going to get into this debate at some
point so I asked my staff to see if we could put together some charts
and try to explain what is happening. It is the part of this discussion
that has received almost no attention, and the Senator is exactly
right. Here is what is happening.
We have a dramatic increase in people eligible for Social Security.
This chart shows the number of Social Security beneficiaries exploding
with retirement of the baby boom generation. This is the increase in
people eligible. We will see in short order a doubling of the people
eligible for Social Security.
The President told us repeatedly:

None of the Social Security surplus will be used to fund
other spending initiatives or tax relief.

He broke that promise.

[[Page S2269]]

He said:

Every dollar of Social Security and Medicare tax revenue
will be reserved for Social Security and Medicare.

He broke that promise.
Then he said:

We're going to keep the promise of Social Security and keep
the government from raiding the Social Security surplus.

He said that in a radio address in March of 2001.
Then he said in 2002:

None of the Social Security surplus will be used to fund
other spending initiatives or tax relief.

I went back and I said, let's add up how much money the President in
his budget is taking from the Social Security trust fund. He is
borrowing $2.4 trillion. Compare that to the income tax cuts of the
same period, $2.5 trillion. Amazing how close these things are.

In effect, what he is doing is taking money from Social Security,
raised by payroll taxes paid overwhelmingly by middle-income people. He
is using it to fund tax cuts that are income tax cuts for
overwhelmingly the wealthiest, and 33 percent of the benefit goes to
the top 1 percent, those earning over $337,000.
We have the spectacle of people, through their payroll taxes, funding
an income tax reduction that goes primarily to the wealthiest among us
and then creating a circumstance in which the Chairman of the Federal
Reserve comes in and says, Oops, we are overcommitted; we now have to
cut Social Security benefits.
That is really kind of a stunning policy if one thinks about it, if
you think about who is adversely affected when you talk about cutting
Social Security benefits. Two-thirds of retirees rely on Social
Security for more than half of their income; 31 percent get at least 90
percent of their income from Social Security; 50 percent to 89 percent
of their income is 33 percent.
Mr. SARBANES. In other words, a third of the Nation's retirees get at
least 90 percent of their income from Social Security, another third
get from between 50 and 90 percent of their income from Social
Security. It demonstrates how dependent retired people are on Social
Security to keep them out of poverty so they can lead a reasonable
life.
Mr. CONRAD. Chairman Greenspan now says we have to cut these benefits
because we are overcommitted, because we have, in part, taken the
money, the President has taken the money under his plan from Social
Security to finance income tax cuts that have gone overwhelmingly to
the wealthiest of the people among us. That is the reality we confront.
Interestingly enough, they say, you have the shortfall in Social
Security which is $3.8 trillion over the next 75 years. That is
absolutely true. We have a shortfall in Social Security of $3.8
trillion over 75 years. Interestingly enough, the cost of the
President's tax cuts over that same period is three times as much:
$12.1 trillion.
Mr. SARBANES. Will the Senator yield?
Mr. CONRAD. I am happy to yield.
Mr. SARBANES. Does that chart mean if one-third of the tax cuts that
are being proposed to be made permanent, if only one-third of them
remain not made permanent, that would more than cover the shortfall in
Social Security?
Mr. CONRAD. Yes. If you look at this chart, it goes back to the point
the Senator was making about choices. This is all about choices. The
choices the President has made are, yes, to have tax cuts in a time of
economic weakness. That we could all understand and even support. We
would choose a different package of tax relief than he chose. We would
have targeted, clearly, more to the middle class because that would
have given us more of an economic boost than diverting so much of it to
the highest income in the country.

However, the President is digging a very deep hole. More and more
debt. More and more deficits. Deficits that explode right beyond the
budget window, right at the time the baby boom generation retires.
What happens? A future Congress and a future administration will have
to make very tough choices, which I outlined earlier in my
presentation. Very deep cuts in spending, very large tax increases, or
some combination to fill in these holes. That is where I fault the
President for taking us on a course that is reckless and fundamentally
not conservative. This is a course that is reckless.
The Senator is right, we are talking about choices. These are the
choices that are made in the budget.
The PRESIDING OFFICER. The Senator from Maryland.
Mr. SARBANES. Mr. President, I appreciate my distinguished colleague
from North Dakota joining with me in this exploration of the
implications of this budget.
I will talk about job creation for a moment, and to indicate any
budget we deal with, which is the most important Government document we
act upon, contains thousands of decisions that are critical to our
national life. Those decisions reflect important choices in terms of
the priorities for our country.
We have just been engaged in a discussion about tax breaks for the
wealthiest among us. Are we more concerned with strengthening Social
Security to make sure that people in retirement are adequately covered
or making the necessary investments in education, transportation, and
the environment? All of those decisions are involved in crafting the
budget.
In its composite, the budget is a very important macroeconomic
document because it sets the fiscal path for dealing with the overall
economy.
We ask the question, Will the budget fund the programs, create jobs,
and strengthen our economy? Will the budget have long-run structural
deficits? What will be the impact of those deficits on our future
economic performance? Will it move us toward full employment or away
from it?
We talked about the credibility of the President's budget and the
fact that it fails to account fully for what the projections should be.
We talked about the budget's failure to project for 10 years to show
the full cost of making these tax cuts permanent, the failure to adjust
for the alternative minimum tax, and the fact that the budget has zero
in it for our involvement in Iraq and Afghanistan.
Who are they kidding? Everyone knows that our involvement in Iraq and
Afghanistan is going to cost something. Then they say: Well, we cannot
really estimate. They should make a good-faith estimate for inclusion
in the budget. We are confronted with these facts, and again and again
we are not getting the full picture. It is a little bit like things are
under shells. If you lift off the cover, all of a sudden you discover
another problem.
When the President proposed his first massive tax cut, he told us,
``We can proceed with tax relief without fear of budget deficits.''
That is what President Bush said when he came into office.
In the first budget he submitted, he predicted, for fiscal year
2004--the year we are now in--that we would have a $262 billion
surplus. This was the President's prediction.
The following year, with a budget already in deficit, the President
advocated another tax cut. At that time, he said, ``Our budget will run
a deficit that will be small and short term.'' And the President's
budget at that time--that is, the next year--stated the deficit would
be so short term that by fiscal year 2004--the year we are now in--the
Government would be back in surplus by $14 billion.
Last year, on the brink of war with Iraq, the President proposed yet
another tax cut. He also submitted a budget that did not include the
cost of the war. He predicted that the deficit for fiscal year 2004
would be $307 billion.
Now, in 3 years, the President had shifted from predicting a surplus
of $262 billion for 2004 to the next year when he predicted a surplus
of $14 billion for 2004. Then, when he submitted the 2004 budget, he
predicted a deficit of $307 billion. So over the 3-year period, we went
from a $262 billion surplus, predicted for the year we are in, to a
$307 billion deficit. That is a change of $569 billion.
It is pretty clear that although the President said, when he
submitted the 2004 budget, he was predicting a deficit of $307 billion,
it looks now as if the 2004 deficit will be about $520 billion. That is
$780 billion more than the President predicted in 2001, $535 billion
more than he predicted in 2002, and $214 billion more than he predicted
when he sent this year's budget--the budget we are in--to the Congress.

[[Page S2270]]

So we are told we can do these big tax cuts and that it will not
matter because we are not going to have a deficit. And here we are
deeply in the hole.
What is the consequence of this? Some might say: Well, he is
producing jobs. We had an economic slowdown, and now we are producing
jobs. We are putting the country back to work.
Let's look at those predictions and what has actually happened.
In the 2002 Economic Report of the President, the administration
forecasted that in 2004 the economy would have 138.3 million jobs. Last
year, the President lowered that estimate to 135.2 million jobs. And in
his most recent economic report, he lowered it again to 132.7 million
jobs. In other words, in just 2 years, the forecast for jobs in the
country has been lowered by 6 million.
When the President passed the 2003 tax cut, the administration
predicted that by January 2004, the economy would create over 2 million
jobs. In the fall of 2003, Secretary Snow predicted the U.S. economy
would create 2 million new jobs from the third quarter of 2003 until
the third quarter of 2004--an average of over 200,000 jobs a month.
What has happened? We just got the figures on Friday for the month of
February. For the month of February, it was reported that the economy
created 21,000 new jobs in February--21,000--none of them in the
private sector, incidentally; zero private sector jobs were created.
When Secretary Snow made this prediction of just over 2 million new
jobs last fall, we would have needed an average of about 200,000 new
jobs a month in order to meet his prediction. The performance has been
so dismal, we have only averaged 59,000 new jobs per month over the
last 2 months. We have to produce jobs 444,000 a month from now until
the third quarter of this year for Secretary Snow's prediction to be
borne out.

The economy is not creating these jobs. We face a real difficult jobs
situation.
Mr. CONRAD. Will the Senator yield on that point?
Mr. SARBANES. Certainly.
Mr. CONRAD. I was looking at this same data, looking at the
President's claim that they are going to create 2.6 million new jobs,
and looking at where we are since they made that prediction. It is
quite stunning.
In February, of these new jobs that were created, some 20,000, as the
Senator indicated, not a single one was in the private sector, not one.
The whole assertion by the President, on his tax cut plans, has been,
if you cut these taxes, you will get more jobs. He was not saying more
jobs in Government; he was saying more jobs in the private sector. Yet
the only new jobs we got in February were in Government. They were
Government jobs. There was not a single new job in the private sector.
So if the President's plan is working, I do not see the evidence for
it. The evidence is, it is failing, and it is failing by a big margin.
I believe one of the reasons maybe it is failing is that the tax cuts
he chose were tax cuts that were geared to the highest income people,
overwhelmingly.
The Senator might be interested to know, I put up a chart that
showed, for 2006, the average tax cut going to somebody earning over $1
million a year is $140,000.
Mr. SARBANES. The tax cut alone.
Mr. CONRAD. The tax cut for that year alone, 2006. Under the
President's plan, the tax cut for those earning over $1 million a year
is $140,000.
The average middle-class individuals, those who are in the middle 20
percent of the income spectrum--you break it down into five 20-percent
groupings--the middle 20 percent, they get about $560 of tax benefit in
that year. The person earning over $1 million gets $140,000.
If you were going to put it on a graph and have the two related--the
tax cut for those in the middle 20 percent and those earning over $1
million a year--the chart would have to be 35 feet tall to make a
comparison between what the wealthiest get and what the middle class
get.
Maybe that is part of the reason this JOBS program is not working,
because it has been so tilted to the highest end that we are not
getting money into the hands of middle-income people who would be more
likely to spend it, thereby spurring the economy.
Mr. SARBANES. Well, I say to my colleagues it is classic trickle-down
theory. It has been discredited before. Yet here it is back before us
again, classic trickle-down economics. Every administration since
Herbert Hoover, which was, of course, classic trickle-down economics,
Democratic and Republican, has had a net creation of jobs over the
course of its administration. In other words, over that 4-year period,
every administration were able to have a net gain in jobs.
This administration is about 2.3 million jobs below where the Nation
was when they came into office--down about 2.3 million jobs. It is the
first administration since Herbert Hoover that will not show a net gain
in jobs over the course of its 4-year tenure. That fact needs to be
laid out before the American people.
This recession we experienced began 35 months ago, the first few
months into the Bush administration. The economy today has fewer jobs
than it did then. This is the first recession since the Great
Depression in which the economy failed, over a 35-month period, to
recreate all the jobs that were lost in that recession. In a typical
business cycle, we long ago would have recouped those jobs and gone on
from there. That has been the case--and this is a long time period--in
every recession we have experienced since the Great Depression.
But here we have a situation in which jobs are not being created to
close the gap, and there is no real prospect, in the few months
remaining, of meeting Treasury Secretary Snow's prediction. To do so,
we would have to average about 444,000 jobs per month out into the fall
of this year. Over the last 3 months, we averaged only 42,000 new jobs
per month, as opposed to 440,000.
This, of course, raises a number of difficult problems. We have seen
manufacturing jobs continue to fall and they have now fallen for 43
consecutive months. We see temporary jobs increasing. We see people
dropping out of the labor force. Last month, 392,000 people left the
labor force. People come in and say, you know the unemployment rate
didn't go up. But if people drop out of the labor force and are not
looking for work, they are not counted as unemployed. One of the
reasons is they become so discouraged they drop out. That helps to keep
the unemployment rate flat, but the exodus from the labor market is
reflected in the job figures.
Mr. CONRAD. Will the Senator yield on that point?
Mr. SARBANES. Yes.
Mr. CONRAD. I was reading the New Yorker magazine last night and they
had two guys talking. One said:

I have quit looking for work; I understand that will help
the economy.

Well, it will help the economy because they quit counting him. That
is the point the Senator is making. The Senator wasn't on the floor
when I showed this chart. I would like the Senator to see this because
it really makes a point he is making. This looks at the last nine
recessions since World War II, what happened in terms of job
production. The Senator was making the point we are now 35 months into
this recession, and that is right here, this line, which shows the job
recovery this time compared to the last 9 recessions. You can see, in
every recession since World War II, 17 months after the peak of the
business cycle, job recovery started in a very healthy way. This time,
it has not happened. We are 35, 36 months past the peak of the business
cycle. Now we see we are 5.4 million jobs short of the typical
recovery.
If that isn't a warning sign to all of us that something is wrong
here, something is not working here--after every recession since World
War II we saw a healthy job recovery beginning 17 months after the
business cycle peak. Now we are at 36, 37 months past the business
cycle peak and we still are not seeing job recovery.
Mr. SARBANES. If the Senator will yield, it is not only that we have
not been able to get up to here, we have not been able to even get back
to the jobs we had at the beginning of the recession. We are still well
below, about 2.3 million jobs, where we were when the recession began
in the early months of 2001, absolutely.

Mr. CONRAD. The chart says ``smallest share of the population at work
since 1994.'' That is really stunning. My

[[Page S2271]]

colleague, the chairman of the committee, talked about having more
people at work than ever before. That is one way of looking at it.
Another way of looking at it is, what is the share of our population at
work. Of course, more people are at work; we have a much larger
population than we have had before but jobs have not grown. If you look
at the percentage of the people who are at work, we are at the lowest
we have been in 10 years--the smallest share of the population at work
since 1994.
I have another chart that shows the duration of unemployment, which
is the highest in over 20 years. That is, when people become
unemployed, they are taking the longest they have taken in 20 years to
find a new job. Something is not right here. Anybody who comes out on
the floor and asserts everything is fine, the economy is growing, jobs
are being produced--no, no, no, things are not fine. There is something
very seriously wrong in this recovery. I just had a gentleman, I said
on the floor earlier, in business who told me, ``Senator, there is
something very different from what we have seen in different
recoveries.'' He is in the machine tool business. He said, ``We should
see our order books filling up, and they are not.'' He said, ``I
suspect that the jobs being created are in China, Mexico, and India,
and not here.''
That goes right to the heart of the point the Senator was making.
Mr. SARBANES. The last chart my colleague presented is an extremely
important one because it shows the percent of long-term unemployed
among the unemployed is at record levels, higher than it has been since
1984. In fact, close to 23 percent of the unemployed workers have been
unemployed for more than 26 weeks. It has been above 20 percent now for
17 consecutive months. For a year and a half, the percent of unemployed
who are long-term unemployed is above 20 percent, which is an important
benchmark. The last time we had a period that ran that long was 20
years ago. The Senator's chart showed exactly that. That was back in
1984.
That is why this effort that has been repeatedly made on the floor of
the Senate and in the committee just last week to address extending
unemployment insurance benefits is so important. That effort has been
turned back. I plead with my colleagues on the other side to move ahead
on extending unemployment insurance benefits.
We still have a serious labor market weakness. We have not recovered
the jobs. It is not as though you could say a lot of job opportunities
have opened up and people can go back to work. That has not happened in
this instance.
Long-term unemployment is at record levels. Nearly 2 million people
have been unemployed for more than 26 weeks. Twenty-six weeks is the
period that the traditional unemployment benefits cover. In the past,
we have always extended unemployment insurance benefits so people can
meet the problem of providing for their families. We have actually
provided more benefits in the past than we have in this recession.
In the previous Bush administration, the program was extended and
then extended again. We built up the unemployment insurance trust fund
for this purpose: to fund these benefits when we encounter an economic
downturn. There is over $15 billion in the unemployment insurance trust
fund specifically collected for the purpose of paying unemployment
insurance benefits in an economic downturn.
I joined with my colleague in the committee the other day to offer an
amendment to make a provision within the budget for extending
unemployment insurance benefits. Regrettably, it was turned down on a
straight party-line vote. I anticipate that amendment will be offered
again on the floor, and I hope my colleagues will reflect upon it
before that occasion arises.
We need to do something. These are people who were working. You
cannot collect unemployment insurance benefits unless you have a work
record that entitles you to collect them. These are not, if you want to
say, malingerers or people who don't want to work. These are people who
had jobs. They lost their jobs through no fault of their own. If it is
their fault, they cannot get unemployment insurance benefits. If they
are to blame, if they have not performed on the job, they do not get
unemployment insurance benefits. These are people who were working, in
many instances had a long working career. They are out of a job. They
are in a labor market where jobs are not being created, as my colleague
dramatically illustrated with the chart he showed. How are they going
to provide for their families? What are these responsible, hard-working
Americans to do in terms of meeting the needs of their families?
Yet we have been turned back on the effort to extend unemployment
insurance benefits, and I very much hope when the issue comes before us
that Members will reflect and agree we need to do something about this
pressing problem.
I will make a couple more points before I close.
This fiscal situation of the United States in which we find ourselves
and the magnitude of it has drawn very sharp comment from objective
observers. Listen to what the IMF said only recently:

U.S. Government finances have experienced a remarkable
turnaround in recent years. Within only a few years, hard-won
gains of the previous decade have been lost, and instead of
budget surpluses, deficits are again projected as far as the
eye can see.

Let me repeat that. This is the IMF commenting about U.S. Government
finances:

Within only a few years, hard-won gains of the previous
decade have been lost, and instead of budget surpluses,
deficits are again projected as far as the eye can see.

The President says he is going to cut the deficit in half by 2009. My
colleague pointed out, I think with great perception, that was not in
the cards. It is not sustained by the numbers.
If we are going to have a debate, we cannot just play around with the
numbers as though they do not mean anything. We have to have some hard
facts upon which to work. These structural deficits that are built in
this budget are extremely harmful to the economy as we move ahead--a
promise to raise interest rates, reduce economic growth, decrease the
number of jobs, increase our vulnerability to a sudden economic crisis.
A responsible budget would not encompass a structural deficit, and if
there is a structural budget deficit, a responsible budget would seek
to correct the imbalance.
I could go on at some length about the choices made within the budget
with respect to what our priorities ought to be, but I make this
fundamental point: In every instance, there is a choice. You do not
make one decision, for instance, to cut taxes for very wealthy people
which then results in a larger deficit and then turn around and say to
educators who say, We cannot carry through on the No Child Left Behind
legislation, that there is no funding to address your complaint. That
complaint is coming from all over the country. Out in the Rocky
Mountain States, we have educational officials telling us they cannot
carry through on that program. They are making that point very
forcefully.
I was reading about it only today or yesterday in the paper. They
said: We can't carry through on it. They are told, We can't carry
through on it because we have this deficit to worry about. Why do we
have the deficit to worry about? We have this big deficit because we
are doing these big tax cuts for wealthy people. So the choice that was
made in the President's budget was to do the tax cuts for the elite
rather than fund the No Child Left Behind program. That was the choice.
I think that is a bad choice. I think the country thinks it is a bad
choice. But there is a need to understand when you put this budget
together, whatever you do on the one hand has an impact on the other
hand. You cannot avoid that.
If you did not do these extensive tax cuts--which the President wants
to make permanent--with those huge costs, the deficit would not run up;
you would be able to hold the deficit down and do something about
education and health care. But the President has put the Nation in an
absolute deficit box.
Mr. CONRAD. Will the Senator yield?
Mr. SARBANES. Certainly.
Mr. CONRAD. As part of my presentation earlier, I showed this
tradeoff very directly. If we look at 2005, the cost of the tax cuts
for those who are in the top 1 percent, those who earn over $337,000 a
year, for the 1 year it is $45 billion. The amount the President is
shorting No Child Left Behind for that same year is $9 billion.

