[Congressional Record Volume 151, Number 12 (Tuesday, February 8, 2005)]
[Senate]
[Pages S1067-S1070]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                               THE BUDGET

  Mr. GREGG. Mr. President, I am rising to discuss the budget as 
presented yesterday to the U.S. Congress and to the American people by 
the President of the United States. Let me begin by saying I think the 
President has been courageous. He has stepped forward and addressed 
some of the most critical problems that we have as a nation, one of 
them being the fact that we are running excessive deficits, another one 
being the proper prioritization of our spending in a time of fiscal 
restraint. It is appropriate, as the President has proposed, that we 
return to a period of fiscal restraint so that we do not end up passing 
on to our children massive amounts of debt, and so that we can assure 
the international community and our own people that we are going to 
live in a fiscally responsible way as a Government. That is what the 
President's budget has proposed.
  I think it is important, before we address the specifics of the 
budget, to talk a little bit about the context in which this budget is 
sent to us. Remember, when this President took office we were headed 
into a fairly significant recession. It was a recession that had arisen 
out of the most rapid economic expansion in our history. It was called 
a bubble, and was appropriately defined as a bubble, the Internet 
bubble of the late 1990s. When that bubble broke, it was very likely 
and it would be historically consistent if we had gone into an 
extraordinarily deep recession. But the President of the United States 
had the foresight at the beginning of the recession to propose to the 
Congress, and the Congress supported it, a fairly significant tax cut 
which was able to shallow out the recession. That is the classic 
approach to addressing a recession, in trying to move out of recession: 
cut taxes so you create more economic activity. You leave more revenues 
at home with the people, allow them to spend more of their own money, 
and as a result you come out of the recession more quickly. And that is 
exactly what happened.
  Today we are seeing a robust recovery. We are seeing a very low 
jobless

[[Page S1068]]

rate. I think it is down to 5.2 percent, in fact. Even though there was 
a significant revenue reduction, a tax cut in the first term of this 
Presidency, we are now seeing revenues growing at an extremely robust 
rate: Last year, 9.2 percent, this year they are going to grow by 6.5 
percent, it is projected next year at 7 percent, and so on into the 
future. As a result of his economic policies, we are seeing a recovery.
  In addition to being confronted with a recession, he was, of course, 
confronted with the fact that the United States was attacked, attacked 
mercilessly by evil people. The damage caused by that attack was not 
only personal loss, which was dramatic and obviously horrible, but it 
was also economic loss, having a significant impact on our economy and, 
as a result, causing us in the Federal budget to specifically have to 
spend a lot of money we hadn't anticipated spending fighting the war, 
and also having an impact on our revenues as a Federal Government.
  The President has been prosecuting this war against terrorism in an 
extremely aggressive and appropriate way and the results are pretty 
obvious. We have not been attacked, now, for almost 3 years. We invaded 
Iraq to change a totalitarian, despotic regime, and we have been 
successful there. We have seen an extraordinary event there, the 
elections which just occurred. Afghanistan is on the road to democracy. 
The success in the war on terror cannot be denied. We are making 
significant progress, but it is still a war we need to fight and we 
need to expend considerable resources to accomplish that. So there has 
been this dual pressure put on our Federal Government: first a 
recession, and, second, fighting a war on terror that had not been 
anticipated when this President came into office but has been well 
handled by this President since he has been in office.