[[Page S2272]]

In fact, this is the chart. Ask and ye shall receive. This kind of
reveals the President's priorities. Mr. President, $45 billion is the
cost of the Bush tax cut for those making over $337,000 in 2005.
Mr. SARBANES. I think that is less than 1 percent of the American
public; is it not?
Mr. CONRAD. The top 1 percent earns over $337,000. That costs $45
billion. But he does not have the money, he says, to fund No Child Left
Behind.
Mr. SARBANES. What that says is he could fund No Child Left Behind
and he would still have $36 billion left of the tax cut; is that right?
Mr. CONRAD. That is exactly what it shows. It shows he would only
need to reduce the tax cut to the wealthiest 1 percent by 20 percent in
order to fund No Child Left Behind.
I said earlier I am in this category. We are very fortunate. My wife
and I are in this category. I asked myself, would I be willing to give
up 20 percent of my tax reduction to fund No Child Left Behind? I
would, because it is the future.
Chairman Greenspan has said if we are looking ahead to the
competitive position of our country, the absolute key is education. Our
people have to be the best educated and the best trained if they are
going to succeed in this highly competitive global environment.
This is about choices. The President is saying it is more important
to have all of this $45 billion tax cut for those earning over $337,000
than to take even one-fifth of it to provide for better education in
the country. I do not think that is the right priority. I think the
Senator is correct.
Mr. SARBANES. There are other examples of this. I offered an
amendment in the Budget Committee to fully fund the firefighter grant
program. That amount is $900 million--not billions as we are talking
here but just $900 million. Two years in a row, the Congress has
appropriated $750 million. So we have not appropriated the fully
authorized amount but we have gotten up fairly close to it at $750
million.
The President's budget submitted to the Congress had $500 million. In
other words, it cut the program by one-third, $250 million, from the
level it had been for 2 successive fiscal years. These are grants that
go out to firefighters across the country to try to enhance their
professionalism, upgrade their equipment, better prepare them to deal
with the threats we confront.
One of the things we are very anxious to deal with is that one-third
of all the firefighters in the country do not have the equipment, the
breathing equipment to protect them in a serious fire, from smoke
inhalation. That is one of the things we would like to take care of.
Yet the President's budget proposed to the Congress cut the funding for
this program by one-third.
The President is now running political ads showing firefighters on 9/
11 moving out of the wreckage, and there is a stretcher with a flag on
it. We know what the firefighters did. We know the heroism they have
shown.
Every year, I go to the National Fallen Firefighters ceremony, which
is held at the National Fallen Firefighters Memorial, which is in
Emmitsburg, Maryland, the location of the U.S. Fire Academy. Families
come from all over the country. There is a weekend of events and
ceremonies to mark the memory and the heroism of fallen firefighters.
The year after 9/11 we could not do it in Emmitsburg. There were too
many people and so the ceremony was held at the MCI Center in
Washington because the number jumped so tremendously as a consequence
of those deaths in New York.
In money terms, that is not a big item, but in its significance and
in what it stands for, I think it is very substantial. We know our
first responders place themselves at risk. They are the first called
upon.

There were firefighters going up the steps of the World Trade Center
in an effort to rescue people when people in the building were coming
down the steps in order to escape. In effect, they were placing
themselves in further danger in order to save their fellow human
beings. They did not know these people. They were all strangers to them
but they were responding to their duty. It is extraordinary when we
stop and think about it.
The impact of it is obviously recognized by some of the President's
people because they are putting it in this political ad. But I would
like to see them take the program up to $900 million to do the
firefighter grants so we could provide firefighters across the country
with the protective equipment which they need as they carry out this
very dangerous occupation. That would require only $400 million. The
President's tax cuts provide $45 billion for the top 1 percent. Will
the top 1 percent, those making over $337,000, who are getting an
enormous--what is the tax return they are getting? Does the Senator
have that figure in his mind, $120,000 or something?
Mr. CONRAD. That is those earning over $1 million.
Mr. SARBANES. Those earning over $1 million get $127,000 per year. As
a category, they get $45 billion. Would they be willing to reduce that
to $44,600,000,000 in order that we could fund these firefighter grants
at the full authorization level of $900 million instead of the $500
million that is in the President's budget, which itself represented a
cut of $250 million from what Congress had appropriated in each of the
other 2 years?
Is it unfair, inequitable, unjust to say that in the order of
priorities, funding those firefighter grants should come ahead of a
small portion of these tax cuts for those making $337,000 a year? I
defy anyone to argue the equities of that case.
That is why this is not a good budget. That is why we voted against
it in the committee and that is why over the coming days, under the
leadership of our very able colleague from North Dakota, we will put
before this body--I and others and certainly the Senator from North
Dakota himself--amendments that will frame the choice in terms of
priorities. Those are the choices we need to face. Let's put the
choices out there.
Do my colleagues think it is reasonable to take a small portion of
this tax cut and use it for this purpose, or must every single penny of
what the President is seeking for the very elite go to the very elite,
despite these other pressing needs?
As I understand it, in the coming days this week, opportunities will
be presented to offer amendments which will frame those choices. The
Senator has framed one. Everyone talks a good game about education,
including the President. The question is, will you put the resources
there to do the job?

As the Senator points out, fully funding education is more costly
than the example that I have been citing. But nevertheless, for just
over $9 billion we could fully fund No Child Left Behind, which would
address what we are hearing from the States, who are saying now, We
can't do this job. You have saddled us with a job without the
resources. The $9 billion is one-fifth of this tax cut that is going to
those making over $337,000 each and every year.
Those amendments framing those choices need to be put to this body. I
look forward to the responses my colleagues will make to them.
I yield the floor.
The PRESIDING OFFICER. The Senator from Idaho.
Mr. CRAPO. Mr. President, I would like to take a few moments to
respond to some of the comments that have been made. I have been
listening to the debate for the last 3 or 4 hours. It brought back a
lot of memories to me.
I ran for Congress about 12 years ago, to the House of
Representatives. I got elected and spent 6 years there before I then
ran for the Senate. In my first race for the Congress we had a giant
deficit. We had deficits in the hundreds of billions of dollars range
for years. I ran on a platform of balancing the Federal budget. This is
the debate we had at that time.
First, there were those who said you can't balance the Federal budget
or, if you could, it would be bad for the management of the Federal
budget and we couldn't run the Federal Government very well if we
didn't use deficit spending. That argument was debunked when, after
about 6 or 7 years of effort starting in about 1994, we did balance the
Federal budget. Frankly, we did very well running the Federal
Government, paying down the national debt, and making a lot of fiscal
progress.
The other argument that was made back then when I ran for Congress,
and which is still being made and is the argument that is being made
today, only in a different way, was we had to have

[[Page S2273]]

higher taxes and higher spending in order to have a successful society
in America. We could not stop the tax increasing, we could not stop the
increased Federal spending, because it was best for all Americans that
we have a large, powerful, centralized Federal Government that had
increasingly more control over the economy; that we nationalize our
health care system; that we increasingly find Federal solutions to
problems as they exist throughout society; and that the private sector
simply could not provide the solutions that were needed.

It was the age-old battle of taxing and spending and a centralized,
large, powerful Federal Government versus those who believed we should
get the tax rates reduced, lower the tax take of this Federal
Government from our economy, let the economy have the stimulus that
would thereby be generated by letting people and businesses have more
control of the individual decisions about the use of their resources,
and try to control the deficit and the size of the Federal Government
by controlling spending.
Those were two objectives for which many of us fought. I was there in
Congress when we fought for and got a balanced budget. The first
objective was to balance the Federal budget, to stop spending more than
we were raising in revenue. The second objective was to reduce the size
of the Federal Government. Many of us felt it had grown too large, that
its reach was too far, and that it impeded the ability of the American
people to have the kind of choices in their own lives, in their own
businesses, they needed in order to achieve the American dream. It was
a classic, age-old battle in American politics, and we are hearing it
on the floor today.
As I have listened during the last number of hours, I have heard
attacks primarily on the President. There has not been a lot of mention
of the actual budget that is on the floor today. There has been some,
but not a lot. Most of the attacks have been on the President, saying
the economy is in bad shape, we don't have as many jobs as we want, we
have a terrible circumstance facing us fiscally in this country, the
deficit is high and we need to do something about it. It has been posed
here that everybody should see we have a problem and, in fact, I think
we all do see we have a problem. But as I have been listening to the
solutions that have been proposed by those who attack the President, I
have seen two solutions. One is they attack the tax cuts in the last 2
or 3 years and apparently would like to see those taxes raised. In
other words, increase taxes. That is one of the proposed solutions. The
other solution is spend more money.
There are a lot of very important programs that will be brought up.
Some have been brought up today. Others will be brought up throughout
this week.
As we debate this budget, I think you will see it will come down to
that age-old argument I debated when I first ran for Congress 12 years
ago and that we have debated virtually every year in one guise or
another since that time. There will be those who want to blame every
problem we have in this country on the fact we cut taxes a few times in
the last 3 years and that we are not spending enough money in the
Federal budget, that we need higher taxes and more spending, and that
will solve our social and fiscal ills.
There are others of us who will argue that by cutting taxes we are
able to stimulate the economy, stimulate investment in capital, give
people the ability to consume, and thereby give greater confidence and
strength to the economy, and certainly give people more control over
what happens with the dollars they earn than they would have had if
they were taxed on those dollars and sent those dollars to Washington.
The budget we actually have before us today is one that does maintain
our effort to stimulate our investment in capital. It does give and
strengthen and protect the tax relief to all taxpayers so we can have
stronger consumer spending and stronger consumer confidence. It builds
up and focuses on strengthening the infrastructure, especially in our
rural areas where we need so much to have a strong investment in the
infrastructure so we can have stronger economic development potential.
This budget focuses on controlling spending.

Remember, I said there were two objectives we fought for early on.
One was to balance the budget, the other was to control the immense
growth of the Federal Government. You can actually balance this budget
by simply raising taxes. It is a mathematical calculation. You figure
out how far you are out of balance, how much spending you have done
beyond your means and beyond your revenue, and raise taxes to meet it.
You can balance the budget. But by doing so you have totally ignored
one of the more important priorities we should have here, and that is
to identify the right size of the Federal Government; to recognize the
tenth amendment that said there was an important role for the Federal
Government, but that those powers not specifically given to the Federal
Government were reserved to the States and to the people respectively.
That is the kind of debate you will see played out in one context or
another throughout the remainder of this week.
It has been said there is no provision for the war against terror in
this budget. Actually, the budget we are debating on the floor today
provides for a $30 billion threshold for a supplemental appropriation
for our spending, if we need it, in the war against terror.
It has been said the tax cuts that were passed by this Congress in
the past few years are the problem we are dealing with today. I think
that is interesting because I believe most Americans realize the tax
cuts that were passed in the last few years all had expiration dates on
them because, as a result of some of the procedures here in the Senate,
we could not get permanent tax relief. So those tax cuts over the next
10 years are going to start expiring. The first three of those tax cuts
to expire, to go away, will happen this year. If this budget is not
adopted, then the people who got that tax relief are going to lose it
and their taxes are going to go back up.
To listen to the debate you would think the tax relief that was
passed by this Congress was solely focused on the wealthy.
As a matter of fact, it has been pointed out that because the wealthy
in this country pay so much of the taxes, when there is tax relief they
get a large part of the tax relief that comes back to them. But the tax
relief we passed was weighted percentagewise more for the lower and
middle classes. You can either look at it in terms of dollars or in
terms of percentages. But the percentage the wealthy pay of the income
tax in this country went up after the last tax cut--not down--because
the greater percentage of focus was on the middle and lower classes.
It is three of the taxes that hit and support those middle and lower
classes that are coming up for expiration this year. The first is the
expansion of the 20-percent income tax bracket by expanding the amount
of income tax at the 20-percent level. We gave a broad level of tax
relief to those who pay the lowest level of tax in this country. That
will expire this year if this budget is not adopted.
The second is the marriage tax penalty. The elimination of the
marriage tax penalty will expire this year if this budget is not
adopted.
Third, the $1,000 child tax credit.
Those who stand on the floor here and say all the tax relief we
passed in the last few years is devastating this economy are going to
get a chance to vote this year on whether to let those tax cuts stay in
place. I predict the support on both sides of the aisle for maintaining
those tax cuts is going to be very broad. Those tax cuts were directed
at those in the very middle and lower income classes which the tax
relief bills focused on in an effort to reform the code.
But then it is true there were other parts of that tax relief which
did benefit those who are in upper income brackets. If you listen to
the debate today, I guess you would assume if we went back and
eliminated those tax cuts, the economy would be fine, employment would
go back, the deficit would be eliminated, and probably all other ills
we have heard about today would go away.
What are these tax cuts we are talking about? There are a number of
them. But one of the most important, in my mind, was cutting in half
the tax rate on dividends, undoubtedly one of the

[[Page S2274]]

strongest things we could do to encourage investment in the capital
structure in our Nation.
Another was the acceleration of depreciation for small businesses so
they could get a little bit better handle on growing their small
businesses rather than sending their small business revenues to the
Government in Washington.
Another was to give those sole proprietorships--those small
businesses that were sole proprietorships--the opportunity to have
their tax brackets reduced.
I believe if you eliminate those tax relief measures, you are going
to reduce the ability of our small businesses in this country to be
resilient and you are going to reduce the investment in capital in this
economy, and you will see the strength of the economy go down, not up.
But that is the debate we are having over whether we should have more
taxes and that is better for the economy or whether we should have
reform of our Tax Code and reduce taxes in those areas that discourage
proper tax policy.
I would like to talk for a minute about what did happen.
Again, to hear the debate in the last few hours you would think the
entire economic difficulty we face today in our Nation is a result of
that portion of the tax relief we gave previously which went to those
who were not in the lower and middle-class tax categories. What in
reality happened was we had a stock bubble growth in this country that
popped. The confidence in the stock market dropped precipitously.
Following that, there was an attack on 9/11 in which terrorists
attacked us on our homeland soil in one of the rare times in the
history of our country where that has happened. As a response to that,
the economy dipped even further. Consumer confidence waned. Following
that, we have had some scandals--some debacles with the WorldCom
problem, the Enron problem, and consumer confidence in the marketplace
went even further into the tank and the economy started dipping even
further.

Frankly, to blame all of the problems we have had on tax relief for
the wealthy is a vast oversimplification. What happened as a result of
all of these things is the economy went way into the tank, and revenue
to the Federal Government went through the floor. As a result of that,
we did not have the kind of revenue we had projected we would have.
In addition, our spending went through the roof. We responded to the
war against terrorism by rebuilding New York and Washington, DC, giving
support to those who had been attacked here on our homeland soil by
developing a new Department of Homeland Security, increasing the
measures and the support we put into defending our homeland, and we
have prosecuted a war against terror across the globe which has
involved two wars, not to mention the overall extent of the cost of
fighting terrorists on many fronts. As a result, spending has gone
through the roof.
There is one other thing, by the way, that made spending go through
the roof. About two-thirds of the Federal budget is on autopilot,
mandatory spending this budget can't control with much success, and
that simply goes on growing regardless of the state of the economy. The
entitlement programs of this country have an autopilot status that
causes increased growth regardless of what is happening in the economy.
That is another one of the big pressures on the spending in Washington.
Those are the things that are really going on here which we ought to
be debating. But instead, it is a Presidential election year and
everything is the fault of the President because he cut taxes, because
he won't support enough new spending. The President would love to
support spending on all of the pet projects and all of the very
important and valuable items in the budget which because of these
deficits we face he has had to control. The President, I am sure, would
love on a number of these issues to support additional funding. But he
has said that outside of our national defense and outside of our
homeland security, he is going to try to hold the growth of the
spending at the Federal level to less than one-half of 1 percent on the
rest of the budget. He is going to do so because in addition to
recognizing we have to deal with our deficit problems through good tax
policy and through stimulation of the economy, because it is a strong
economy that will help us get out of this, if anything will, he also
recognizes the other side of the coin is we have to solve this problem
through focusing on the spending side of this budget.
Last year, when we had a similar budget before this Congress and
before this Senate, we had something in the neighborhood of 80
amendments to the budget. I would bet there are going to be dozens and
dozens of amendments to this budget. Last year we defeated most of
those amendments because we had budget points of order and a
requirement of 60 votes in order to break this budget. Last year, we
defeated almost every one of those 80 or 81 amendments. If my memory
serves me correctly, there was something in the neighborhood of $800
billion in new spending over a 10-year cycle in those 80 to 81
amendments which we defeated. Certainly, every one of them had a
constituency, every one of them had a valid reason why it was a good
proposal for a good cause for some spending to be made. But we had to
try to control this deficit. That is what we did. That is what we will
do again.

I am sure as these proposals are made and as efforts to attack this
budget are made, almost all of them will be couched in the argument
that it is the tax cut on the wealthy which has made this problem for
us, and simply taxing the wealthy more will solve this problem for us.
We can tax the wealthy and spend the money and we will be fine in this
country.
You can only pursue that line of thought to a certain point. I am
sure it has already been said here on the floor by others, but that top
1 percent and that top 5 percent already pay the vast majority of the
income tax in this country. The last tax relief we gave made their
percentage share of the taxes in this country grow, not go down. At a
certain point, we have to realize we will have a strong economy, and we
will have a strong Federal budget if we hold the line on tax increases
and hold the line on spending and pay attention to both balancing the
budget and trying to maintain the correct size of this Federal
Government.
There are many more things that need to be said. I unfortunately have
an appointment in just a few minutes to which I have to go. But there
will be a lot of debate that will go on during this week as we clash
over the proper fiscal policies of this Government.
I encourage everyone in this country who listens to the debate this
week to listen to it with an understanding of what is really being
debated. It is the age-old fight between those who want higher taxes
and higher spending and a more powerful, centralized Federal Government
with an increasing reach into the economy, and those who want to keep
taxes lower, who believe that is a stimulus to the economy, and who
want to downsize and rightsize the Federal Government. In one way or
another, virtually all of the debate we will have this week will focus
on that issue.
I yield the floor.
The PRESIDING OFFICER (Mr. Thomas). The Senator from North Dakota.
Mr. CONRAD. Mr. President, my colleague keeps referring to pet
projects. We on our side do not believe it is a pet project to educate
the children of this country. We on our side do not believe putting
cops on the street is a pet project. We do not believe funding our
firefighters is a pet project.
But I am very glad the Senator has talked about the record on debt.
Here is the Republican record on debt. When the President took office,
the projection for the publicly held debt was $36 billion. In the
President's 2002 budget, that increased to $1.2 trillion. After his tax
cut passed, that increased to $1.6 trillion. In the President's 2003
budget, the debt went up to $3.3 trillion. In the President's 2004
budget, it went up to $5 trillion; with the Senate GOP budget for next
year, $5.5 trillion.
If our friends want to have a debate about who is responsible for the
growth of the debt, it is squarely on their shoulders. Their budgets
have passed. They have shredded this deficit and debt. They can say
they are interested in fiscal responsibility. They have not

[[Page S2275]]

walked the walk and they have not voted the votes.
I wish our colleague had not had to leave because he has come back
with this old canard that I heard again in the committee saying that we
offered amendments that added to the debt last year, or would have if
only the Republicans had not defeated them. The problem with that
argument is it is not true.
Here is what happened. Democratic amendments on the Budget Resolution
were all paid for last year, and more than paid for, so that we would
actually reduce the deficits, reduce the growth of debt. If you took
all of the amendments we offered, they did not increase the deficit.
No, no. Let's go to the record. What actually happened? Our amendments
on the Budget Resolution would have reduced the deficit by $687
billion.
I am so glad the Senator brought this up because I have a list of
every Democratic amendment to the Budget Resolution, that I will print
in the Record, offered last year, what the cost was, and what the
offset was. If any Member wants the opportunity to go back and check
the record, here is their chance. What they will find is on every
amendment, Democrats paid for their amendments, and Democrats also
included deficit reduction. At the end of the day, if all of our
amendments would have been adopted, we would have reduced the deficit
by $687 billion.
In addition, our friends on the other side are trying to rewrite
history. They are trying to act as though our amendments last year were
a package. They were not a package. They also want to act as though
they were amendments for 10 years. Half of them were not. Half of them
were 1-year amendments. In each and every case, we not only paid for
our amendments on the Budget Resolution, we had additional deficit
reduction.
For example, Senator Biden offered an amendment to fund the COPS
Program, $1 billion in cost, and he provided $2 billion of offset. He
paid for the amendment, plus he provided $1 billion of deficit
reduction.
I ask unanimous consent to have this printed in the Record so
hopefully our colleagues will not keep repeating these false claims
they have made in the past.
There being no objection, the material was ordered to be printed in
the Record, as follows:

DEMOCRATIC SPENDING AMENDMENTS TO 2004 SENATE GOP BUDGET PROVIDED FOR $687 BILLION IN DEFICIT REDUCTION OVER 10
YEARS
[Dollars in billions]
----------------------------------------------------------------------------------------------------------------
10-year
Amendment No. Sponsor Purpose spending 10-year offset
----------------------------------------------------------------------------------------------------------------
278.................... Biden...................... COPS...................... $1.000 -$2.000
281.................... Kerry...................... HIV/Global Aids........... 0.797 -1.592
284.................... Murray..................... Fully Fund NCLB Act....... 8.900 -14.664
294.................... Graham..................... Prescription Drugs........ 219.000 -395.832
299.................... Schumer.................... Homeland Security......... 79.320 -158.511
300.................... Lautenberg................. Restore Defense Cuts...... 88.030 -88.030
311.................... Kennedy.................... Pell Grants............... 1.800 -1.800
315.................... Kennedy.................... Unemployment Insurance.... 16.300 -16.635
318.................... Leahy...................... First Responders.......... 3.000 -6.000
324.................... Lincoln.................... TRICARE................... 20.279 -20.279
328.................... Wyden...................... Fire Management........... 0.500 -0.500
341.................... Reid....................... Concurrent Receipt........ 12.764 -12.764
343.................... Hollings................... Port Security............. 2.003 -2.003
357.................... Kennedy.................... Expanded Health Coverage.. 38.000 -38.000
361.................... Daschle.................... Indian Health Service..... 2.871 -2.871
372.................... Levin...................... Restore Education Cuts.... 2.668 -4.685
376.................... Conrad..................... IDEA...................... 72.880 72.880
381.................... Clinton.................... First Responders.......... 3.500 -7.000
382.................... Cantwell................... Job Training.............. 0.678 -0.678
385.................... Dorgan..................... Veterans Affairs.......... 1.014 -2.029
387.................... Byrd....................... Amtrak.................... 0.912 -0.912
395.................... Dorgan..................... Homestead Venture Capital. 3.567 -3.567
396.................... Harkin..................... Rural Health Care......... 25.000 -25.000
409.................... Dayton..................... IDEA...................... 193.246 -386.554
415.................... Dodd....................... Head Start/After School... 37.871 -75.742
417.................... Bingaman................... Child Care................ 8.758 -8.758
418.................... Clinton.................... First Responders.......... 4.500 -9.000
419.................... Dodd....................... Firefighting Grants....... 11.866 -23.730
421.................... Murray..................... Education................. 2.00 -2.000
423.................... Corzine.................... Environment............... 10.661 -10.661
424.................... Clinton.................... Vocational Education...... 3.102 -3.103
425.................... Harkin..................... Restore Education Cuts.... 20.660 -20.660
429.................... Landrieu................... Imminent Danger Pay for 3.00 0
National Guard.
----------------------------------------------------------------------------------------------------------------

Mr. CONRAD. Every single time I have heard our friends on the other
side claim the Democratic amendments to the Budget Resolution would
have increased the deficit, it is absolutely false. Go back and read
the amendments. The deficits would have been reduced under our
amendments because we provided fully the offsets for each of those
amendments.
We can go down the list. In fact, I had an amendment to fund IDEA and
completely paid for it. Senator Lautenberg had an amendment restoring
the defense cuts. Members will recall, there were defense cuts last
year. Senator Lautenberg fully funded defense and provided the money to
do so. On homeland security, there were increases offered to better
protect the country. It was fully paid for, plus an amount for deficit
reduction. Every single amendment was fully paid for. Accumulate the
totals, it is $687 billion of deficit reduction.
Our friends on the other side talked about the record on deficit
reduction. I am glad he did because here is what has happened to the
deficits over time. We can see on this chart going back to 1969, the
last time we had record deficits was in the administration of the
previous President Bush. President Clinton came in 1992, and we can see
the deficit went down each and every year until we were back in
surplus. It was only when this new Republican President took office
that we again went back into deficits and now have gone into record
deficit territory, the biggest deficits in the history of the country.
Here is what has happened to Federal spending. The Senator from Idaho
wants to posture this as a question of spending, who is responsible for
spending, and that spending is the reason we have deficits.
No, we have deficits because we spend more than our income. Deficits
are a function of spending and revenue, not just a factor of spending
but a question of spending, the relationship between spending and
revenue.
This chart shows going back to 1981 spending as a share of our gross
domestic product. Go to 1992 when a Democrat took control, and what
happened to spending as a share of our gross domestic product? Spending
went down each and every year from about 22 percent of gross domestic
production to 18 percent of gross domestic production. Spending has now
gone back up with our friends on the other side in charge of the White
House. And I don't fault them for the increases; 91 percent of the
increases in spending were for defense, homeland security, and
responding to the attack on September 11. We all supported that
increase in spending, as well we should have. We had to defend this
country.
However, I remind my colleagues, when Democrats were in charge in
1993, we put in place a 5-year deficit reduction plan without a single
Republican vote, and we reduced spending each and every year of that 5-
year plan. In 1997, we had a bipartisan plan. Thankfully, that was a
nice moment in time. We

[[Page S2276]]

had a bipartisan agreement. We continued to take spending down.
Spending has now bumped up because of what has happened.
Let's look on the revenue side. On the revenue side, again, President
Clinton came in and revenue went up. It was that combination of
spending going down under the Democratic plan, and revenue going up
that got us back into balance, and stopping the use of Social Security
for other purposes. That is the Democratic record on spending and
revenue. We lowered spending. We raised revenue so that we balanced the
budget, and stopped the raid on Social Security.
Our friends on the other side have raised spending--and I don't fault
them for that because it had to be done to respond to the attack on
this country--but they also dramatically cut revenue. Here is what has
happened to revenue. It has been shredded. We will have the lowest
revenue this year as a percentage of GDP since 1950. It is that
combination of increased spending and reduced revenue that has
mushroomed the deficits.
Let's be honest. I don't think the deficits we are facing at the
moment are the basis for our strongest criticism of the President's
proposals. Anyone who is honest would acknowledge once we had been
attacked, once we had to increase defense spending, increase homeland
security spending, the economy took a hit, we would expect budget
deficits.
Our criticism of the President and his preliminary is that he is
suggesting deficits from now forward as far as the eye can see. He
never wants to balance the spending and the revenue. Oh, he wants to
keep the spending going. They say he is going to restrain spending.

Please, the spending he is restraining in his budget is 17 percent of
Federal spending. He is going to save about $7 or $8 billion when the
operating deficit, this year, is $700 billion. That is a 1-percent
solution the President has come with. He is solving 1 percent of the
problem.
Now, let's get serious. Let's be direct and honest with people.
Talking about that restraining spending is going to solve the problem,
and you come in here and save $7 billion, when you have a $700 billion
problem, and suggesting you are solving the problem? That is not real.
That is not serious. That is not credible. That does not stack up.
What the President is proposing is increasing spending and cutting
revenue, when we already have record budget deficits. And what does it
do? It balloons the deficits and the debt at the worst possible time,
right before the baby boomers retire. That is the President's plan: to
put us deeper and deeper into the deficit ditch, to take every penny of
Social Security surplus over the next 10 years--$2.4 trillion--every
penny of which has to be paid back. The President has no plan to do it.
The President says he is cutting the deficit in half over the next 5
years? The only way he is cutting the deficit in half is if he leaves
out things, he leaves out that there is a war going on. He says there
is no war cost past September 30. That is what his budget says: zero to
fund this war past September 30; nothing for Iraq, nothing for
Afghanistan, nothing for the war on terror.
He says he is going to fully and aggressively prosecute the war on
terror, but he has no money to do it. Zero is not the right answer.
That is what is in the President's budget to fight the war in Iraq, to
fight the war in Afghanistan, to fight the war on terror. The President
has a big goose egg past September 30 of this year.
And tax cuts? The President says: Do not worry. Do not worry, my
budget will cut the deficit in half over the next 5 years. What he does
not tell people is, beyond the 5-year window, the cost of his tax cuts
explode.
He also leaves out the alternative minimum tax. It affects 3 million
people now, the old millionaire's tax that is now becoming a middle-
class tax trap. The President deals with that crisis for 1 year, does
nothing for the next 4 years--a problem that is growing geometrically.
It is going to affect 40 million people by the end of this budget
period. The President does nothing past the first year.
The President's budget adds $3 trillion to the national debt in the
next 5 years. This is the President who told us he was going to have
maximum paydown of the debt, and he is increasing the debt by $3
trillion over just the next 5 years, and all of it at the worst
possible time--right before the baby boomers retire.
I have shown chart after chart today showing the long-term
implications of the President's plan. The long-term implications are to
dig this deficit hole deeper and deeper and deeper as you go out into
future years. The cost of his tax cuts explode at the very time the
trust funds of Social Security and Medicare go cash negative. He is
putting us in a situation that will require the most agonizing of
decisions in the future.

No, our chief complaint against the President's budget is not the
deficits being run now, although they are of record proportion. Our
chief criticism of the President's budget is he has us on a course to
balloon the deficits and the debt in future years, right before the
baby boomers retire, compelling a future Congress and future President
to make tough choices.
On the question of the tax choices the President has made, when I
hear it said, ``Oh, really, the wealthy in the country are paying
more,'' please, the wealthy in the country are paying more? I do not
know how anybody can stand on the floor of the Senate and seriously
assert the wealthy are paying more. I have just shown that those
earning over $1 million a year, under the President's proposal, in
2006, are going to get a $140,000 tax cut, on average, in that year.
The wealthy are paying more? Who are we kidding? In 2005, the top 1
percent, those earning over $337,000, are going to get a $45 billion
tax cut. That is the cost of the tax cut going to the wealthiest 1
percent. The cost of the tax cut for those earning over $1 million a
year, in 2005, is $27 billion. The President chose a set of tax
policies that overwhelmingly go to the wealthiest among us.
I put up a chart earlier that showed the top 1 percent--those earning
over $337,000--get 33 percent of the benefit of the tax cut in 2005--33
percent, the top 1 percent.
The President said this is all to get the economy moving. Look, I
believe it was important to have tax reductions to get the economy
moving. Of course, it is not just the tax reductions, it is also the
spending. About half the stimulus in the last 3 years has been
spending; about half of it has been tax cuts. Both of those were
warranted.
The problem is, the tax cut mix the President chose did not give us
the biggest bang for the buck at creating jobs or growing the economy.
And that is not just my view, that is the Congressional Budget Office's
view. They were asked to look at all of the tax cut proposals and tell
us what kind of bang for the buck you would get. Interestingly enough,
the tax cut on personal capital gains, they said, would give you a
small bang for the buck--small--yet that was singled out as one of the
important areas for tax reduction.
The same is true on the dividend tax reduction that our colleague
mentioned. He said that was a centerpiece. Well, it was a centerpiece
in terms of what it cost. It was not a centerpiece in terms of what
most economists would tell you is bang for the buck at getting economic
growth and job creation. I believe that is a fundamental reason we are
in the circumstance of today.
Yes, we should have stimulated the economy. Yes, we should have had
tax cuts. Yes, we should have had increased Government spending to give
a lift to the economy. But the tax cuts should have been geared to
primarily the middle class. They are the folks who spend the money.
Instead, this tax cut proposal has gone primarily to the wealthiest
among us, those who are the most likely to save the money rather than
spend it. However laudatory it is to save money, the thing that
stimulates the economy, at least in the short term, is to spend it.
This is a bad set of choices.
In addition to that, going forward, the President's proposal will dig
us into a deeper and deeper deficit ditch, creating a circumstance,
when the baby boomers start to retire, that will become more and more
difficult and require tough choices.
What is going to be needed is not just tax increases, no. We need
more revenue. The first place we ought to look is not tax increases but
closing the tax gap, the difference between what people owe and what
they pay because we

[[Page S2277]]

know the vast majority of people pay what they owe. But we have a small
group of people and companies who do not. We now know that is costing
us $255 billion a year. That is not a tax cut. That is somebody
cheating on their taxes, cheating all the rest of us, cheating the
ability of this country to meet its requirements of national defense
and homeland security. That is the first place we ought to go to begin
to close this gap.
Yes, we are going to have to be tough on the spending side, too. It
is going to take both. We are going to have to restrain the growth of
spending, and we are going to have to get more revenue. It is as clear
as it can be. Anybody who tells you something other than that is not
being straight.
I hope before we are done we will have a healthy debate on the
priorities of the country. I believe one of our top priorities is to
get our fiscal house in order. Now that we have economic recovery
underway, we have to move back to fiscal balance. We have to reduce
these deficits that are at record levels, and not just by make believe.
The President says he is cutting the deficit in half in the next 5
years. He says the deficit is only going to be $237 billion in that
fifth year. But when we total up the things we know are going to be the
costs, including the war and fixing the alternative minimum tax and the
money that he is taking from Social Security and Medicare that has to
be paid back, what we see in that fifth year is not $237 billion being
added to the national debt; it is $600 billion. It is $600 billion the
next year and $600 billion the next year and $600 billion the next
year. What we see happening is, right before the baby boomers retire,
an explosion of the national debt under this President's plan. That
cannot be the answer.
I yield the floor.
The PRESIDING OFFICER. Who yields time?
Mr. NICKLES. I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. SESSIONS. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Who yields time?
Mr. NICKLES. Mr. President, I yield the Senator such time as he may
consume.
The PRESIDING OFFICER. The Senator from Alabama.
Mr. SESSIONS. Mr. President, I express my appreciation to the
chairman of the Budget Committee, Senator Nickles, for his leadership.
We will miss him desperately in this Senate. He has chosen not to seek
reelection, which he would have handled easily, and we are certainly
going to miss him. His handling of this budget process this year was
particularly skillful, principled, filled with integrity and good
judgment.
I also appreciate the ranking member, Senator Conrad. He is a skilled
man with the numbers of this budget. He can find more bad numbers in
this budget than most anybody I know, but a lot of those numbers need
to be talked about. He is correct. We have some long-term problems with
financial stability. It is great to debate and have people discuss our
challenges and have the numbers put out there and not hide anything as
we go forward.
I believe we have produced a budget that is responsible, that the
American people, if they understand it, could appreciate and would
support in general. We will continue to debate it, and it will pass I
believe, much as it has been written.
What we had to do is confront the situation of declining revenue to
our Government. It has come from a number of different reasons,
primarily because the economy has not been as healthy as we would like
it, although we have seen some positive rebound. We ought to talk about
that and we should consider that as we evaluate how we are going to
handle the country's financial situation.
To sum up where we are, President Bush submitted a budget he believed
funded the Government's discretionary accounts, including defense and
homeland security and all other discretionary accounts, at $818
billion.
We were operating in the Senate under a budget of last year that
called for us to stay at $814 billion, $4 billion less. So we decided
the right thing for us to do was produce a budget at 814. Then, as we
continued to score the proposals in the President's budget, that budget
came in at $823 billion. So to go from $823 billion to $814 billion
there was $9 billion we had to confront as we worked from the
President's budget.
Unfortunately, we had to take a sizable sum from the proposed
increase in defense spending. The budget called for an increase of $26
billion for defense, 7 percent, the largest aggregate increase in the
budget. We were forced to come in at a $20 billion increase for
defense. We made other decisions and reduction changes. Certainly, I
hope this Congress will support the President's proposals to eliminate
some 50 or 60 programs that need to be eliminated.
Everybody knows that we too seldom confront spending programs that
have a certain value on the surface but, if examined carefully and with
an eye toward efficiency and productivity and wise use of the
taxpayers' dollars, don't meet the test. But we seldom, if ever,
eliminate one. The President said it is time to do that. I, too,
believe it truly is.
I spoke to the National Association of State Treasurers this morning
and shared with them, a story of when I became attorney general of
Alabama in 1994. My predecessor had left our office in a colossal,
disastrous situation financially. We were forced, because we had a
balanced budget constitutional amendment in the State of Alabama, to
terminate the employment of one-third of the employees of the
attorney general's office. It was a very difficult and painful decision
for me. All those terminated were noncivil servants. They were hired
under the political system that the attorney general could use at that
time. But still many of them were good people, and I hated to terminate
their employment.

But we reorganized that office. We worked hard. I believe we
thereafter produced as much or more good legal work, even though we
lost one-third of the employees.
I say that to illustrate there is a myth in this Senate, in this
Congress, that somehow money only tells whether something is being
productive, and if you don't give an agency more money, somehow they
can't do as much work as they were doing before. That is wrong. It is
not so. Every business in America understands they can do more for less
work hard to do so. I think that is one reason why so many Americans
today are cautious and concerned about how our Government spends their
money.
It is because they are at their workplaces every day, working with
ingenuity and technology and training and new systems to produce
widgets better and cheaper for the consumer so they can stay in
business. They expect the same out of Government, and they have every
right to.
This budget comes in at 814. I believe we can make that work, but
there will be, throughout this process, a host of amendments to spend
more for every item you can imagine. Many of them have every resonance
of good and worthwhile programs. In fact, some of them will be. But we
simply don't have the money we want to spend on all these programs. We
need to show discipline. If we show discipline, and we do this for
several years, we can bring this budget back into balance again.
Senator Nickles believes, if we stay at this constrained spending
rate, we will cut the deficit in half within 3 years. That is a good
goal. I would like to exceed that. Maybe we can exceed that. We will
just see. I will share my personal view that economic growth will be a
big part of accomplishing our goal.
When President Bush was elected President, the economy was in
trouble.
In the third quarter of President Clinton's last year in office,
negative growth occurred. The first quarter that President Bush was in
office--had negative growth. Not good. But, that is what he inherited
from his predecessor.
I say that because people say this slowdown was President Bush's
fault. The NASDAQ exchange had lost one-half of its value by the time
President Bush took office. The bubble had already burst and that value
out there, on paper at least, was gone, leaving companies strained and
unable to borrow and hurting the economy in a

[[Page S2278]]

number of different ways. The economy began to come back, and in
September 2001 we had the attack on the Trade Towers and the Pentagon.
That hurt us, too. So we are bouncing back from that.
The President did not sit around and not do anything. He acted. He
had a number of programs. One was to stimulate this economy through
allowing the American citizens to keep more of the money they earn. I
think that was a good idea. First of all, it is always good policy in
this land of freedom and individual responsibility to allow the people
who earn their wages to keep as much of it as they possibly can. That
is who we are as a people. We are not part of the socialist ideal of
Europe, other countries. We have a heritage of freedom and individual
responsibility. First, I thought President Bush's actions were good
philosophically.
Secondly, it has helped our economy. We have seen continual growth
since. The third quarter of this past year, the growth of GDP in
America was at 8.2 percent. That is the highest growth in over 20 years
in this country. The fourth quarter of last year was over 4 percent.
The combined two quarters were higher than any two quarters President
Clinton had when he was in office, I have been told. It was a good end
to last year.
I think we are going to have good growth this year. The stock market
is coming back up. Mr. Greenspan said interest rates are expected to
stay low. He expects growth to continue. Jobs have continued to
increase for the last three or four quarters. Not as much as we would
like; we need to see more growth in the job area. But the household
survey numbers look a lot better than the numbers that are most often
cited, the wage number. Regardless, we want to see continued growth in
jobs. Economists tell us as the economy grows, it takes some time
before employers start adding permanent employees. In other words, they
will pay overtime and do other things before they hire a permanent
employee. But if their business stays healthy and continues to grow,
they will hire people over a period of time. Jobs lag behind growth.
Despite the fact that we have people running for President who have
been going around for months saying how terrible everything is, how
unemployment is hurting us so badly, how the economy has been damaged
by President Bush, consumer confidence is up there pretty healthy and
strong. So we have to be pleased with that.
With regard to the unemployment numbers, in June of last year, the
unemployment rate was 6.3 percent. The fourth quarter's unemployment
was reported at 5.6 percent--which is a significant drop--is about the
average over 20 years for unemployment in America. Do we want it to get
better? Absolutely. Do we need to take steps to continue the growth and
continue job enhancement in America? Yes. I am willing to consider any
good proposals toward that idea.
Mr. President, this economy seems to be coming back on solid footing
and trusting the individual American citizens who work hard, manage
their money carefully, and businesses to increase productivity. Oddly,
increased productivity is not good for jobs. If businesses improve
productivity, they can make more widgets with less employees. I think
almost every economist who would be consulted on this subject would say
that in the long run productivity increases are good because
productivity is what will allow us to be competitive in the world
marketplace. Without increases in productivity, we will not be able to
compete with low-wage nations.