  As a result, we now confront some significant fiscal questions that 
we must address. Having put in place the tax cut, which has caused very 
strong economic recovery and which is starting to show significant 
revenue increases, and having pursued a course of fighting a war that 
has cost us a great deal of money, we now must make decisions on how we 
properly balance our fiscal house in Washington. The President has 
suggested we do that essentially by looking at all functions of the 
Federal Government and trying to address them in a comprehensive, 
thoughtful way, and at the same time in a fiscally responsible way.
  There are two issues we confront in the area of fiscal 
responsibility. The first, of course, is the short-term deficit. How do 
we get this deficit down? How do we reduce its size so we do not end up 
taking bills that we are incurring today and passing those bills on to 
our children to pay tomorrow. The President has put forward a budget 
that reduces the deficit in half over the next 4 to 5 years. That is an 
extremely aggressive timetable, but it is one which is very doable. The 
President has put forward an aggressive and effective outline to 
accomplish that.
  The second thing this administration has proposed is to address the 
outyear issue, which is even a bigger problem for us as a nation. This 
is a function of the huge population in this country called the baby 
boom population. We are going to see a massive shift in the 
demographics of this country. Beginning in the year 2008, the baby boom 
population will start to retire. It is the biggest population segment 
of our society, and the pressure that it will put on the systems that 
support our retirement, people who are in retirement, will be dramatic, 
both in the area of Social Security and in the area of health care.
  As a nation we have had a very strong commitment to senior citizens, 
ever since the days of FDR. We can take great pride in the success of 
that commitment, and we intend to continue that commitment, but the 
whole genius of the Social Security system, and to a large degree the 
Medicare and Medicaid system, was the concept it would always be a 
pyramid; that there would always be a lot more people working than 
would be those taking out of the system; that there would be many 
people paying into the system to support individuals who are on 
retirement.
  In 1950, for example, there were 12 people paying into the Social 
Security system for every 1 retired person supported by that system. 
Today it is about 3.5 persons paying into the retirement system for 
every 1 taking out of that system. But because of the size of the baby 
boom generation, beginning in the year 2008 those numbers change 
dramatically, and by 2016 there will only be 2 people paying into the 
system for every 1 taking out, and we go from a pyramid to essentially 
a rectangle and it is simply not supportable in its present form.
  The practical effect of that is that those children who will be 
working, our children and our grandchildren whom we want to see have a 
better lifestyle, those two people will have to pay a much higher 
burden of taxation in order to support that one person who is retired 
unless we do something about that, unless we address that issue.

  So the issue is, do we want to pass on to our children a system that 
we know will not work, or that we know will put them in a position 
where they have to pay so much in taxes that their lifestyle will be 
less favorable than ours has been or will we address this issue today 
and start to get ready for that retirement boom, that large demographic 
shift, and as a result taking the burden off our children and 
grandchildren to a certain degree and assuring them that they also have 
a retirement system that works?
  The President has not only suggested a budget which in the short term 
addresses the deficit by reducing it by half over 4 years, as I 
mentioned, he has also stepped forward on this critical issue and 
suggested we do need to address these major entitlement programs. And 
he has made proposals in the area of Social Security that have been 
hotly debated here and that will continue, obviously, to be a subject 
of considerable consideration.
  In this budget he has specifically addressed the issue of entitlement 
spending, especially in the area of health care and Medicaid, and in a 
number of other areas such as agriculture. It is those entitlement 
programs which we as a Congress have an obligation to try to fix today 
so that they do not end up bankrupting our children and our children's 
children tomorrow.
  The importance of this is highlighted by this chart behind me, the 
effect of entitlements on the spending of the Federal Government. If 
you look at this chart, the orange line is entitlement spending, the 
yellow line is defense spending, the red line is nondefense 
discretionary spending, and the bright red line is interest.
  You can see that in the year 2000, entitlement spending was about 55 
percent of the Federal budget. This year it will be about 56 percent. 
By the year 2015 it will be 64 percent of the Federal budget. As a 
result, it will essentially absorb all the revenues of the Federal 
budget--all the revenues of the Federal budget--unless we address these 
programs today so we have them in order so they do not put that type of 
pressure on our Federal budget and on our children who have to pay the 
costs of that budget through their tax burden in the future. That is 
why reforming Social Security is so important. It is why this budget is 
such a positive step, a step in the right direction toward reforming 
the way we, as the Federal Government, operate. That is why I 
congratulate the President for it.
  What the President has proposed is essentially a budget which, for 
lack of a better term, gores everybody's ox. He essentially has said: 
Listen, if we are going to get our fiscal house in order, we can have 
no sacred cows. Everybody's programs have to be on the table. We have 
to look at every program and prioritize in those programs. Yes, there 
is a significant increase in defense spending, but the increase in the 
defense spending is not as great as it had been projected it would be. 
In other words, the President has looked at the base, the defense 
spending base, and actually reduced that. If you don't believe me--you 
don't have to believe me on that. All you have to do is listen to some 
of the folks outside this building who advocate defense spending for 
programs they support. We are already hearing from a number of defense 
contractors, a number of people in the activity of supporting the 
Defense Department, that their contracts are being impacted because the 
defense budget has been reduced from what it was projected to be.
  The President has put defense on the table. Obviously, he has put 
nondefense