So productivity is a good and bad thing. In the long run, it is going
to be good. But I think it has delayed the surge of hiring we would
like to see, but I think we will see hiring increase as time goes by.
There are a lot of reasons our country had a decline in revenue. A
small portion of the decline--maybe a quarter--was the tax cut. But the
tax cuts, I am absolutely convinced, were key cause of that 8-percent
growth we saw--4 percent in the last quarter--which is surging out
there and which will lift us out of this slowdown.
I believe the fundamental problem with the lack of income to America
has come about because our taxes in this country are focused on the
highest income wage earners. I know my colleague on the other side said
we are reducing taxes on the rich. But after all the tax cuts, the
highest 1 percent, highest 10 percent will still pay a larger
percentage of the total taxes to America than the lower income people
will pay--a higher percentage of total tax revenue will still come from
the rich. But the deal is this: If you have money invested in the stock
market and the market drops by one-half or more, as NASDAQ did, and you
sell your stock, what can you do? You take a loss. You don't show a
gain and pay a tax on the gain. You show a loss. The loss claim is
limited to $3,000. But $3,000 for a lot of people who sell stock means
loss of revenue to the Government. For those in the top brackets who
are paying 38 percent, that is a large loss in tax revenue to America.
Corporations that were making profits in good times and who are now
showing losses are not paying taxes. People who were being paid bonuses
because companies were doing fine, they don't get those now, and they
are not paying more taxes. So it seems to me that by taxing heavily our
highest income people and depending on them substantially for our base
revenue from income taxes, we have created a pretty volatile situation
in how the income comes in.
If you have 6 months of growth like we are having now, I don't think
you will see a lot of bonuses to executives. But if you have a year, 2
years, of growth, and improvement and profits begin to come back in a
company, you will see other things happening that will generate profits
for the corporation. More people will be hired, more people will be
working overtime making that extra money, and they get taxed at the
higher bracket rate. All those things, to me, indicate the President is
correct to decide to take strong action, to inject an infusion of
American ingenuity into the economy by allowing them to keep their
wealth, what they have earned.
As a result of that, we will get growth and, as the growth stays out
there, I hope our budget numbers are going to look better. Will growth
solve all our problems quickly? I don't think so. I think we are going
to have to sustain a long period of managing our spending habits,
keeping spending growth down. Some areas need to be reduced. Some areas
need to be increased modestly. We are going to have to resist starting
a whole lot of new programs, and I am indeed troubled by the expansion
already of the expected cost of the prescription drug program.
If we do those kind of things, and this economy comes back and we
hold the line, we will begin to see the deficit be reduced. That is
what we desperately need to do. We simply cannot sustain the size of
the deficits we have today, and it is not necessary that we have the
kind of deficits we have today. I feel that strongly. I believe we will
see progress happen.
I offer as support for my belief the fact that as of June last year,
the experts--CBO or OMB--predicted the deficit would be $450 billion
for the fiscal year ending September 30 of last year. But when the
numbers came in, it was not $450 billion, it was $375 billion, $75
billion less than they were predicting a few months before, and that
was because of some containment in spending and because of the economy
coming back.
We are not going to see huge, dramatic improvements, but we can
believe and hope that if this economy remains strong and we remain
firmly in control of spending, we will see some good things happen.
This budget does that. It is less than a 4-percent increase overall,
about a 3.5-percent increase in spending.
Frankly, we would have done better coming in with lower spending, but
most of our spending is entitlement spending that goes up on its own on
a trajectory we have not figured out how to control. We are going to
need to figure out how to control it as the years go by and bring
sanity and wisdom to that process.
I think our President has submitted a good budget that does not go
hog wild. I believe our committee, after a long period of intense
debate--Republicans and Democrats engaged in offering amendment after
amendment and their philosophies and debates--has produced a frugal
budget, even more frugal than the one the President submitted; that if
we pass this budget and do not lose our discipline with the inevitable
proposals for spending that are

[[Page S2279]]

about to come, then we will be in good shape to chop away at this
deficit.
We must not do it, however, at the threat or expense of those
marvelous tax cuts that are so important to our economy and to our
American family. First, the child tax credit. Instead of $700, we
raised it to $1,000 per child. I believe that is important.
The marriage tax penalty. The very idea that this Congress would
penalize people who get married by increasing their taxes is just an
anathema to me. I cannot believe we would do that. This marriage
penalty fix went a long way toward eliminating that problem. It is not
a gift to married people; it is simply allowing them to get back on a
level playing field. A tax is a penalty. We should not penalize
marriage.
The third provision up for renewal is expanding the lowest bracket,
the 10-percent bracket, covering a lot of people who were paying 15
percent on their income taxes, the lower income bracket. That bracket
will be increased so more people will be paying at 10 percent rather
than 15 percent.
All of these provisions are critical. They will strengthen the
family. In fact, we need more young couples to have children today.
Somebody has to take care of us when we become aged. A lot of people
are not having children. One reason is they do not think they have the
money to raise children, and the child tax credit and the marriage
penalty might well strengthen our families in ways we cannot measure in
terms of economics but, in the long run, will be good for this country.
I believe that very deeply. That is why I am particularly supportive of
those two reductions in taxes.
I thank Senator Nickles for his leadership. I appreciate this
opportunity to share a few words at this time. I see Senator Nickles,
the chairman of the Budget Committee, is back in the Chamber. I, again,
congratulate him for the extraordinarily capable way in which he
handled this process.
I yield the floor.
The PRESIDING OFFICER. The Senator from Oklahoma.
Mr. NICKLES. Mr. President, I thank our colleague, Senator Sessions
from Alabama, not only for his statement but also for the outstanding
work he has done on this committee. It is not easy reporting out a
budget resolution. It is not easy defending a budget. I encourage our
colleagues who want to throw rocks at it all the time to put one
together.
I compliment our colleague from Alabama. He has been an invaluable
member of this committee. He has worked very hard. We touch every
single dollar in the Federal budget in this committee. We review all
those dollars. I compliment the Senator from Alabama for being an
outstanding member of a challenging working committee.
Mr. President, I yield to the Senator from Colorado such time as he
desires.
The PRESIDING OFFICER. The Senator from Colorado.
Mr. ALLARD. Mr. President, I thank the Senator from Oklahoma for
yielding. I wish to say how grateful and what an honor it has been to
serve with the current budget chairman. He has done a great job. He has
been a great leader in the Senate. This is the last budget with which
he is going to be involved in the Senate. He is thorough, he is
straightforward, meticulous and has put together some good budgets
since working with him as chairman on the Budget Committee. We are
going to miss him in the Senate. He has done a yeoman's job in putting
together this budget.
Like he said, putting together a budget is not simple. It is always
easy to criticize a budget, and that is what I pointed out during the
Budget Committee hearings. All we are hearing is criticism about this
item and that item, but nobody is putting together a total budget,
laying it before us and explaining what they are going to do to
eliminate deficit spending.
I think back to last year, for example, on the floor of the Senate
when we were debating the budget. It was the same situation. The
chairman and Budget Committee members had worked hard to put together a
budget and bring it to the floor of the Senate. Colleagues were
consistently complaining and criticizing the deficits, but the fact is,
we had amendment after amendment presented calling for more spending.
It totaled up to about $1.6 trillion in amendment after amendment
calling for more spending.
Where were they getting a lot of the money? They were getting the
money by wanting to increase this tax and increase that tax to pay for
it. The rebuttal is: Well, we pay for it by increasing taxes.

I do not think the answer to this economy and the long-term solution
to this budget is to increase taxes. I think the long-term solution is
we need to hold down spending.
One of the problems we have run into in recent years, since about
2002, since many of the provisions which held spending in check are no
longer before us, is we have seen spending increase, and we are
continuing to see spending as a problem as we move forward and debate
this budget.
We cannot deny the role the recession has had in revenues coming into
the Federal Government. Our deficits are a function in any 1 year of
the amount of money that is coming in and the amount of money that is
being spent. In any 1 year, when spending is greater than the revenue
coming in, we end up with a deficit.
Sometimes in our discussions, we interchange the terms ``debt'' and
``deficit.'' There is a difference. Debt is the accumulation of the
deficit spending over the years, so it reflects that. Deficit is when
we spend more than what we bring in in revenue.
I have some information. When we look at the economic downturn--and
the President in his budget had come up with a figure in the economic
downturn--he held 49 percent of the current deficit. I looked at a
chart--this is from the President, the Executive--and it comes up with
similar figures. This is put out by the Joint Economic Committee.
Senator Bennett is chairman. It is equally balanced between Republicans
and Democrats out of the Senate. They point out what has happened to
the surplus.
Using our CBO figures and using the figures we use in the legislative
branch, we come up with the weak economy could be attributed to greater
than 40 percent, and that increased spending was attributed to 36
percent of the loss of the surplus. Then we have our tax cut in 2001,
18 percent. The economic stimulus was 1 percent, and then the tax cut
we put in place again was 5 percent. So the total is about 24 percent
of the loss of surplus that would be attributed to tax cuts; 36 due to
an increase in spending of the Federal Government, and the weak economy
another 40 percent. This is by the Joint Economic Committee. This is
not me. This is not the President putting that out. This is a
bipartisan committee we have which looks at these kinds of figures.

Then we look at what happens year after year with spending as
compared to the tax cuts we have put in place. Let's take a look at
that. We start in fiscal year 2005. Here is a good example. The tax
cuts reduced revenues by $212 billion. Spending increases enacted since
2002 will total $268 billion. We have $212 billion tax expense to the
surplus, but spending is $268 billion.
Let's see what happens in 2006 as we move out in time in this budget.
The gap we see between spending and tax cuts and its impact on the
surplus grows even more. The 2006 tax cut reduces revenues by $163
billion and spending increases enacted since 2001 will total $314
billion. That gap is growing with each year as we move out. Over the
next 5 years, 2005 to 2009, revenue decrease due to tax cuts is going
to run a total of $979 billion.
What happens during the same time period with our spending as it
moves out in time, $1.722 trillion. That is what happens to the growth
in spending.
The point I am making is when there is a tax cut and that money is
returned to the American people, it does not escalate and grow as an
expense against the surplus, but the spending grows considerably.
I happen to believe our budget process is prejudicial against holding
down taxes. The way the budget rules work, it is always easier to
increase spending than it is to cut taxes. I think one of the most
important ways to continue to stimulate this economy is to make sure we
hold down our tax burden. I know the other side is advocating that we
go ahead and increase taxes, but I think that is wrong. It is the wrong
thing to do now, when the economy is starting to come back. We are
starting

[[Page S2280]]

to see very encouraging figures about the economy in response to the
stimulus plan we passed in the two previous tax cuts we put in place.
They were put there to stimulate the economy.
When this President came into office, he inherited an economy that
was starting to go down. Then we went through an unprecedented period
of an economic downturn, which we had never seen during modern times,
where revenues decreased at least for 3 consecutive years as we looked
out. This had a profound impact on the amount of revenues coming into
the Federal Government.
If we had not made those tax cuts, my personal judgment is this
economy would still be struggling. Those tax cuts stimulated the
economy, and now I think once we start getting the revenues in from
this year, we are going to see a growth and the budget reflects that.
Our economy is going to be on the way. With the recovering economy, we
are going to see a regrowth in revenues coming to the Federal
Government. The best way to grow revenues to the Federal Government is
to stimulate the economy, not to increase taxes. Increasing taxes has a
depressing effect on people's willingness to produce because they do
not see themselves keeping that money in their pocket. They see it
coming back to Washington and being spent. If the citizens of this
country can see the money they are earning staying in their own pocket
and paying for their needs, meeting their family's needs, meeting the
needs of their local economy, they see it as a much more beneficial
process and something that would motivate them to be more productive.
When they are more productive, they are going to be paying more Federal
taxes. Then that return comes back to the Federal Government and is
reflected in increased revenues and helps us eliminate deficit
spending.

The last parameter to change in our economy is unemployment.
Unemployment is going down and we are continuing to see job growth.
This last report was not as much as was hoped, but we are continuing to
see a growth in jobs. According to the payroll survey, jobs have
increased 6 months in a row. The household survey remains higher than
prior to the recession and more Americans have jobs than at any other
time in our history. This is a result of those tax cuts.
Where do we go from here? We have the economy beginning to grow, and
we have a budget before us that begins to eliminate the deficit. I will
talk a little bit about that because the President had planned to
eliminate the deficit within 5 years of his budget. He said we can cut
the deficit in half either as a percent of gross domestic product or in
nominal terms--in other words, actual dollars.
We have done better than that in the Budget Committee, thanks to the
leadership of the chairman. We are getting out of deficit spending
within 3 years, depending on how one wants to talk about it, or even as
soon as 2 years. This is in real dollars, and we are doing better than
the President. I think this is a phenomenal step in the right
direction.
We started taking this deficit seriously in the last budget. In fact,
it was important to me, and I know a lot of other members on the Budget
Committee, that we start taking an early step in eliminating the
deficit, so we started putting this plan in place in the last budget.
It is important to me that when I look at today's budget I want to make
sure we are staying with that plan, or doing better.
I am happy with what the President has proposed. I am especially
happy with what has come out of the Budget Committee. We need to stay
with that commitment and move forward. In order to continue to hold
down spending, we are going to have to put in place some budget rules
in order to have a disciplined approach to deliberating the budget so
spending does not get out of hand.
I know the chairman of the Budget Committee is looking at such a plan
and giving it some serious thought. We have part of that plan currently
in the budget proposal before us, and I think that is something we need
to focus on. In fact, from a long-term strategy standpoint the most
important thing might be to do something legislatively that would put
in place, with the President's signature, some real rock-solid rules on
how we can control spending.
There need to be some provisions in case of an emergency, but we
cannot be so flexible that we allow the emergency spending to be
abused. I have observed in the short time I have been in the Senate
that emergency spending bills get abused. Again, with some good,
thoughtful provisions, and if we can get this budget passed, I think we
will have in place some rules that will help us try to stay on board in
order to eliminate the deficit.
I am convinced with the economy starting to grow that we can get back
to where we have surpluses. I would like to be back in a position where
I was a number of years ago where I could propose amendments on the
Senate floor on appropriations bills to pay down the surplus, to pay
down the public debt. I am glad we did that, because if we had put some
of that money aside toward paying down the public debt, then it gave us
some money in reserve.
We got to the point where we had an unprecedented time in our
history, which we just experienced when this President came into
office. We had an economic downturn that was getting well on its way,
we had 9/11, and then we had some major conflicts we had to pay out of
this budget.
I would hate to think what our deficits would be like today if we had
not made an effort to pay down part of the public debt when we had an
opportunity to do that. At first, it was not very easy to get those
amendments adopted on the floor, but after staying with them we were
able to get those so we could make some significant steps toward paying
down the public debt.
I am hoping in the not too distant future we will be in a position
again where we can pay down the public debt and eliminate deficit
spending so we are back out of the red on an annual basis and then
begin to work to pay down that public debt because that gives us sort
of the reserve. I am glad we had that there. That is responsible
management of the taxpayers' dollars, responsible management of our
budget resources we have that come from hard-earned dollars that our
taxpayers, American citizens, are earning for the Federal Government
and sending back to Washington.
Then, once we are in a position to get this budget passed, I think we
also need to look at ways in which we can take care of emergency
spending provisions. There are some dollars that are put in this budget
to try to take care of some predictable emergency spending that we
think we are going to have.
We will have an emergency surplus bill. It will be either the end of
this year or in the next fiscal year. It is right and proper and good
accounting to begin to take that into consideration.
I hope at some point in time we can begin to develop a pot of money
over here for emergency expenses only. Then, once we have developed
that, we will not have to come in for emergency supplementals where
spending gets out of control and people get around our budget rules. We
need to work and modify those, in my view, in order to have long-term
responsible budgeting, at least out of the Senate and in the Congress.
I think the solution is no tax increases. I think we could help our
economy even more if we would take some of these--in fact I would take
all these recent cuts we passed, which were the economic stimulus
package and the 2001 tax cut as well as the 2003 tax cut--and make
those all permanent. I think that would stimulate our economy to
continue growing and we would go through another unprecedented period
of economic growth, bringing revenues into the Federal Government, and
that would be part of our solution as far as getting out of deficits.
I think the fact that businesses and families, individual taxpayers,
could plan ahead with the understanding that those tax cuts were going
to stay in there for some time would build confidence in the economy.
Then they would be willing to go out and make their investments and, as
a result of that, create more revenue. When the tide rises, everything
rises and everybody benefits.
I hope at some point in time we can make all these permanent,
especially the inheritance tax. The death tax is not part of those we
have in here, although I think we extend that out for a year or two in
this budget. But we

[[Page S2281]]

need to permanently eliminate the death tax because it is silly to
think people are going to plan for their death. They are not going to
do that. The elimination expires toward the end of this decade and then
it goes way back to previous levels, which are extremely high. That is
not fair. If nothing else, just out of fairness we need to permanently
eliminate the death tax.

I see my time is running out. I thank the chairman, again. I see
Senator Domenici on the floor. He was the chairman of the Budget
Committee before Senator Nickles took over that responsibility. I think
both of them have been very responsible and have worked very hard on
the budget. I think we have a good piece of legislation. It is a
resolution, an agreement between the House and Senate. It doesn't
require the President's signature, but it is a commitment of both the
House and Senate to eliminate deficit spending and hold down our tax
burden and spending. I think we are heading in the right direction. If
we can accomplish what is in this budget, I feel good about the future
of this country and the future of our economy.
I yield the remainder of my time.
The PRESIDING OFFICER. The Senator from Oklahoma.
Mr. NICKLES. I thank our colleague from Colorado for not only his
statement but the outstanding job he does as a member of the Budget
Committee. He works hard. He does his homework. He is one of the more
knowledgeable persons on our committee about a lot of issues on the
budget. I compliment him for his statement and his contribution in
putting this budget resolution together.
I note my predecessor as chairman of this committee, Senator
Domenici, is seeking the floor. It is always a pleasure to work with
him. I yield him such time as he desires.
The PRESIDING OFFICER. The Senator from New Mexico.
Mr. DOMENICI. Mr. President, I have to go to a chairmen's meeting
now, so I cannot speak very long. I did not want to let the first day
go by without saying a couple of things.
Senator Don Nickles has done an outstanding job, as have the Members
who serve with him, working for our country, joining him in doing the
very best possible job they can do.
I think the budget before us, under the circumstances, is as good as
we are going to get. I only hope not only do we pass it but at the end
of the year we look back and say, with the exception of things that
were outside of our control, it truly was enforced; we carried it out.
I hope that is the case.
I will come back tomorrow to make a few more remarks. When you get a
budget and it is deficit time, and the debts are as big as they are,
people generally are too gloomy. There are too many people running
around saying how bad things are. I have been there when the deficits
were bigger than they are now. I have been there when they were less. I
have been there when it was balanced, believe it or not. Frankly, I
think what is good to know is that the American economy, the engine of
wealth day by day, is in pretty good shape.
We are in a world economy that makes it very tough for America
because we are trying to let the whole world get rich right alongside
us. America is not looking to try to keep the world poor. It is pretty
obvious that whatever globalization means to others, they have it wrong
if they think the United States wants everybody else's wealth.
The truth is, we buy from everybody because we want them to grow and
prosper. We want their workers to make money. We want their businesses
to prosper. That is beginning to happen in a rather phenomenal way. In
fact, I have never asked anybody to check carefully what has happened
to China in a decade, but I imagine it would be phenomenal what is
happening to their people, to their prosperity, and to their
opportunity to make the world a better world for everyone.
While all that is going on in poor countries, America has trouble
because we have to compete. We have a lot of people thinking we ought
to pull out of this world. Not only pull out of wars, a lot of people
think we ought to quit negotiating treaties of trade and just come
home.
I think we are very lucky we have a cadre of leaders for the most
part who do not believe that is the way. I would be very worried if we
were going to move in that direction, all of a sudden say we are
staying home, we are not selling our goods, and we are not buying
theirs; it will just be fortress economic America. If that were the
case, it would not take us along until we would have one broken down
fortress.
From my standpoint, I will join with those who are trying to help
America do a better job of producing goods and wealth cheaply and more
competitively, getting our universities, our laboratories, and great
scientists to produce out of the research room, out of their
laboratory, into the technology room, and then onto the manufacturing
floor. What we need is to move those faster. The great research has to
turn into production in America. If only we could dream up some way to
sensitize that so it would happen better and more rapidly. Researchers
like researching but they would like it more if they could produce a
product.
If we are not there yet, there are plenty of people who do not feel
that way about research. But I submit that we are going to have more
and more researchers in every sense of the word who believe they are
not successful until they have solved the problem, produced the
product, and let America take cutting edge advancement to work at
making products.
Having said that, tomorrow I will return and talk a little bit about
this specific budget and the deficit we have and the debt we have.
But I want to close by saying I sure hope the average American is not
too worried about the future. When you go through a recession for a
couple of years, have two wars going on, and terrorists who ripped the
heart out of your major city, and you are still in as good a shape as
you are today with our economy growing, productivity growing, and more
people working than any comparable day in history, you have to feel
proud. For those who want to lead our country, the best way to do it is
to convince them they have something to be proud of and that the future
is bright.
I am down here on a tough budget with a tough chairman who worked
hard to get us here, and probably with many people who won't agree with
it. But I am here because I also want to let people know we are going
to do the best we can. We have cut taxes not only because we like to
cut taxes--that is true, we do--but because we think an economy in
recession needs to have taxes cut if it is going to get out of
recession. We think that happened. We are proud of that. We don't want
to do away with the taxes that are about to occur right now because
they are the right kinds of taxes. If we are going to do pay-as-you-go,
let us at least let those taxes that we cut take effect.
I want to repeat in closing that I am going to start working tomorrow
with a bipartisan group of Senators to produce a pay-as-you-go plan. It
will include taxes, but it won't include the taxes that we have already
passed that are waiting to be enforced but look 4 or 5 years from now,
no more free rides for anything--no free rides for taxes, no free rides
for defense, no free rides for anything. We are going to increase
things. If you cut something, you also pay for it. If we can do that
for 4 or 5 years and start the process so that it is credible, what a
change it will have. It will be a very positive day for America and for
those who invest if we do.
For today, I said about as much as I can. I yield the floor. I thank
the chairman for yielding. I thank the Senate for listening. I yield
the floor.
The PRESIDING OFFICER. The Senator from North Dakota.
Mr. CONRAD. Mr. President, I thank Senator Domenici, former chairman
and very distinguished member of the committee, and someone to whom we
all look for wisdom on budget issues.
Let me pick up on the last point he made, the pay-go provision. What
the Senator is talking about are rules that we used to have that were
allowed to lapse in 2002 which required if you wanted to add spending
or cut taxes, that was fine, but you had to pay for it. You had to pay
for it. I think that budget discipline that was lost is unfortunate. We
ought to renew those budget disciplines as quickly as possible.
I think it is fine to say there are certain taxes we should cut. In
fact, I have

[[Page S2282]]

indicated publicly that I will vote to extend the 10-percent bracket. I
will vote to extend the marriage penalty relief. I will vote to extend
the expansion of the child care credit. I will vote to extend the small
business expensing. I personally believe--and I think Senator Allard
and I may agree--those are provisions that we ought to continue. There
may be some more that Senator Allard wants to continue that I would not
without paying for it.
But I would say on any spending that is new and any tax cuts that are
new, we ought to pay for them. This deficit ditch is so deep now that I
think we ought to impose that discipline on ourselves. We did it
before. It helped. I don't think it solved the problem, but it
certainly made a contribution. It provided a discipline on both the
spending side and the taxing side that was important. That doesn't mean
you can't, on an emergency basis, spend more or tax less. It requires a
supermajority vote. It requires 60 votes to break that discipline. I
think it helped us immeasurably. I think it saved hundreds of billions
of dollars.
I was on this floor last year with Senator Nickles siding with him in
stopping some spending by raising budget points of order that apply on
the spending side of the ledger.
I think it is very important that we reintroduce those disciplines as
soon as possible.
Let me talk a little about this budget. I talked earlier about the
President's budget. I also want to talk a little about this budget and
why I think it is deficient.
The first thing that concerns me is it adds $2.86 trillion to the
debt over the next 5 years. I think one of the things that is being
missed in these discussions is something that is flying right below the
radar. It is the amount of money that is being taken out of Social
Security to pay for other things, money that has to be paid back but
that gets lost in this discussion of deficits. The reason for that is
they are talking about what is called the unified deficit. That is when
you put all the money in the pot and you treat it all the same. All the
Social Security revenue goes into the pot along with the income tax
revenue and every other kind of revenue. All the spending comes out of
that pot. The problem with that approach is at this moment in time,
Social Security funds are running big surpluses in preparation,
supposedly, for the retirement of the baby boom generation. But we are
not using that money to pay down the debt or prepay the liability. We
are taking that money and using it to fund tax cuts and other
expenditures of Government, and those Social Security surpluses are
growing dramatically, by the end of this 5-year budget the Social
Security fund surplus just for the fiscal year 2009, is going to be up
over $235 billion. I think it is hiding, basically from all of us, and
from the American people, our true fiscal condition.