[[Page S1069]]

discretionary on the table; that is, all the other spending on the 
discretionary side in that he has limited the increase in these 
accounts to about 1 percent less than the rate of inflation. He has 
picked priorities. He has named 150 programs that he is either willing 
to reduce or actually eliminate. That is a courageous step on his part. 
The Congress doesn't have to stick with those priorities.
  There are some programs I have concerns about, which everybody else 
in this Chamber has talked about--this program or that program. But we 
have to acknowledge the basic goal of limiting nondiscretionary to an 
increase of 1 percent, which is a reasonable goal. And within that 
increase, we as a Congress can set the priorities. We don't have to 
accept all 150 programs the President sent up here as his suggestion 
for places where we cut or where we will reduce programs. We can pick 
other programs, but we do have to pick. That is our responsibility in 
governance.
  We have to be willing to step up to the table and say yes, there are 
priorities in times of a tight fiscal process. We have to make some 
difficult judgments, and those judgments should be subject to a 
limitation--a number on which we all agree. And, in my opinion, the 
President has picked a reasonable number, which is about a 1-percent 
rate of cut in these accounts.
  In the entitlement area, the President has also said we have to slow 
the rate of growth of entitlements. This chart, as I mentioned, shows 
that as being an absolutely critical decision. It is about time we do.
  He, of course, has suggested an entire national debate on the issue 
of Social Security. It is not part of this budget. In the Budget 
Committee, I don't have much impact on Social Security. It is outside 
our purview. But he also has been willing to step forward on a number 
of other entitlement programs--specifically Medicaid, where he has made 
a suggestion which I think makes a lot of sense as a goal. He 
essentially said, Governors, we will give you an increase that you can 
use for the purposes of bringing more kids into the Medicaid Program, 
which is what our goal should be under Medicaid, but the increase isn't 
going to be as great as you want. However, at the same time, we are 
going to give you dramatically more flexibility on how you spend that 
money.
  I don't know a Governor who is worth his or her salt in this country 
today who wouldn't be willing to get a little less money with a lot 
more flexibility and feel they can do a lot more effective job of 
delivering that money and getting services out to people who need 
Medicaid.
  I think it is a good proposal, the type of proposal we should embrace 
and say that is probably going to be very good policy.
  In any event, the difficulty of slowing the rate of growth of 
Medicaid and giving more flexibility to the Governors is one which I 
think we as a Congress can move forward and hopefully can be part of 
the budget.
  I don't get to make the decisions as Budget chairman. I don't get to 
make any decisions. The leader may make decisions, and the Senator in 
the chair. But as Budget Committee chairman, I theoretically put 
forward a budget--sort of a blueprint, the mark that people work off of 
for the rest of the year. The Budget Committee comes out with top-line 
numbers. Then it is up to the Finance Committee to do the mechanics of 
how that number is going to work.