Let me make this point. If we take the chairman's mark--I have high
regard for the chairman. I respect him. I have found that he is
somebody I can trust. I also like him. This does not have anything to
do with personalities. This has to do with the fiscal situation we face
as a country. Under the chairman's mark, the total debt of our country
at the end of this year is going to be $7.4 trillion. But this year,
$612 billion will be added. Next year, we will have $8 trillion of
debt. The next year, $569 billion is being added to the debt; the next
year, $553 billion; the next year, $563 billion; the next year, $564
billion. Do you notice a certain sameness as to how much is being added
to the debt every year? Yet at the same time, the chairman and other
Members have said it is cutting the deficits in half. And both
statements are true. The deficit--which is calculated on a unified
basis with all funds going into the pot, all revenue and all spending
coming out of that same pot--is being reduced in half over 3 years by
the chairman's mark. The problem is the increases in the debt are not
being cut in half. The increases in the debt are virtually unchanged.
The debt is increasing this year by $612 billion under the chairman's
mark. By the third year it is going to increase by $563 billion.
The debt increases are not being reduced by this plan in any
significant way.
As a result, for the 5 years, the debt is being increased by $2.860
trillion.
This is, in many ways, the good times because the baby boomers have
not started to retire yet. They start to retire in 2008. When we couple
the increased expenses which flow from the baby boomers retiring with
the reduced revenue by making the tax cuts permanent--and, by the way,
that cost explodes right outside this 5-year budget window--what we see
is under any growth scenario, any reasonable growth scenario, this debt
problem, this deficit problem, is going to get much more serious in
this next 10-year period. It is not getting better.
Those who say, gee, with some more growth this will all work out--no,
it does not work out. That is what the Comptroller General of the
United States is warning us about, that is what the International
Monetary Fund is warning us about, that is what budget group after
budget group is warning us about. We cannot grow our way out of the
deficits that are coming because we are stacking up debt at the time
that is most favorable. We are stacking up debt when we have the trust
funds throwing off huge cash surpluses.
What is going to happen when those trust funds go cash negative?
Instead of $160 billion of Social Security surplus, which will happen
this year, instead of $235 billion of Social Security surplus which
will happen in the fifth year, when those trust funds go cash negative,
then what happens, and the baby boomers have retired and the full cost
of the President's tax cuts have been phased in? Then these deficits
look like child's play. Then we have a real chasm which has to be dealt
with.
As I see it, the chairman's budget simply does not do the job. When
we look at the chairman's mark and we put back in the war costs CBO
says will be there, and we look at addressing the alternative minimum
tax, here is what we see the operating deficits looking like over the
next 5 years. They are enormous. The operating deficits are enormous.
We see very little reduction in them under the chairman's mark. There
is $638 billion going down in 2009 to $520 billion, and I don't believe
that is an accurate reflection. I believe by the time we get to the
fifth year we will add another $600 billion to the debt, based on my
own analysis.
Our colleagues on the other side have talked about this proposal
reducing the deficit. Actually, this proposal does not reduce the
deficit. The deficit is going down on a unified basis, not counting the
money that is being taken from Social Security, if we do nothing. The
deficit is going down if we do nothing. But if we adjust the baseline
for the one-time expenditures that were made last year, when we had a
supplemental appropriations bill for over $85 billion last year--that
is in the so-called baseline going forward--if we take that out, which
the chairman has done--and, by the way, I commend him for doing that
because otherwise we build in spending that should not repeat itself.
It is one-time spending that should not be added to the base. The
chairman has taken it out of the base. He is absolutely right to do so.
Once we have done that and then we look at what is happening with the
deficits under the chairman's proposal, what we see is it increases the
deficit by $177 billion over the next 5 years. He is adding $177
billion to the deficit over the next 5 years. That is a mistake. We
have record deficits now. We have the baby boomers coming. They will
retire. We should not be adding to the deficit by the policy decisions
we make here. We ought to be reducing it.

The chairman says the deficit in the fifth year under his plan will
be $202 billion. That is only true if we leave out certain things.
Number one, he is leaving out additional war costs in that fifth year.
The Congressional Budget Office says residual war costs in the fifth
year will be $30 billion. He leaves out the alternative minimum tax
fix, that costs $55 billion in the fifth year. He leaves out the $22
billion he will borrow from the Medicare trust fund that year which he
has to pay back. He is leaving out the $235 billion he is borrowing
from the Social Security trust fund in that fifth year. In that year
alone, he will borrow $235 billion from Social Security. He will borrow
another $22 billion from Medicare trust funds so he is borrowing $257
billion in that year and that is being stacked on the debt. So instead
of adding $202 billion to the debt in that fifth

[[Page S2283]]

year, he is adding at least $545 billion to the debt. That is my own
conclusion.
What is wrong with, for example, this budget in terms of revealing
our full fiscal condition? One of the first problems we have is the war
costs. The President has zero for war costs past September 30th. The
chairman has put in a reserve fund of $30 billion which is certainly
more forthcoming than the President's plan. But the chairman does not
include it in his actual budget so he does not add to the deficit
calculations by that $30 billion. He just says it is in a reserve fund.
It may be spent, but we are not counting on it.
That is not a budget. It is not a budget when you say we may spend
this money, and if we do, we will find someplace to get it. I guess we
will have to borrow it because he is not providing the funding for it.
He is not adding it to the deficit totals for that year. He is not
budgeting for it.
The Congressional Budget Office says for the 10 years from 2005 to
2014, the residual war cost is $280 billion. We are not facing up to
the real costs we all know are coming.
Then we look at priorities. In 2005, the tax cuts going to the top 1
percent cost $45 billion, those earning over $337,000. If we were to
keep the promise of No Child Left Behind in that year according to the
chairman's budgets--this is a different number compared to the Bush
budget because this budget before the Senate, the chairman's mark, is
somewhat more generous in dealing with No Child Left Behind than the
President's budget--but looking at this budget, he is $8.6 billion
short of meeting the amount committed to No Child Left Behind. That is
less than 20 percent of the money that is going in the tax cut to the
wealthiest 1 percent.
The same is true as we look at other priorities. Veterans medical
funding. If we were to increase veterans medical care funding to meet
the 2004 service levels, it would cost $521 million. Instead, we are
giving $45 billion of tax cuts to the wealthiest 1 percent.
This is a question of priorities. What is more important? They are
saying it is 90 times as important. We will spend 90 times as much
providing a tax cut to the wealthiest 1 percent than to restore medical
care funding to the 2004 service levels in 2005. If we took a poll of
those who are the wealthiest 1 percent in this country and they were
asked, Would you be willing to give up 1\1/3\ percent of your tax cut
so we could match the medical care funding of our veterans in 2005 with
what we did in 2004, there would be a resounding yes, I would give up 1
percent of my tax cut in order to provide decent medical care for our
Nation's veterans.
The COPS program. It would take $700 million to restore the cuts
being made in the COPS program. COPS program is the program that has
put 100,000 police officers on the street. It costs $700 million to
restore those cuts that are in this chairman's mark. Again, I compare
it to the $45 billion being provided in tax cuts to the wealthiest 1
percent.
Does it make sense to cut the COPS program, reduce the number of
police on the street, when we are threatened by terrorist activity in
this country?
I do not think that makes sense. I do not think those are the right
priorities for the country.
We look at the firefighters in the same way. It would cost $246
million to restore the cuts to the firefighters that are included in
this budget. Again, if one looks at a comparison of the tax cuts
provided to the wealthiest 1 percent--those earning over $337,000--it
costs $45 billion for that same year.
If you asked the people who are in this category: Gee, would you be
willing to give up one-half of 1 percent of your tax cut so we do not
cut the firefighters, I think overwhelmingly people in that category
would say, yes, that is a priority that we fund the firefighters at
last year's levels and not cut them, not cut them dramatically.
This is a debate about choices. It is about choices of what is the
future course for our Nation. I believe the deficits and debt that are
contained in these budgets are simply too large and we need to take
aggressive action to deal with them, and this is all happening at the
worst possible time, right before the baby boomers retire.
But I am not focused on this year's deficit. That concerns me, but
that is not the focus of my concern. I am much more worried about where
this is all headed under the President's plan. I am much more worried
about where this is all headed under the chairman's plan than the
immediate deficits.
One would expect deficits at a time we have been attacked. One would
expect it at a time we have been recovering in the economy. The problem
with the President's plan, the problem with the chairman's plan, is
they never plan to get out of deficit. Instead, they keep adding to the
debt, and by hundreds of billions of dollars a year, not just this
year, but next year, and the next year, and the next year, and the next
year--every year by over $500 billion of added debt, and every year
thereafter, taking every penny of Social Security surplus, borrowing
it, using it to fund tax cuts and other expenditures, with no plan to
pay it back.
No, this does not add up. This does not add up. This does not come
close to adding up. It has enormous implications for our long-term
economic strength.
Now I understand this is an election year and things are unlikely to
be changed very dramatically this year. I have had probably a dozen of
my colleague say to me, what we need is a big plan for next year. I
wish we could take more aggressive action this year, but I am realistic
and know it is probably true that our best opportunity to deal with
this problem in a fundamental way will come next year, and that is when
we need to be prepared to act in a serious way and quit just hoping
against hope that somehow this all goes away.
It is not going away. It is not going away under the chairman's plan.
He is adding $500 billion to the debt every year of this plan. It is
not going away under the President's plan. He is adding even more. The
President adds $3 trillion to the debt over the next 5 years--$3
trillion. This plan is a little bit better. It adds $2.860 trillion to
the debt. None of this is sustainable, especially in light of the
retirement of the baby boom generation, which starts in 2008, and of
the cost of the President's tax cuts that absolutely explode beyond the
5 years of this budget plan.
I thank the Chair and yield the floor.
The PRESIDING OFFICER. The Senator from Michigan.
Ms. STABENOW. Mr. President, I rise to speak about the budget. I
first commend my ranking member, the Senator from North Dakota, for his
incredible leadership and the way in which he has presented all of
these issues and the challenges facing our country. There is no
question that a huge hole has been dug with deficits as far as the eye
can see.
I remember coming onto the Budget Committee as a new Member of the
Senate in 2001, when the debate was what to do with the largest surplus
in the history of the country. I remember when the Senator from North
Dakota was talking about the baby boomers retiring and the need to put
money aside to meet our obligations under Social Security and Medicare,
and the need to look to the future.
Unfortunately, instead, what we saw were very short-term decisions
that turned the largest budget surplus in the history of the country
into the largest budget deficit in the history of the country, in only
3 years. It is astounding to see what has happened in the last 3 years.
But I thank him for his courage and his willingness to fight for what
is important to my family and the people of Michigan and the people of
North Dakota and people all across the country, for fighting for the
right priorities for the future of our country.
I also want to take a moment to thank our chairman, who convened his
last budget hearing and budget resolution markup this year. I
appreciate the fact that he conducted a fair markup, as he has done
since being chairman. We came to the conclusion and voted on a budget
resolution that now is in front of us. He did it in a very fair way.
I also commend him for a couple of tough decisions he made that the
administration was not willing to make. Chairman Nickles, unlike the
administration, put funding in the budget for ongoing activities in
Iraq. He put in a reserve fund of $30 billion. While I am concerned
that is not enough to meet the request that will come back to us, I
commend him for his leadership in understanding the number certainly is
not zero, that there needs to be an

[[Page S2284]]

amount that is put aside into a reserve fund.
But this budget is so flawed in the end analysis, I am not sure where
to begin in talking about it. It reminds me of Yogi Berra when he said:
This is deja vu all over again. Because that is exactly where we are,
given the direction we have gone in the last 3 years. Once again, we
see a budget that is skewed to a privileged few while leaving middle-
income families behind. It fails the credibility test, and it does not
reflect our Nation's values and priorities. I hope the Senate will
decide to reject it and go back to the drawing board and get it right.
Our Nation's budget is our chief economic tool. This is the fourth
time President Bush has submitted a budget to Congress containing his
economic plan for the Nation. Unfortunately, the President's last three
budgets have led to major job loss, soaring deficits, rising debt, the
looting of the Social Security and Medicare trust funds, and have
failed to provide the necessary resources for our domestic priorities.
It seems every day we hear more and more economic bad news. Certainly
in the State of Michigan every day there are headlines of job loss.
On Friday, the Labor Department said there were only 21,000 jobs
created in February. This is anemic, according to many economists, and
285,000 jobs short of what the President said would happen just a
couple of months ago. At this rate, it will take 9 years to recover all
of the jobs lost under President Bush.
Unfortunately, the people of the State of Michigan can't wait that
long. Our people need jobs now. Under the Bush Presidency, we have lost
2.8 million manufacturing jobs, many of them in the State of Michigan.
Our manufacturing sector is in crisis. Every day we hear about another
company shipping its jobs overseas to China or India or Mexico. In
fact, the State of Michigan had the highest number of jobs lost last
year.
Just last Friday, our Democratic Policy Committee held a hearing on
the topic of shipping jobs overseas. At that hearing we heard testimony
from Dave Doolittle who works at the Electrolux Refrigerator plant,
Greenville, MI. They announced they were going to close and export
2,700 jobs to Mexico.
Despite major concessions offered by the workers and over $70 million
in economic incentives from the State and the community--the community
did everything right; the workers did everything right--Electrolux
announced it will close next year, and 2,700 workers will be out of a
job. That means 2,700 families will be without a breadwinner in a town
of 9,000 people; 2,700 people losing their jobs out of 9,000. This type
of job loss is devastating to these families.
In addition to that, when we look at the ripple effect and the
suppliers involved and others, this can reach as high as 8,000 good-
paying jobs with health care and pension plans throughout the entire
region. This type of job loss is devastating for our families, and it
is devastating to Dave Doolittle.
Mr. Doolittle has worked at the plant for over 23 years. He has a
pension. He has health benefits. He has one child in college and two in
high school. The plant closing will devastate his family. He asked us,
who will pay for his two high school children to go to college? What is
he going to do about health care for his family? Will they be able to
keep their home?
To add insult to injury, Dave Doolittle and other employees will be
working on an assembly line that has just received major investments of
$100 million to improve it so the company can see what problems it has
so they can then rebuild that and take it to Mexico. This highly
productive, highly skilled workforce is working out all the kinks in
the equipment that they will then pack up and send to Mexico.
Unfortunately, the President's budget and the budget before us will
do nothing for Dave Doolittle and his family. He is a one of a growing
number of hard-working families making up a part of another America.
The other America includes not only the unemployed but millions of
workers who have simply given up trying to find a job. If you include
them in the unemployment rate, these discouraged workers push the
unemployment numbers up to 9.6 percent, almost 1 in 10 of our workers.
People such as Dave Doolittle are not interested in a handout. This
is a hard-working, skilled individual. What he is looking for is a good
job and a chance to give his children and his grandchildren-to-be a
better future. They want to provide their children with health care and
an education so they can live the American dream. Isn't that what we
all want for ourselves and for our children? They want the country to
be strong and safe from terrorist attacks. They are counting on us to
do what is right at home and abroad.

Unfortunately, the Bush economic policies have failed Dave Doolittle
and his family on all counts. The President's budget has no plan to
create jobs. It does nothing to help the uninsured and make health care
more affordable. It contains proposed cuts for our schools, our police
officers, our firefighters who are trying to protect us on the front
lines against terrorist attacks.
On these priorities and more, Democrats tried to improve this budget
in committee but were voted down on a party-line vote every time.
This budget also lacks credibility. For the last 3 years we were told
one thing; yet something very different has happened over and over. The
first tax cut produced massive deficits and harmed our economy. Despite
all that, the President continues to push the same trickle-down
economics that have failed. If these tax cuts were done by trial and
error, they were an error.
Consider everything that was said and what actually has happened. We
were told that the administration's tax cuts in 2001 and 2003 would
create jobs, but we have lost jobs, almost 3 million. We were told we
would have a surplus, but we now have the largest deficit in the
history of the country. We were told we would pay off the national
debt, but now our national debt is higher than when President Bush took
office. We were told the President's budget would not use Social
Security trust funds, but now we are using every penny of the Social
Security surplus to pay for tax cuts for the privileged few. We were
told we needed to modernize Medicare and add a prescription drug
benefit, with which I agree, but now we have a law that will privatize
Medicare, hurt one in four seniors on Medicare, and cause them to lose
their private insurance. It does little to help seniors purchase
prescription drugs and does nothing to lower prices for all Americans.
We were told we would fund Leave No Child Behind and special
education, but now we have failed to fully fund them. School districts
are making cuts, shortening their school years, and laying off
teachers. We were told we would have a new Department of Homeland
Security that would help protect us, but in only the second budget
cycle for this agency, we are already seeing budget cuts from last
year, and we are falling far short of what is needed to protect our
country.
We tried to make some changes to this budget in committee to have it
better reflect our Nation's values and priorities. Unfortunately, we
were unsuccessful. We tried to add fiscal discipline and reduce the
deficit, but we lost on a party-line vote. We tried to fully fund Leave
No Child Behind, but we lost on a party-line vote. We tried to restore
the cuts to our firefighters, but we lost on a party-line vote.
Unfortunately, the Democrats were not the real losers, though. The
American people were the losers by those votes.
We are in this budget and economic mess because this administration
has valued wealth over work and the privileged few over our children's
future. For the privileged few, this administration has given so much:
most of the tax breaks, subsidies for insurance companies and HMOs, and
$139 billion in profit for the pharmaceutical industry. For working
families there has been very little. In fact, working men and women and
their families are worse off than they were 3 years ago.
Three million workers have lost their jobs. As of the end of January,
we have over 400,000 people who have lost their jobs who have been cut
off of unemployment insurance. Eight million will see their pay cut
because of new overtime regulations. Seven million people who work for
the minimum wage have seen their pay eroded, and 12 million children
were too poor to get the child tax credit.