  The President has laid out those specific ideas. But the Finance 
Committee is led by some very creative people. Senator Grassley is one 
of the most creative people around. He has a talented group of people 
who may come up with a different way to approach this. But we should be 
able to agree that the rate of growth of those entitlements should be 
slowed. The same is true in other entitlement accounts which the 
President has addressed. I congratulate him for that.
  There are two issues which have received a fair amount of attention 
from the press, and from the naysayers who gather around this Capitol 
talking about fiscal discipline, trying to use this basically as a 
straw-dog argument. I always ask these folks, Where is your idea? Where 
are you going to make your difficult decisions for controlling 
spending? You don't usually get that answered. What you usually get is 
this: He doesn't include the issue of the war costs; or, he doesn't 
account for his tax cuts; or, the tax cuts are too high.
  Let us address both of those issues.
  First, on the war costs, the war costs should not be in the basic 
budget. They should be accounted for, and we are going to account for 
them. They should be very visible and transparent, and they will be. 
But these are not one-time items. Unfortunately, they are not. They are 
certainly two- or three-time items, and they won't be occurring 4 or 5 
years out. This is a 5-year budget. The war will be over, hopefully, 
within a year or a year and a half when our need to put a lot of money 
into Iraq will drop dramatically. It is looking like that may be the 
case after these elections. We don't want to build into the base of the 
Defense Department the war costs so that 5 years from now we are giving 
the Defense Department all the money they are spending in Iraq as part 
of their base, because they are not going to need it.
  This argument that the war costs are not included is a straw dog. It 
simply is not a good approach to fiscal accountability. It is 
appropriate that we account for it, and we will. It is appropriate that 
it be highlighted, and it will be. But it shouldn't be built into the 
base of the budget if 3 or 4 years from now we would be spending a lot 
of money on defense which was spent on the Iraq war and it should not 
be spent any longer on defense; it should be spent on something else or 
returned to the taxpayers in tax cuts, which gets me to the second 
issue.
  You can't have it both ways, but some of our colleagues would like 
that. You cannot be opposed to the tax cut 2 years ago and then say 
taxes need to go up this year when the numbers show pretty distinctly 
two things.
  One, as I mentioned earlier, because of the tax cut the recession was 
shallower, more people got back to work quicker, more people had money 
in their pockets to spend sooner, and as a result the economy recovered 
faster.
  Two, tax revenues are up. They are up dramatically, and they are 
projected to continue to go up. They are up by 9.2 percent last year, 
6.5 percent this year, and headed toward 7 percent next year. They are 
headed to continue to grow at that type of compounding for the 
foreseeable future, which means tax revenues are headed back to their 
historical place as a percentage of gross national product, which is 
about 7.9 percent; and they are getting there because we have more 
economic activity as a result of having put in place tax laws which 
create an incentive for capital formation--jobs and economic activity.

  The tax cuts are working in generating more revenue. If you were to 
raise taxes now on top of this embryonic economic recovery we are 
experiencing, you would flatten the recovery. And as a result, you 
would probably be reducing revenue rather than raising revenue because 
the economy would start to slow down. It would be the absolute wrong 
policy.
  I await with great anticipation a budget from the other side of the 
aisle. I certainly hope they will put one out this year. They did not 
put one out when they were in charge of this place, and they didn't put 
one out last year, or the year before. I await with great anticipation 
to see the tax increases they will actually bring forward. Maybe they 
will be the same taxes or the exact same policy which we saw from 
Senator Kerry when he was in charge--not in charge. I should not say 
that, but when he was running for President. His proposal was to raise 
taxes on the highest income Americans and then spend the money, the net 
effect of which he was going to spend $1 trillion more than he would 
take in which would have aggravated the deficit by $1 trillion. That 
is, of course, a policy which, if those on the other side of the aisle 
want to continue to debate, we look forward to debating.
  The bottom line is this: The President has proposed a stringent, 
responsible budget which moves us toward reducing the deficit by half 
in the next 4 years. That is what we need to do.
  More importantly, the President has stepped forward on the key issues 
of the outyears--specifically Social Security and entitlement 
spending--to try to address so we can assure our children do not end up 
having to pay so

[[Page S1070]]

much in taxes in order to support us in our retirement years when they 
cannot live as good and as full of a life as we have had.
  I congratulate the President on his budget, and I look forward to 
working with this Congress in passing such a budget and moving toward 
fiscal responsibility in this country.
  I thank the Chair. I yield the floor.
  The PRESIDING OFFICER (Mr. Allen). The majority leader.

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