[[Page S2285]]

Three years ago, Federal Reserve Chairman Alan Greenspan gave the go-
ahead for massive tax cuts for the top 1 percent, and this Congress, in
conjunction with the President, enacted them, and now we have the
largest deficits in history.
Unfortunately, now Chairman Greenspan is urging Congress and the
President to make cuts in Social Security because we have these
deficits. This means tax cuts for the privileged few are paving the way
for cuts in Social Security for middle-income families. This is wrong.
How can we ask people who have worked their entire lives to have
their Social Security cut to pay for tax cuts for our privileged few?
I mentioned earlier that budgets are all about values and priorities,
and I truly believe that. We have to decide, do we want more tax cuts
for the privileged few or do we want all Americans to be safe by
providing full funding for firefighters, police officers, and other
first responders?
Do we want more tax cuts for the privileged few or do we want a real
comprehensive Medicare prescription drug benefit and lower prescription
drug prices for everyone?
Do we want more tax cuts for the privileged few or quality schools
with highly educated teachers and small class sizes and state-of-the-
art technology for all of our children?
More tax cuts or quality education? More tax cuts or quality health
care for our veterans who have served us and continue to serve us
today? More tax cuts or hundreds of thousands of new jobs, rebuilding
our Nation's highways?
We need a new vision. We need new priorities for America. We need a
positive budget that will help all Americans raise their families, get
access to health care, and enjoy their lives and their retirement. We
need to restore our fiscal discipline, make critical investments to
create jobs, and strengthen Medicare and Social Security. In short, we
need to make the needs of American families our top priority again.
I will be supporting a number of amendments that will do that in this
budget debate. I am hopeful we will be able to get bipartisan support
to be able to do those things that American families are asking us to
do, so at the end of the day we will have a budget that reflects what
is important to the people we represent.
I yield the floor.
The PRESIDING OFFICER. The Senator from Colorado is recognized.
Mr. ALLARD. Mr. President, I want to set the record straight. We have
heard a lot of discussion from the other side about the burden or about
how these tax cuts are somehow favoring the rich and somehow implying
that the rich are getting some sort of an advantage.
I share with my colleagues some facts. This factsheet was put out by
the Tax Foundation. It talks about the Federal individual income tax.
It takes us up to 2001. The top 1 percent of the earners in this
country, the top 1 percent who pay the highest taxes, pay 40 percent of
the individual income tax in this country. The top 5 percent pay 53.3
percent. The top 10 percent pay 64.9 percent. The top 25 percent pay
82.9 percent. The top 50 percent of the individual income taxpayers in
this country pay 96.1 percent.
That means the bottom 50 percent only pay 4 percent of the total
individual income tax that comes in. That is the individual taxes that
are filed.
I was looking to see what happens when we look at all income classes
and all returns. These are taxable returns, itemized tax liability, at
the 2003 rate and the 2003 law and 2003 income levels. If we look at
those returns that show $100,000 to $200,000 in taxes, they pay 25
percent, a little over 25 percent. If we look at those who pay over
$200,000 in taxes, they pay 49 percent. So if we total all the income
classes and all returns--these figures are put out by the Joint
Committee on Taxation--and we look at all these returns, and this is a
current document--the previous document I referred to was up to 2001--
put out by the Tax Foundation--if you take those who are $100,000 or
more, they pay over 75 percent of the taxes in this country.
Now, it seems to me those individuals with those tax returns reflect
hard work and productivity. They are doing their fair share in
supporting the economy of this country. I think this needed to be made
part of the record. That is why I wanted to take a little time to talk
about the tax burden, because the story we keep hearing from colleagues
on the other side is that somehow the rich are getting off easy.
The lowest 50 percent of our individual taxpayers pay 4 percent and
the top 50 percent are paying 96 percent of the taxes. That tells you
who is paying the taxes.
Then, if we look at all the returns filed in 2003, and then look at
who is paying those, all those who paid $100,000 or more are paying
over 75 percent of the taxes. That is phenomenal. The producers and
earners are paying their fair share.
I might add that a large percentage of these individuals, as well as
others, are coming from small business. That is where our economic
growth occurs, where our new ideas come from. If we can continue to
promote and encourage the growth of small business, then that means our
economy is going to do well. That is why I think the tax cut that we
put in place was the right solution, and it has worked. I don't think
anybody can deny that the tax cuts we put in place have worked. They
have worked.
If we increase taxes, which is being encouraged on the other side,
supported by the other side, it is the wrong thing to do at the wrong
time--particularly when our economy is beginning to show growth. I
think it is important, again, that we ought to actually extend these
taxes permanently. If we would do that, I think that sends a message to
the producers of this country that we are open for business and they
will get out and they will produce. When the economy grows, I think it
will help work us out of where we are now in deficits. I think it will
increase revenues to the Federal Government substantially, and it will
be easier for us to work our way out of the deficits we now face.

I yield the floor.
The PRESIDING OFFICER (Mr. Bennett). The Senator from Michigan is
recognized.
Ms. STABENOW. Mr. President, if I might respond to my colleague's
comments, we certainly have heard similar comments before. There are a
couple of concerns that I have. Like everything, it depends on how you
look at the numbers and how you look at what is happening in terms of
tax burden. The debate that has gone on relates to the income tax. It
has nothing to do, first, with all of the taxes.
In this debate, there is always a conscious desire not to look at the
payroll tax, which everybody pays and, in fact, it is skewed more to
lower and middle-income people, because above a certain income you
don't pay the payroll tax anymore.
So let's look at who is paying the payroll tax. Let's look at who
pays sales tax, which is based on what you buy. It has no relationship
to your income specifically, in terms of what the sales tax burden is.
We know it falls more on low- and moderate-income individuals.
We can also look at property taxes. We look at a wide array of taxes
in this country and we see that low- and middle-income people have a
huge burden. When taxes get cut, it is not on the things they are
paying; it is on those taxes--in this case, the income tax--which is
paid by those who make higher incomes, higher percentages.
When we look at the total tax burden, we see that it is the middle-
income people in this country who get squeezed on all sides. We should
not add to that by extending a tax cut that continues to do that.

Let us look at the numbers, how the tax breaks stack up. The combined
effect of the tax cuts of 2001 and 2003, if you make over $1 million a
year--that is in a year and a half--if you make over $1 million a year,
your combined tax cut is $140,369. The average middle-income-tax payer
will get a tax cut of $566. Look at these numbers. This is more than
the majority of people in the country earn working hard every single
year for their family. They work hard, they play by the rules, they are
struggling with sending their kids to college and making sure they can
buy their homes and pay the property taxes, and all of the other
pressures on them. They are worried about losing their job now to
overseas competition. Instead of selling products overseas,

[[Page S2286]]

they are worried their jobs are going to go overseas.
We have individuals who work hard every day, play by the rules, and
the vast majority of them are earning less per year than what one
person is going to get in an income tax cut who earns over $1 million a
year. I do not begrudge in any way someone who earns over $1 million a
year. That is not the point. The point is we are looking at this kind
of a tax cut of $140,000 versus $566. There is a major issue of who is
getting the tax benefit and who drives the economy, from where does the
economic growth come. We know it is from middle-income-tax payers who
are as consumers purchasing in the economy, but more broadly we look at
this in terms of choices.
We know if we were to give them two-thirds of their tax cut this year
instead of all of it, we could fully fund what has been reported is
needed to keep us safe with homeland security--every single penny. It
is a large number. We are told by Warren Rudman and the members who
came together to look at all of our homeland security needs--not only
police and fire and bioterrorism, borders and ports and chemical
plants, but all of it--it will cost $15 billion, which is one-third of
what those at the top are going to get back this year in a tax cut.
Would folks be willing to take a little bit less to know they are
safe, that their family is safe, that the borders are safe, that the
ports are safe, that they can call 9-1-1 and know they can get a first
responder at their home if there is an emergency, or that the community
can respond, that police and firefighters can talk to each other on the
radio, have interoperability, which they do not have now?
All across Michigan, we do not have one system where everybody can
talk to each other in case of an emergency. I think most of the people
who do very well in this country would say, yes, that is important for
my family, and that is a tradeoff I am willing to make; that is a
choice I am willing to make.
This is about choices. It is not about class warfare. There are huge
differences in what people will be getting back. It is not about
penalizing or in any way demonizing people who make over $1 million a
year. This is about choices. When we see red for as far as the eye can
see, when we see that this year's projected deficit, just this year's
deficit of $521 billion is more than the entire investments outside
defense--take defense away--all of our domestic investments, all of our
domestic budget: homeland security, education, health care, law
enforcement, protecting the environment, parks--we could wipe out the
entire domestic budget, except for defense, and not equal the deficit
hole that the administration has put us in just this year.

It is a matter of choices and saying to someone who is doing very
well: We need you to help. We need you to be willing to make sacrifices
just as every family is, just as our men and women in the armed
services are making in Iraq and Afghanistan. It is about choices. If
the choice is keeping every American safe, making sure we can protect
ourselves from terrorist attacks across this country, and asking those
doing very well, who have reaped the benefits of this country, to help
share in paying for that, I think the majority of them would say yes.
That is something we all are willing to do.
This is always a question of choices. It is a question of priorities.
It is a question of values.
As the chart shows, it is also a question of fairness for people. If
we look at the difference in the average middle-income-tax payer and
the cut they will get in 2006, and those with incomes over $1 million
and the cut they will get, we see that in addition to this disparity,
this middle-income-tax payer is paying a payroll tax, sales taxes,
property taxes, and contributing greatly to the payment of services in
their community.
This budget is about what is fair for everybody, what is the right
thing to do to keep us strong fiscally, how do we put ourselves on a
path of not asking our children to pay the burden of the debt that is
being accumulated, how do we make sure we are smart in terms of our
investments in the economy to grow jobs, put money in the pockets of
middle-income people, small businesses that drive the economy--the
majority of new jobs are coming from small business--how do we make
sure that is a priority for us, and how do we make sure we are creating
a set of priorities and a vision for the future that our families are
asking us to do?
Thank you, Mr. President.
The PRESIDING OFFICER (Mr. Fitzgerald). The Senator from Utah.
Mr. BENNETT. Mr. President, I listened to this particular debate for
a while. I have a few observations. I am not prepared to make a
significant economic statement. I will be doing that at some point
during the debate. But I think I will respond to a few comments that
have been made.
If I may quote Paul Samuelson in a recent article in Newsweek and the
Washington Post, he said most of the debate about jobs that is
currently going on is bogus, and he makes the point that if a President
could create jobs, the unemployment rate would be permanently at 3.2
percent. If a President could create jobs, every President would. If a
Congress could create jobs, every Congress would. No one wants to go
home and address his constituents at a time when jobs are difficult.
The fact remains, however, that the Congress or the President cannot,
with a wave of the hand or the passage of legislation or the adoption
of a political slogan, create jobs. Jobs are created in the economy.
Jobs are created because of two things: There first must be accumulated
wealth, accumulated capital of some kind, and then there must be
someone who holds that capital who is willing to take a risk.
All wealth is created by the combination of accumulated capital and
risk taking. When we tax people, we tax their accumulated capital. We
have to do that. We should do that. I am not suggesting in any sense
that taxes are not appropriate, but if we tax capital too much, capital
flees. It goes some place else. If we regulate risk taking too heavily,
it goes some place else or it is killed altogether.
As a consequence, if we are going to have jobs, we want an economic
situation where accumulated capital is allowed to work and where risk
takers are rewarded for their risk and where they receive the incentive
necessary to compensate them for the risk they take.
I do not mean to be overly personal, but I hear people talking about
two things. One, they talk about small business and how wonderful small
business is, and then they talk about millionaires and how millionaires
should be willing to sacrifice a little of their money so everybody
else can have a job.
It is very interesting that those who talk about let's not make the
tax cuts permanent then praise small business in the next breath.
Perhaps they do not realize most of the tax returns that show income in
excess of a million dollars are, in fact, the tax returns of owners of
small business.
Let me give my own personal example to illustrate the point. I have
done it before, but I have discovered since I have come to the Senate,
there is no such thing as repetition in the Senate. We always give
every speech as if it is brand new.
Before I came to the Senate, I was the president of a privately held
corporation that filed its taxes under the S section of the Tax Code.
Therefore, it was known as an S corporation. It used to be called a
subchapter S corporation, but they changed the law a little and it is
now just an S corporation.
When that phrase is used, people's eyes glaze over and they say, what
does that mean? Well, it is very simple. If the corporation earns $1
million and it has 10 shareholders, instead of the corporation paying
taxes on that $1 million, as an S corporation it pays no taxes, but
each of its 10 shareholders, assuming their shareholdings are equal,
pays taxes on $100,000. Why would any shareholder want to do that? Very
simple. It avoids double taxation.
If the corporation made $1 million, had 10 shareholders and it paid
taxes, it would pay taxes at 36 percent. The Federal Government would
get 36 cents out of every dollar it earned.
At the time I was doing this, the top tax rate was 28 percent. By
saying, all right, we are going to register as an S corporation so the
corporation does not pay any taxes on the $1 million, it comes to the
10 shareholders and each one of us will pay taxes on our share of the
earnings, which in my case was 28 cents, that is a very significant
difference--the difference between paying

[[Page S2287]]

28 cents on every dollar you earn and 36 cents on every dollar you
earn.
During the period of time Bill Clinton was President, that number
went up to 42. I had said before if we had started that company at a
time when the effective tax rate was 42 percent, we probably would not
have survived, but because we started it during the Reagan years when
the top individual tax rate was 28 percent, we got to keep 72 cents out
of every dollar we earned.
What did we do with that? We put it back into the corporation and we
created jobs, real jobs. The company had four full-time employees when
I joined it as the chief executive--not a very big company, frankly,
not a very big deal. It eventually grew to 4,000 jobs. The reason it
had that kind of momentum as a small business is because we only paid
28 cents back to the Federal Government out of every dollar we earned.
We put the 72 cents into growing the business and from a base of 4 jobs
we created 4,000 jobs. If we add up all of the income taxes that were
paid by those 4,000 employees and the corporate taxes that were paid by
the company when it finally went public and ceased to be an S
corporation, it became a C corporation, and the taxes that were paid by
the suppliers of our company and the taxes that were paid by their
suppliers and all the rest of it, we come up with a very large number
that came into the Federal Government because that company was started.

As I said in the beginning, it was started because of two things:
accumulated capital and risk taking. How much accumulated capital did
we have? We borrowed $175,000 from the bank. It was the bank's capital.
That was our accumulated capital. How big a risk did we take? Every one
of us signed away everything we owned in the form of a personal
guarantee to make that company go. After about 9 months of operation, I
remember the principal shareholder of the company saying to me, Bob,
are we going to make it? Are we going to survive?
I said to him, well, it depends on whether we get repeat business. We
sold a product that had a year's life and the question was would the
people at the end of the year come back and buy the product at the end
of the year. I said, if we get 55-percent repeat business, we are going
to survive. If we get less than that, your next phone call has to be to
a real estate broker because you are going to have to sell your house.
The bank is going to show up and take everything you own.
On that pleasant note, we went ahead with the business. It turned out
we got more than a 55-percent renewal rate. We got a 95-percent renewal
rate and the business doubled. It continued to grow and we funded it
with internally generated funds because we were able to keep 72 cents
out of every dollar we earned and put every dime of that 72 cents back
into the business.
Because we were an S corporation and the profits we were earning
showed up on our individual tax returns, I filed tax returns that
showed I was earning over $1 million a year. Now, in fact, my salary as
the CEO of that company was $140,000, but there was the other million
that was added to it as my share of the company's earnings reported on
my personal income tax return.
If we go to the chart that was shown by the Senator from Michigan, I
would be one of those who would be earning $1 million a year. In fact,
my take-home stayed exactly the same at the $140,000 figure. The rest
of it was all a bookkeeping entry. We did it because we wanted to avoid
double taxation and because we wanted to take advantage of the fact
that the effective rate for individuals was lower than the effective
rate for corporations. We built the business and we created the jobs
because the tax situation was as I have described it.
We hear all of these comments about how wonderful small business is
and how small business is the engine that is driving the economy, and
they are right. We hear all of these comments about how small business
is where the new jobs are, and they are right. It is interesting that
almost unanimously those who represent small business are saying to us,
keep the President's tax cuts in place. If you do not, you will stifle
small business.
On this floor we are seeing our colleagues say, let's let the
millionaires pay for the things we want to do, let's take a little off
the top from the millionaires and then we can afford all of these
wonderful Federal programs we want to fund, all of the time while we
are saying, gee, we are spending too much money, but we should spend
more money here and we should spend more money there and we should
spend more money in the other place. And where are we going to get it?
Well, we will let the millionaires pay it.
Then they say, all of this will help small business. The small
businesspeople are saying, we are the millionaires and it is not coming
to us in personal income, it is showing up on our tax returns in K-1
forms filed to deal with an S corporation, and you are stifling job
growth, you are stifling small business if you do it this way.
We do not hear from the real small business man and woman. We hear
from those who say, I am speaking for small business while I am saying
small business is wonderful, and at the same time I am saying increase
the taxes on those small business men and women who have sole
proprietorships or S corporations or limited liability corporations.
The other point I want to make in this debate has to do with jobs. We
are hearing over and over, where are the jobs? Once again, it is the
President's fault. President Bush has presided over the loss of more
jobs than anybody since Herbert Hoover. He must have done it
deliberately is the implication. As I said at the outset, Paul
Samuelson said if a President knew how to create jobs, we would never
see the unemployment rate go above 3.2 percent.

What is the basis of the creation of jobs? Let me give a statistic.
When economic activity goes up, obviously there is a need for more
jobs. There is a need for more people to work at businesses, at firms
that are involved in the economic activity growing. So the economic
activity has gone up.
We had a great year in 2003. The gross domestic product grew by 4.3
percent, which in historic terms is terrific. The President said we
will get good growth if we have these tax cuts, and we have gotten good
growth. We have added something like $3 trillion to $4 trillion worth
of wealth on the stock market--and that involves over 50 percent of our
population.
The stock market is not just for the privileged few at the top now.
Teachers' pensions, labor union pensions, veterans' pensions, people
who have invested for their children's college funds--over half of
Americans are now invested in the stock market. They have seen, since
the President's program went into place, an increase in the overall
value of the stock market in the multiple trillions of dollars. This is
not a small accomplishment.
But where are the jobs if GDP is at 4.3 percent, historically a high
position? The stock market has come back, creating a tremendous amount
of accumulated wealth, and where are the jobs?
There is another statistic that answers the question we need to pay
attention to. In 2003, once again GDP increased by 4.3 percent.
Normally that is a time when you would see the creation of many jobs.
However, in that same year productivity increased by 4.4 percent: a
staggering number in historic terms. But the net effect is that it was
higher than GDP.
Whenever productivity grows faster than the economy grows, something
we don't like happens and that is we lose jobs. For all of the efforts
on this floor and in the White House and in the Federal Reserve to get
the economy growing, to get the traction in the recovery growing--and
we produced a year of 4.3 percent growth in 2003--with that strong
growth, we lost 60,000 jobs. The reason was productivity grew at 4.4
percent while GDP was growing at 4.3 percent.
Some will say the solution to the problem is to get productivity
down, to have GDP growing and productivity falling. That, of course, is
a prescription for long-term economic disaster. The most significant
thing we want to do in our economy is keep it as productive as
possible, to have productivity growing rapidly here so we can outgrow
the rest of the world. That is what America has done for 100 years or
more.
Go back to the middle 1800s and look at the productivity figures for
the then leading economy in the world, which was Great Britain, and the
productivity figures for the young upcoming

[[Page S2288]]

country in the world, which was the United States. You see that over
the years the United States had a higher productivity than Great
Britain by about a half a percent. That was enough, over the decades,
and then the century, to see America eclipse Great Britain and see
Great Britain ultimately disappear as a major world economic
factor. America now stands as the strongest economy in the world. We do
not want our productivity to go down.

The thing that has happened in this recession and recovery, something
that has not happened before, is that through the quarters of recession
and recovery productivity remained strong. Productivity simply means
you are getting more value out what the workforce is producing. You are
getting more goods; you are getting more services; you are getting more
to sell. If you can get more out of the workforce in this fashion, it
means ultimately your society has a higher standard of living and your
consumers pay less for the goods they use. But if productivity is
growing faster than the economy is growing, that means you are getting
that result, higher standard of living and lower cost, with fewer
people.
This is the real dilemma we are facing that is not being discussed
when we talk about economics. The real dilemma we are facing is how do
we get the GDP to grow faster than productivity
I believe productivity will come down from the high of 4.4 percent
that we saw in 2003. I don't think that is sustainable. I think the GDP
will eventually cross over the line so the GDP is growing more rapidly
than productivity does, and when that happens the jobs will
automatically come into play. They will appear. It will not be because
of anything we do or not because of anything President Bush does or of
anything that a potential President Kerry might do. It will happen
because the economy is strong enough that the GDP will grow faster,
that productivity will be passed by the GDP number. Whoever holds
office at that time, be he or she, Republican or Democrat, will take
full credit for it. They will say, since it happened on my watch, I did
it.
But let us, at least for a moment, in the rhetoric of this election
year, pause and recognize what is happening. We are in the midst of the
information revolution. It is as fundamental to changing the economy as
the industrial revolution was in the late 1800s. We have not yet
learned quite how to cope with it and deal with it. But the potential
for good for our citizens, and for the world, is enormous.
I don't want to peddle fear and pessimism because, in fact, we should
be optimistic and excited about the future that this represents to us.
It will be filled with challenges, just as the industrial revolution
brought enormous challenges. But it will be filled with opportunity and
it should be filled with optimism.
I close with this observation. If we had been having this debate 100
years ago, in 1904 instead of 2004, and some economist with a great,
clear crystal ball had come before us and told us the following we
would all have panicked, but it would have been true if he had said
this 100 years ago. He would have said: Sixty-nine percent of America's
labor force works on the farm; 69 percent of America's labor force is
involved in agriculture, which is civilization's oldest economic
activity. One hundred years from now, in 2004, that number will be two.
Yes, you heard me, it is now 69 percent; 100 years from now it will be
2 percent.
If that were all he had said, the sense of panic would be enormous.
Of course, he would have been accurate because agricultural jobs now
have gone from 69 percent of the labor force to 2 percent.
What in the world have we done with all of those people who are out
of work? The industrial revolution took hold and their productivity
became greater and greater and greater, and today the 2 percent of
Americans who are involved in agriculture produce more food and fiber
than Americans can possibly eat or wear, even though obesity is our
largest health problem. We have to export food to keep the farmers busy
and only 2 percent of our working force is in agriculture.
We have enormous productivity.
Here is another statistic and cautionary tale in that same situation.
The percentage of workers involved in manufacturing has been going
down, just like the percentage of workers involved in agriculture for
50 years--not just in this country but all over the world. As we now
see the percentage of workers going down in manufacturing and we get
all excited because it is going down in one President's term, or in the
8 years of Bill Clinton, or in the first President Bush's term, or in
Jimmy Carter's term, or wherever it might have been going down, it has
been going down on a steady basis for over 50 years here and in Europe
and in every other industrialized country in the world.
What have we done with those workers? How have we been able to find
jobs for them? The son of the steelworker who no longer has a job
because about 10 percent of the number of steelworkers is necessary to
run a steel mill now compared to the number that was necessary when we
had open hearth furnace steel mills, the sons and grandsons of those
steelworkers who worked in the open hearth furnaces are now working for
Microsoft, or Verizon, or in a startup that will become the next e-Bay,
or whatever company you want to speculate. They are earning more money
than their grandfather and their father earned, and they are providing
for their families better. We are in the midst of the information
revolution, as I said, that is transforming the economy as
fundamentally as the industrial revolution did.
As we deal with this recession and this recovery and talk about what
we need to do, let us understand the environment in which we are
operating.
There are many things we don't know about the information revolution.
There is much to understand before we can make sound policy. But we
come back to a fundamental truth which was true during the agricultural
age, which was true during the industrial age, and which is true now
during the information age; that is, in order to get economic activity,
growth, and wealth creation, you need two things--accumulated capital
and the willingness to take a risk.
If we can always remember those two fundamentals--that all growth and
all wealth comes from the combination of accumulated capital and taking
a risk--we will make wise decisions.
If we fall for the siren song that says the way to deal with our
problem is to share the wealth and take the accumulated capital and
spread it all around in a way that nobody then has any risk--Karl Marx
suggested that and we have seen what has happened to the economies that
followed his economic advice--we will kill the goose that has been
laying golden eggs in this country for over 240 years.
That is a dramatic condemnation of some of what I have heard on the
floor, and it is over the top. But, frankly, much of what I have heard
here on the floor is over the top.
Let us stay with the basics. Let us do our tax policy in a way that
encourages accumulation of wealth. Let us do our regulatory policy in a
way that encourages the taking of risks. Then as the wealth is created
by the combination of accumulated capital and risk taking, let us
devise a tax system that does not kill the golden goose but that does
take out of the economy the money we need to deal with the proper role
of government. I am not one who says we shouldn't have taxes. I am not
one who says people shouldn't pay their fair share. I am not one who
says just because you are successful you should be left alone. But my
fundamental goal is a tax system that functions to raise enough money
to pay for the legitimate needs of government, not one that picks
winners and losers, not one that tries to set social policy by tax
incentives. Let social policy be set by Congress. Let the taxes be
drawn in a way that produces the greatest efficiency in the economy.
Then the gross domestic product will grow more rapidly than
productivity, even though the information age will keep productivity
high. At that point the jobs will start to come and we will have done
our jobs.

We cannot create jobs. The President cannot create jobs. But what we
can do is create an economic circumstance where jobs are discouraged
and economic activity is dampened. When that happens, we will all pay
the price.
I yield the floor.
The PRESIDING OFFICER. The Senator from North Dakota.

[[Page S2289]]

Mr. CONRAD. Mr. President, I agree with much of what the Senator from
Utah has indicated. There are basic fundamentals to the functioning of
our economy. Right at the heart of the determination of how successful
we are as an economy and the role the Federal Government plays is first
on the monetary side with the Federal Reserve Board and on the fiscal
policy side what we do with our spending and taxing decisions.
The problem I have with the President's budget and the budget offered
by the majority is it contemplates deep additions to the debt even at a
time of economic strength leading into the retirement of the baby boom
generation which will explode the cost of the Federal Government. When
we overlay that with the President's tax proposals, it explodes the
cost of revenue lost to the Federal Government at the very time the
baby boomers retire, taking us right over a fiscal cliff.
Those are not just my views. Those are the views of many who have
studied the President's plan. That is why we have the Comptroller
General of the United States warning us we are heading in a direction
that is unsustainable. That is why we have the head of the Federal
Reserve Board saying to us we are overcommitted and tough choices are
going to have to be made. That is why responsible budget group after
budget group has said to us you are overcommitted. You have massive
deficits--the biggest we have ever had in dollar terms--and you are
headed for even more trouble in the future.
Mr. BENNETT. Mr. President, will the Senator yield for a question?
Mr. CONRAD. I would be happy to.
Mr. BENNETT. Mr. President, I agree with the Senator about the size
and terrifying nature of what we are facing with retirement of the baby
boomers. But I disagree with him about the connection between this
budget and that kind of disaster. I feel even as we are running
surpluses right now, the disaster that is facing us is exactly the same
size regardless of where we are right now.
My question to the Senator is when he references the Chairman of the
Federal Reserve Board, with whom he and I both have had this
discussion--we know how strongly Chairman Greenspan feels--is the
Senator not aware Chairman Greenspan is of the opinion that the
President's tax proposals did indeed help produce the recovery in which
we now find ourselves, and indeed Chairman Greenspan has endorsed
making the President's tax proposals permanent? Is the Senator aware of
the fact Chairman Greenspan, even as he warns about the same things the
Senator and I agree upon in terms of the problems of the future, says
in the present context making the President's tax proposition permanent
is a good idea?
Mr. CONRAD. I am fully aware of that. I say to the Senator the
Chairman of the Federal Reserve Board has also told the Congress to
consider cutting Social Security benefits. That is part of the logic of
where it all leads. The 75-year shortfall in Social Security is one-
third the 75-year cost of the President's tax cuts. To suggest these
two things are not related is to avoid reality--an unpleasant reality,
but, nonetheless, a hard fact we have to cope with.
The fundamental problem we have here is our appetite for spending is
greater than our appetite to tax ourselves to pay for it. I believe it
is going to take an approach on both sides of the equation. I believe
we are going to have to restrain our impulse to spend, and I believe we
are going to have to be more disciplined on the revenue side of the
equation.
The revenue side of the equation is what has really fallen out. We
now look at this year and we see revenue will be at the lowest
percentage of gross domestic production since 1950. While it is true we
have seen an up-tick in spending largely because of the needs for
additional money for defense and homeland security and responding to
the September 11 attacks, it is still true even with that increase in
spending that we are well below the levels of Federal spending in the
1980s and the 1990s as a share of our national income.
As I diagnose this problem, I come to a different conclusion than the
Senator from Utah. I share with the Senator the conclusion we have to
discipline spending. I also believe we have to work on the revenue side
of this equation. I say the first place we ought to look is not to a
tax increase but to the tax gap, the difference between what is owed
and what is being paid that the revenue commissioner now tells me for
2001 was $255 billion for the 1 year alone. We have not had any serious
aggressive effort to go after this tax gap.
I was also told by the former revenue commissioner that he
anticipates those in the vast majority who pay what they legitimately
owe are paying 15 percent more because we have some--both companies and
individuals--who are failing to pay what they legitimately owe. I am
confident the Senator from Utah pays what he legitimately owes. I know
I do.
Mr. BENNETT. Mr. President, if I could respond, I have no idea if
what I pay is what I legitimately owe or not because the Tax Code is so
impenetrable I did not get an answer out of two different people as to
what the amount is. I pay the amount my tax preparer tells me I owe and
so far the IRS has accepted that as legitimate.
Mr. CONRAD. I would be happy to review the Senator's returns and
render another judgment.
Mr. BENNETT. Give me a third opinion.
If I could make a quick comment without the Senator losing his right
to the floor.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BENNETT. I recognize fully the level of revenue currently coming
into the Federal Treasury is at a distressingly low historic point. But
I go back again to a comment that Chairman Greenspan once made to a
group of us. I am not sure whether the Senator from North Dakota was
present. It fits in with the area of agreement that we have. He said to
us: You can set the level of spending just about wherever you want. You
can pass a law and be pretty sure spending will be where the law says
it will be. You cannot set the level of income where you want. That is
a function of the economy.
If we look at the period which we all look back on with such great
satisfaction--that is, the years in which we were in surplus--one of
the major reasons we were in surplus was that the economy unexpectedly,
according to the computers at CBO, produced far more revenue than CBO
scored. This came as a result of the balanced budget agreement, the
agreement entered into with the Republican Congress and the Democratic
President after the 1996 election, an agreement that the Speaker of the
House in 1995 tried to enforce with heavyhanded political methods and
got himself in trouble in 1995. But after the election, the leadership
of the Senate and the House and the leadership in the White House with
President Clinton sat down and we got the balanced budget agreement,
the balanced budget proposals, and in that process the Congress
insisted, the President resisted but finally agreed to cut the capital
gains tax rate.

The CBO scored the amount of revenue we would get from that tax cut.
The actual revenue, I believe, was five times as great as CBO scored
it. No one had anticipated the rivers of cash that would come in.
Now, rivers of cash came in, in my view, because there was capital
tied up in mature investments that wanted to find more entrepreneurial
kinds of investment but believed that it could not move it--that is,
the owners of capital believed they could not move it with the capital
gains rate of 28 percent. When the capital gains rate came down to 20
percent, they figured that was enough to allow moving the capital out
of mature investments and into entrepreneurial investments and we saw
Federal revenue go above 22 percent of gross domestic production, which
I don't think has ever happened before.
Now we are in a recession. There are no capital gains. The revenue
has gone down into the teens in percentages of gross domestic
production. The recovery, historically, can be depended upon to take
care of that and the more the recovery persists, the more Federal
revenue as a percentage of gross domestic production will rise.
I thank the Senator for his courtesy and will not continue this
dialog because I am intruding on the good will of others, but I
appreciate the opportunity to have engaged in this exchange.
The PRESIDING OFFICER. The Senator from North Dakota.

[[Page S2290]]

Mr. CONRAD. I might say for my part I always enjoy visiting with the
Senator from Utah and his questions. He thinks about these subjects in
a very careful and disciplined way. I always enjoy these chances to
have a serious discussion and a serious debate that is all too lacking
in the Senate.
Just momentarily, because I know the Senator from Nevada has a
presentation he would like to make, and I know the Senator from
Washington also has something, for the record I will provide the other
side of the story with respect to something Senator Allard presented.
Senator Allard was making the argument that those at the highest
income levels are actually going to bear a greater proportion of the
total tax bill going forward than they did before the tax cuts. The
analysis we have seen by others reaches a different conclusion. Let me
share that with my colleagues.
This is done by the Tax Policy Center which is run jointly by the
Urban Institute and the Brookings Institution. Their conclusion is
those with very high incomes will be paying a smaller share of total
taxes as a result of the Bush tax cuts.
Let me give three examples. Those with taxable incomes above $1
million who constitute 0.2 of a percent of taxpayers would pay 12
percent of total taxes in 2006 without the Bush tax cuts. With the tax
cuts, these same pairs will pay 11.2 percent of total taxes in that
year. This includes not only income taxes but payroll taxes.
Second example. Those with taxable incomes above $500,000, who
constitute one half of 1 percent of taxpayers, would pay 17.4 percent
of total taxes in 2006 without the Bush tax cuts. With the tax cuts,
these same taxpayers will pay 16.4 percent of total taxes in that year.

Finally, those with taxable incomes above $200,000, who constitute
2.4 percent of taxpayers, would pay 30.7 percent of total taxes in 2006
without the Bush tax cuts. However, with the tax cuts, these same
taxpayers will pay 30.1 percent of total taxes in that year.
The Senator from Colorado was arguing that those who are at the high
incomes will pay more of total taxes as a result of the Bush tax cuts.
This independent analysis by the Tax Policy Center reaches just the
opposite conclusion. When you look at income taxes and payroll taxes,
higher income people, those at $1 million, those at $500,000, those at
$200,000, all will pay less than they would have paid without the tax
cuts.
Finally, looking at it in a different way, under the Bush income tax
cuts, the top 20 percent of income earners got 68.7 percent of the
benefit. More striking, the top 1 percent of income earners, those
earning more than $337,000, got 33 percent of the benefit of the Bush
tax cut. That is much more than any other income class.
Finally, looking at 2006, how the tax benefits stack up, in that
year, middle-income taxpayers, those who are right in the middle of the
income stream, the 20 percent right in the middle, will receive an
average tax cut of $566. Those with incomes over $1 million in 2006
will get an average tax cut of $140,369. If these bars were actually
proportionate, the bar representing the tax cuts received by those with
over $1 million of income would have to be 35 feet tall. It would have
to be 35 feet tall in order to compare proportionately with what the
middle-income taxpayers will receive in that year.

I thank my colleagues and yield the floor so the Senator from Nevada
can speak.
I ask the Senator, will you give us an idea how long you intend to
speak?
Mr. ENSIGN. Maybe 10 or 15 minutes.
Mr. CONRAD. Ten or 15 minutes. And then for the information of our
colleagues, I ask the Senator from Washington, how much time would she
like?
Mrs. MURRAY. Ten minutes.
Mr. CONRAD. After that, we will then probably close down the shop. We
do not have any other speakers on our side, I say to my colleague.
The PRESIDING OFFICER (Mr. Crapo). The Senator from Nevada.
Mr. ENSIGN. Mr. President, I want to make a couple of comments about
the budget we have before us today.
It was an interesting process, once again, in the Budget Committee
last week. We had a lot of amendments that went pretty much down party
lines. But one comment I will make about the Budget Committee that is
maybe a little more encouraging this year is the rhetoric was not
nearly as harsh. And that, in an election year, I think is something
positive to take out of the whole discussion in the Budget Committee.
While there were differences, I thought it was at a little higher level
this year--my second year on the Budget Committee--than my first year.
I thought there was a little less rancor and a little more agreeing to
disagree type of attitude on the Budget Committee.
There are differences between the two sides, and sometimes even
within our own parties, as we look at making policy. The ranking member
on the Budget Committee has made a lot of issues about deficits. I echo
that. I think it is very important we get the looming deficits in the
outyears under control because they are a huge threat to the long-term
health of our economy.
Having said that, there are reasons for deficits, and there are
acceptable reasons for short periods of time to run deficits. The two
biggest reasons would be being in a recession and having a war.
Unfortunately for our country, those both hit at the same time.
We had, obviously, the recession which started at the end of the
Clinton administration and continued on into the early parts of the
Bush administration. Then we had September 11 and the global war on
terrorism. We had the huge costs for New York City, the huge cost to
our economy 9/11 has had, as well as the cost in increased spending the
global war on terrorism has had. Given all of that, it is
understandable why we have a $500 billion deficit.

Where I would disagree with my colleague, though, is what are we
going to do with it now. How are we going to go into the future to get
our hands around this deficit, to bring it down to an acceptable level?
I think an acceptable level is to do what we were doing; and that is,
to start paying down some of the long-term debt. With the baby boomers
out there, we have to have a growing economy. We have to get some of
this debt under control so we will be able to afford some of the things
people want to be able to afford, as far as our Government spending is
concerned.
But we have to look at how do we go forward. What are our priorities?
That is what the budget we have before us attempts to set. We have more
money for education. We have more money for veterans benefits. We have
more money for the defense of our country. We wish we did not have to
be spending all this extra money on the defense of our country, but
that is the primary role for the Federal Government, according to the
Constitution, to defend the United States of America. This budget
reflects that primary role of the Federal Government.
Having said that, I want to look at how we have gotten to the present
deficit so we can have a document that takes us forward.
This pie chart we have shows the various reasons why we have the
deficit we have today. About 40 percent of it, shown on the yellow
portion of the chart, the largest chunk, is because of the poor
economy. Some of that can be blamed on September 11. Some of it is
because of a downturn in the business cycle, and we are coming out of
it. But the fact is, that is a big part of the reason we are in this
deficit.
Almost 40 percent--37 percent--comes in the red area on this graph,
and that is because of new spending. That is everything from the war,
education programs, veterans benefits, environmental programs, roads,
everything you can think of. That is new spending. That is almost 37
percent.
The tax cuts have reduced revenues--out of a total of 100 percent of
the reason for the deficit, it accounts for about 23 percent of the
deficit.
You can also make the argument, though, that the economy would be
worse without the tax cuts. Therefore, the yellow-shaded portion, which
is the 40 percent, would be even higher without the tax cuts. Because
what the tax cuts did--and Alan Greenspan has testified to this--is
they stimulated the economy so fewer people were on the unemployment
rolls and more were working. That is the reason we have a lower
unemployment rate today. That includes self-employed people. That is a
big part of what people are doing. They are starting their own
businesses.
One of the big things we heard from a lot of States is their State
budgets

[[Page S2291]]

are in trouble. We saw a dramatic decline in the value of the stock
market. The NASDAQ, toward the end of the Clinton administration, was
tanking. Then we had September 11. All of that, with the bad economy,
kind of combined and we saw huge losses in the stock market.
Since the tax cuts we passed last year, we have had an increase
between the New York Stock Exchange and the NASDAQ of $4.5 trillion in
value. We would see an increase in tax revenues at this point except
there are so many people who had losses from before when the stock
market tanked that we do not have a huge amount of increased revenues.
But the fact is, as the stock market continues to go up, we are now
poised to start reaping the benefits in new revenues to the Federal
Government from the stock markets and capital gains taxes.

By the way, in the State of California, one of their biggest budget
problems was the lack of capital gains taxes. The more the stock market
goes up and the value of property goes up and the value of a lot of
things goes up, the more State budgets are going to be helped,
especially States that rely on revenue sources such as that, such as
the State of California does.
I wish we could get more of a handle on Federal spending. I believe
it is out of control.
I want to run through a few charts to show that when we were in
surpluses, people got a pretty strong appetite. The ranking member on
the Budget Committee talked about how we all have big appetites around
here for spending. It is an easy way to get reelected, to keep giving
that money out. It is hard for people to say no. When we were in those
surpluses, the appetite increased. Federal spending went up fairly
dramatically. You can argue for every one of these programs, it was
justifiable. But we have to realize we got to this point.
A couple of examples. These are simple examples. The Low Income Home
Energy Assistance Program. You can see in the last several years how it
had gone up. Then it went down for a few years. Now it has gone back
up.
For the Centers for Disease Control, there have been dramatic
increases in the last several years. The increases started in about
2000, and went forward pretty rapidly.
The child nutrition programs, you can see, continued, but with a
fairly good uptick in the last few years.
The child care funding in around 2000 had a huge jump compared to
what it was during the 1990s. It was fine when the economy was
producing a lot of tax revenues.
This is the National Institutes of Health. Their spending, as you can
see, has had a very rapid rise.
There are a lot of great programs, but the fact is, we have built a
lot of spending into our budget now.
As Ronald Reagan said--and I am paraphrasing him--he discovered, when
trying to eliminate Federal programs or Federal spending: The closest
thing to eternal life in Washington, DC, is a Federal program.
That was a true statement back then and remains so today.
Both sides of the aisle are going to have to come together and
address the problem of Federal spending. The ranking member of the
Budget Committee has argued that we need to start looking on the
revenue side.
I have a philosophical difference of opinion because I believe
increasing tax rates takes away the incentive for businesses to invest.
I remember when I was in business as a small businessperson, and I
maybe wanted to do an expansion on my animal hospital. As a practicing
veterinarian, if the Government was taking more money, I would have
less money to be able to make that decision. Maybe I couldn't add that
extra employee or I couldn't do the expansion to add on to my building.
The more money I had in my pocket because the Government was taking
less, the more money I could pump back into the economy by doing an
expansion of the building or by hiring another employee. Even if I
didn't hire an internal employee, doing an expansion obviously puts
other people to work.
That is why there is a philosophical difference between the two sides
of the aisle on taxes and tax cuts. I want to put it in the hands of
investors and entrepreneurs to stimulate the economy. It can be that
low-income tax cuts, child tax credits, things such as that, help the
economy because then those folks go out and spend money.
The bottom line is, we have to have a strong economy and have tax
revenues going up. We are not going to cut spending around here--we all
know that--but at least slow the rate of growth down to the point where
the tax revenues start outpacing what we are doing spending-wise so
that we can start taking care of these deficits and eliminate them
within a few short years.
I am not a person who thinks that 7, 10, 12 years out is acceptable
to have deficits where they take a dip down and then they start going
back up. I believe we have to take it down as we did in the 1990s, take
it all the way down to where we start actually paying off some of the
long-term debt so that we leave our children and grandchildren with a
smaller Federal debt than we currently have. If we don't, with the
retirement of the baby boomers, our children and grandchildren will
have to pay higher taxes.
It is important we join together across party lines and work out the
differences we can, understanding there are philosophical differences.
The one place we both agree is that we need to hold the line on
spending. We will have different priorities of where that spending is,
but we need to hold the line on Federal spending, especially over the
next couple of years until the economy starts becoming robust.
I yield the floor.
The PRESIDING OFFICER. The Senator from North Dakota.
Mr. CONRAD. Mr. President, I thank my colleague from Nevada. He is
also a valuable member of the Budget Committee. I enjoy these
discussions with him. He is thoughtful. We disagree, but we will have a
chance to talk about some of those disagreements as we go through the
debate.
I am going to take a moment to talk about some of these issues now,
but I believe he does share a fundamental commitment to the notion that
we have to get these deficits down. We may have some differences about
how to do that. I believe we have to both restrain spending and work
the revenue side of this equation. I don't think it is going to work
without that.
Let me start with a little different take on what has caused this
dramatic flip in where we are with respect to deficits and what we
earlier projected to be surpluses. We have had, for the period from
2002 to 2011, a $9 trillion reversal. As we look at the causes, here is
what we see. The tax cuts are 33 percent of the difference.
The Senator from Nevada had a chart. I think it showed 23 percent. I
don't quite know what the difference is, although I will bet in his
chart he did not include the additional debt service as a result of the
tax cuts. My recollection is it was 23 percent in his chart. We may
also have a different timeframe.
Our analysis from 2002 to 2011 is that 33 percent of the
disappearance of the surplus was from tax cuts. The second biggest
reason was technical changes, primarily lower revenues--lower revenues
that were not caused by the tax cuts; lower revenues that were because
the projections were overly optimistic.
The third biggest reason was other legislation. It is spending. Most
of the spending went to increased defense spending, increased homeland
security spending, and the response to the 9/11 attack, rebuilding New
York, the airline bailout, and the rest. Only 8 percent of the
disappearance of the surplus for the years 2002 to 2011 is the result
of the economic downturn. In our analysis, the biggest reason for the
disappearance, the biggest single reason, is the tax cuts.
I am much less concerned about the tax cuts in the short term. I
think all of us know you have to run deficits in the short term with an
economic downturn, with the attack. It is the longer term policy of
continuing to run these deficits that is truly dangerous and reckless.
When we look at where the increase in spending occurred, we can see
that 91 percent of it is in these three areas: The increase in defense
spending, which is by far the biggest, the increase in homeland
security, and the response to the attack.
Here is what has happened to the debt under the President's plan. The
debt is taking off like a scalded cat;

[[Page S2292]]

again, right before the baby boomers retire. The problem I see with the
budget the President has put before us is there is no real progress on
reducing the increases in the debt. The President says he is going to
cut the deficit in half, but that is only because he leaves out whole
areas of expenditures. But if you look at increases in the debt, what
you see is quite a different picture. The debt keeps getting increased
under the President's plan by $600 billion a year, each and every year,
for as far as the eye can see. At the end of the budget period it is
increasing by $700 billion.
The Senator from Nevada says we have to get back to reducing the
deficit so we stop accumulating debt and so we are in a position to
start paying down debt. That isn't where the President's plan takes us.
This is from the President's own budget document.
What it shows is record deficits, the biggest deficits in dollar
terms we have ever had, a slight improvement in terms of the so-called
unified deficit where all the funds are jackpotted, Social Security
money is used to pay for tax cuts and other expenditures. But then look
what happens. As the baby boomers retire and the President's tax cuts
explode in cost, we are taken right over the cliff. That is the problem
with the President's plan. It doesn't add up in the long term. It does
not add up in the short term, and it takes us in a very reckless
direction, one in which we will not be able to meet the long-term
obligations of the country.
With that, I yield the floor and thank the Senator from Washington
for being here this evening and for her invaluable contributions to the
deliberations of the Budget Committee.
The PRESIDING OFFICER. The Senator from Washington is recognized.
Mrs. MURRAY. Mr. President, I thank my colleague for his tremendous
leadership on the Budget Committee over the years and for his
leadership in making sure we do the right thing in terms of deficits
and also investments for this country.
I have served on the Budget Committee for the past 11 years, through
recessions and economic expansions and during periods of surplus and
periods of deficit. I know what responsible budgets look like because I
have worked with chairmen from both parties.
I believe this Republican budget doesn't do what we must do to create
jobs, improve our security, and to meet our country's needs. I think we
can do better. That is why I am speaking out on the floor this evening.
It is why I offered amendments in committee last week, and it is why I
will be offering amendments on the floor this week.
Mr. President, this is a critical time for our country, and we need a
Federal budget that meets our needs. We are facing many challenges
today, from supporting our soldiers in Iraq and Afghanistan, to
improving our security at home, to recovering all the jobs that we have
lost, and addressing the growing deficit.
This budget resolution should help us meet those challenges, but
instead it offers the wrong priorities. It favors tax cuts over our
Nation's security. It favors boardrooms over classrooms. It favors
deficits over job creation. Frankly, this budget offers too little help
for families in my State of Washington. My State still has the fourth
highest unemployment in the Nation. This budget does not give families
in my State the support they deserve as they work to turn our economy
around and build for the future.
The people of Washington deserve a real Federal commitment because
they work to create jobs and provide health care and improve our
security and transportation. On the issues important in my State, this
budget comes up short. I am particularly disappointed that the
President's budget doesn't fulfill the Federal commitment to secure our
ports, care for our veterans, to invest in education, to improve health
care, or to provide the infrastructure we need to move our communities
forward.
Not only is this budget bad for Washington State, but it is also bad
for our country's economic future, lining up massive deficits for years
to come. I hear many in the majority speak of the need for ``fiscal
discipline,'' but the rhetoric in this budget doesn't meet the reality.
This budget continues the fiscal policies that have put our Nation's
priorities in jeopardy.
Two weeks ago, Americans learned that the majority's policies are
threatening America's retirement security in order to pay for their own
irresponsible fiscal policies. Rather than backing away from a
misguided economic policy that has cost us millions of jobs, the
administration now appears ready to cut Social Security benefits for
millions of hard-working Americans. I am not willing to tell the people
of my State that they must suffer because of the fiscal mistakes of
this administration or this majority in the Congress.
I want to turn to a few of my top concerns with this budget: port
security, veterans, education, health care, and transportation.
In Washington State, we depend on our ports. One in 4 Washington jobs
rely on international trade, and our ports are critical economic
engines. Unfortunately, as we all know, in today's world, America's
ports are vulnerable. A terrorist attack launched on or through our
ports could bring our commerce to a standstill, threatening lives and
jobs and really our economic future. We have an obligation to improve
the security of our ports.
Unfortunately, this budget tells our communities that the Federal
Government will not be a full partner in port security. This budget
literally sticks our local ports and communities with unfunded mandates
at a time when local and State budgets are already stretched incredibly
thin.
The President's budget undermines port security in 4 ways:
First of all, it eliminates Operation Safe Commerce.
Second, it underfunds the Maritime Transportation Security Act by 93
percent.
Third, it doesn't provide the Coast Guard with the funding it needs
to meet its growing missions.
Finally, the President's budget cuts port security grants by 63
percent.
Last week in the Budget Committee markup, I offered an amendment to
stop the President's cut to port security grants. My amendment failed
on a party-line vote. This fight is not over. I will continue to push
this White House to pay its share of port security instead of passing
those bills on to our local communities.
Mr. President, this budget also shortchanges our veterans. Washington
State is home to more than 670,000 veterans today. They rely on
services they were promised when they signed up for service to our
country. But the President's budget is $2.6 billion below the
independent budget recommendation for the VA.
The VFW, in fact, called the President's budget ``harmful to
veterans.'' The Disabled American Veterans called it ``utterly
disgraceful.''
This is the wrong message to send at a time when the next generation
of combat veterans is today risking their lives in Iraq and
Afghanistan.
Last week, I offered an amendment in the Budget Committee to increase
the VA construction account by $400 million. Last year, Congress
authorized the VA to take money out of its health care budget for these
construction projects that will begin in this fiscal year. Unless we
can increase that construction account, our veterans are going to face
a $400 million cut in their health care services.
The amendment I offered in committee would have protected our
veterans from that cut. Unfortunately, the veterans amendment was
defeated in the committee on a party-line vote.
Our American veterans deserve better, and I will keep fighting for
them.
Let me talk about education. I really believe this budget fails, as
we all know, to provide the funding that was promised in the No Child
Left Behind Act. This Republican budget comes up $8.6 billion short of
what our local schools need to fully fund No Child Left Behind. I
represent nearly 28,000 Washington State students who will be denied
title I services this year under the President's budget request.
The President's budget falls $84 million short of the title I funding
that was promised to my State under the No Child Left Behind Act.
The President's budget also freezes funding for impact aid, dropout
prevention, school counseling, afterschool programs, teacher quality,
migrant education, and rural education.

How can we expect our students and teachers to succeed when we fail
to

[[Page S2293]]

provide them with the resources they need? That is why I offered an
amendment to provide $8.6 billion to help our local schools implement
the No Child Left Behind Act.
Once again, in committee my amendment failed on a party-line vote. We
cannot expect our schools to do everything we required of them under
the No Child Left Behind Act without the support we promised to them.
Let me talk about health care. I believe this budget also seriously
jeopardizes health care for many in my home State of Washington. This
budget could jeopardize critical support for community health centers,
the community access program, NIH, and the CDC.
This budget also reduces our commitment to Medicaid. That is a
program we should be expanding and strengthening to address the rising
number of uninsured and increasing costs of health care.
Today, Washington State is struggling to keep its commitment to low-
income children through the Medicaid and CHIP programs. Medicaid cuts
could result in another 74,000 uninsured individuals in my home State
alone. We need more help from the Federal Government and, frankly, this
budget falls short.
Finally, let me say a word about transportation. Less than a month
ago, this Senate passed a strong, bipartisan bill to invest in our
Federal highways, transit, and transportation safety programs for the
next 6 years. Unfortunately, despite the overwhelming support of the
Senate, the budget that we see now before us today cuts $62 billion for
investment in our surface transportation needs. That is about jobs and
about economic growth.
It is estimated that for every $1 billion we spend on transportation
infrastructure, we create over 47,000 good paying family wage jobs.
We know that investing in our transportation priorities today will
help us not only improve our quality of life but will provide for our
future economic growth. If this Congress truly cares about investing in
jobs, we will provide the funding agreed to by the Senate less than 1
month ago today.
As I see it, as this budget is written today, it fails our families
in areas such as security, veterans, education, health care, and
transportation. I am hopeful that we can improve this resolution
through the amendment process this week and really create a budget that
makes the right investments, that is fiscally responsible, and reflects
the priorities of working families across this country.
I look forward to working with my colleagues throughout this week to
address those issues.
I thank the Chair, and I thank the Senator from North Dakota for his
work. I see the chairman of the Budget Committee. I know this is the
last budget he will shepherd through the Congress. I thank him for his
commitment to our country as well.
The PRESIDING OFFICER. Who yields time? The Democratic leader.
Mr. DASCHLE. Mr. President, I wish to speak to the budget resolution
for a couple minutes, if I can. I know we are getting closer to the end
of the day. This budget, obviously, maps out this Nation's fiscal
present and future in great detail, but this budget, as all budgets, is
more than about numbers. It is about choices. The choices we make in a
budget tell us who we are and what we value as a nation.
Unfortunately, the budget resolution brought to the floor by our
Republican colleagues, like the budget proposed by President Bush last
month, makes the wrong choices, sets the wrong priorities, and fails to
prepare our Nation for the challenges we will face in the future.
Since President Bush took office, 3 million private sector jobs have
been lost. Today, 8.2 million Americans are out of work, and the number
of long-term unemployed is at the highest point in 20 years. But even
with so many Americans looking for work, the Republican budget fails to
provide a strategy for creating new jobs.
Nearly 60,000 veterans are on waiting lists for care at veterans
hospitals. When our troops fighting in Iraq and Afghanistan return
home, the lines could get even longer. But despite the extraordinary
sacrifices our soldiers have made for us, the Republican budget offers
veterans only longer waits and higher fees.
School districts across the country are facing an early end to
classes because they do not have the resources to offer students a full
year of learning. Despite the strain on local school budgets and the
promises the President made in the No Child Left Behind Act, the
Republican budget falls $9.4 billion short of their commitment and
leaves millions of children behind in the process.

Al-Qaida and other terrorist groups are still plotting against
Americans and still capable of carrying out catastrophic attacks on
American soil. Despite CIA Director Tenet's warnings of continuing
threats, the Republican budget fails to provide our first responders
and port officials the resources they need to make us more secure.
Our Nation is at war, our economy is flagging, our schools are
struggling, and our Government is facing record deficits as far as the
eye can see. Despite the tremendous challenge our Nation faces, this
budget inexplicably proposes a staggering $1.3 trillion in new tax
breaks primarily for those at the very top.
When President Bush took office, he inherited record surpluses that
ensured a rock solid fiscal foundation for a generation to come. But in
3 years, due to these reckless policies and irresponsible choices, this
administration has steered our country toward an unprecedented fiscal
meltdown. Rather than try to repair the damage caused by these
policies, this budget continues these policies and digs an even deeper
hole.
This is not an accident. It is becoming increasingly clear that
supporters of these policies have pursued them knowing that--some would
say hoping--the record deficits would unravel the Nation's retirement
security net.
Three years ago, the administration and Republicans tried to
obfuscate this fact with budget gimmickry. During the 2000 campaign and
numerous times since then, the President assured us that under his
watch none of the Social Security surplus would be used to fund other
spending initiatives or tax relief. But late last month, Federal
Chairman Alan Greenspan blew the cover off this budget strategy. He,
too, said, in 2001, that the President's tax breaks would not endanger
Social Security, but now that the deficits caused by the tax breaks are
unmistakable, Chairman Greenspan and the Republican leadership say it
is Social Security that must be cut rather than the tax cuts that drove
us into deficits in the first place.
In the face of the unending flow of red ink, President Bush publicly
shifted his position as well. When asked his opinion of Chairman
Greenspan's comments, President Bush responded:

My position on Social Security benefits is this: Those
benefits should not be changed for people at or near
retirement.

The President appears to be indicating that cutting Social Security
benefits for the coming generation of retirees, including the baby boom
generation, is an option he is prepared to take. The choice many of our
colleagues are making is now apparent for all of us to see. They are
choosing tax breaks for the wealthy elite over a strong Social Security
system upon which every American can depend.
Democrats have a different set of priorities. In the course of the
coming debate, we plan to offer a series of amendments aimed to repair
our fiscal problems, keep the promises made to our seniors and
veterans, and prepare our country for the challenges of the future.
Each amendment will fix a glaring weakness in the Republican budget,
and each will be fully paid for. In fact, most will actually reduce
deficits that the budgets have created.
First, we will offer an amendment to strengthen Social Security. As I
noted earlier, when President Bush was elected, he promised not to
touch the trust fund. The administration flip-flopped on that promise,
and in the last 3 years has taken $550 billion from Social Security to
pay for the tax breaks. But they are not done yet. According to the
Congressional Budget Office, the Republican budget spends every penny
of the 10-year $2.4 trillion Social Security surplus on tax cuts and
other Government programs. In other words, in 3 short years, the
Republicans have gone from promising not to touch a penny of the Social
Security surplus to proposing that we spend all $2.4 trillion to fund
their tax breaks and other Government spending.

[[Page S2294]]

We believe the Social Security system represents a solemn promise to
our seniors, and we will propose an amendment that protects Social
Security for generations to come.
Second, we will offer an amendment to help end the jobs crisis and
get more Americans back to work. On average, more than 80,000 private
sector jobs have been lost each and every month since this President
took office. The manufacturing sector alone has lost 2.8 million jobs.
We will offer an amendment that encourages the creation of American
jobs, discourages shipping American jobs overseas, and provides
dislocated workers the assistance they need.
Third, we will offer an amendment to provide the resources necessary
to ensure that our veterans receive the care and treatment they
deserve. According to CBO, the President's request is $257 billion
below last year's level when adjusted for inflation. With 60,000
veterans already on waiting lists for health care and tens of thousands
of military personnel scheduled to return home from Iraq and
Afghanistan as the newest generation of veterans, this underfunding
will only increase an already unacceptable backlog.
Moreover, just as the administration last year, the budget also
contains policies--higher fees and copayments--that will drive 800,000
individuals out of the system and make those who choose to stay pay
more. When our soldiers in uniform come home from Iraq and Afghanistan,
they will deserve a parade, and they will get it. But our obligation to
our veterans does not end with the parade. Our amendment will give all
Members of the Senate an opportunity to demonstrate their recognition
of and appreciation for all these veterans have done for our country.
Fourth, Democrats will offer an amendment to fully fund the Leave No
Child Behind law. This law offered schools a deal. It said, if you hold
your students to higher standards, we will guarantee you the funding to
meet those standards. Schools are holding up their end of the bargain,
but the President has reneged.
In the years since the bill was passed, President Bush has failed to
request the funding he committed in this legislation. This year, the
President's budget request is $9.4 billion short. The Democratic
amendment will keep the promise we made to our children. This budget is
a portrait of broken promises, bad choices, and misplaced priorities.
At a time when it is critical that we begin to regain a firm fiscal
footing, this budget drives us even deeper in the hole. The White House
and Republican leadership have chosen to continue their reckless fiscal
policy all in the name of providing massive tax breaks to the
privileged few and giveaways to special interests. As a result, their
budget fails our veterans, our seniors, our children, and millions of
Americans who are looking for work. We could do better. We must.
Our Nation has the resources to fulfill our promises to seniors, our
veterans, and our schools. We need to make responsible choices. We need
to honor the promises we have made. Our budget should reflect the
priorities and choices of the American people. Democrats are ready to
make sure it does.
I yield the floor, and I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. NICKLES. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. NICKLES. Mr. President, I think we are coming closer to
concluding the debate tonight. I urge our colleagues to be aware of the
fact that this is going to be a busy week. I want to make a couple of
comments. I have heard two or three of our speakers say this budget
shortchanges veterans and education.
I will throw out a few facts about what this resolution does.
Sometimes people say they are referring to the President's budget, or
they are referring to something they read in the paper. I will just
throw out a few facts. The total amount of money we anticipate spending
in education, mandatory and discretionary, is $68 billion. That is a 9-
percent increase over last year, mandatory and discretionary combined.
People are acting as if there were significant cuts.
I also refer back to what we were spending in the year 2000. Today,
it is at $97 billion. So it has almost doubled since the year 2000, and
yet we hear a lot of people saying we are cutting education like crazy.
Education has grown, and grown dramatically in the last few years.
Those are just a couple of the facts. That includes mandatory and
discretionary.
On the discretionary side, we are anticipating a little over $3
billion increase between 2004 and 2005. That is in the resolution, and
people should know that.
I have also heard some comments on veterans. I will restate the
facts. What we are assuming in our resolution is an increase of 14.3
percent for veterans, mandatory and discretionary, between 2004 and
2005. That is a big increase. Keep in mind, both in education and
nondefense we are assuming very close to a freeze, but we are assuming
a big increase for veterans, primarily on the mandatory side.
Congress did a lot of things last year to increase payments to
veterans, including current receipts. So when we add all of these
things together on the discretionary side, we are assuming over a $1.4
billion increase, most all of that for medical care. Again, medical
care has risen dramatically over the last several years. We are looking
at programs that have been expanding dramatically. Let me mention a few
figures.

In the year 1990, on the discretionary side for veterans, we spent
$13 billion. In the year 2000, 10 years later, we spent $20 billion.
Today we are forecasting $30.5 billion. So it took 10 years, from 1990
to the year 2000, for discretionary spending for veterans to go up $7.9
billion. Now, from the year 2000 to the year 2005, 5 years, it has gone
up another 50 percent.
People say you are shortchanging veterans. Maybe no matter what
figure we had in the budget there would be those same complaints.
Veterans, if you add discretionary and mandatory, we have a 14.3-
percent increase, if you add the two. Combined, discretionary and
mandatory, $61.45 billion to $70.2 billion, there is a 14.3-percent
increase. Yet I have heard three or four speakers saying we are
shortchanging veterans.
I heard one speaker a moment ago say, yes, there are going to be new
fees. The budget we have before us did not assume there will be new
fees. The President did recommend a proposal increasing the
prescription drug copay on priority levels 7 and 8, from $7 to $15.
Those are mostly nonservice-connected disabled and high-income
veterans. I think a very good argument can be made they should have a
higher copay. That is not assumed in our budget.
We also did not include the proposal to establish a $250 deductible,
again on levels 7 and 8 nonservice-connected disabled and high-income
veterans.
Those two proposals were not included; yet I have heard two or three
speakers already allude to them, so I thought we should point that out.
We have significant increases for both education and for veterans. I
urge our colleagues to become aware of that before they say they are
going to offer amendments to increase funding because we are
shortchanging education or shortchanging veterans. I think we are fair.
Given the amount of deficit we have, I think we have very generous
increases in both functions, and I urge our colleagues to look at that
before they say, no matter what that figure is, they are going to be
voting for more money. I think that would be a mistake.
I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. NICKLES. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.

____________________