[Congressional Record Volume 154, Number 84 (Wednesday, May 21, 2008)]
[Senate]
[Pages S4590-S4602]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
THE BUDGET
Mr. CONRAD. Madam President, we are now considering the conference
report on the budget. For the knowledge of my colleagues, and
especially my colleague, Senator Gregg, I will consume somewhere in the
range of 35 minutes. If he has other things to do, we can get that word
to him so he is not inconvenienced while I make an opening statement.
Here is what we are confronting--a very dramatic deterioration in the
budget condition of our country. You can see, in 2007, the official
deficit was $162 billion; that is down from what had been record
levels. We achieved an all-time--not achieved, there is no achievement
to it--we saw an all-time record deficit in 2004 of $413 billion. That
became the record. The year before was the record up until that point--
$378 billion in the red. Of course, the real situation is far worse
because this does not disclose how much the debt has been increased.
Then we saw some improvement, to 2007, a deficit of $162 billion. But
now we are right back at record levels--$410 billion estimated for this
year. I believe it is going to be even worse, and 2009 will be about
the same level.
When I talk about debt, here is what I am talking about. The gross
debt of the United States has gone up like a scalded cat under this
administration. When this President came into office at the end of the
first year, the debt stood at $5.8 trillion. By the time we are done
with the 8 years he will have been responsible for, the debt will have
increased to more than $10.4 trillion--a near doubling of the debt of
the country. Increasingly, this money is being borrowed from abroad. As
this chart shows, it took 42 Presidents--all the Presidents pictured
here, 224 years to run up $1 trillion of U.S. debt held abroad. This
President has far more than doubled that amount in just 7 years. There
are over $1.5 trillion of foreign holdings of U.S. debt run up by this
President in just 7 years. He has taken what 42 Presidents took 224
years to do and he doubled it and then added another 50 percent to
foreign holdings of U.S. government debt. The result is we owe Japan
over $600 billion, we owe China almost $500 billion, we owe the United
Kingdom a little over $200 billion, we owe the oil exporters over $150
billion. My goodness, we owe Hong Kong over $60 billion. We now owe
Russia over $40 billion. That is a sad fiscal record, but that is the
legacy of this President's fiscal policy.
This tremendous runup in foreign debt means we have spread dollars
all over the world and are now increasingly dependent on the kindness
of strangers to finance our debt here. One of the results of that has
been a substantial drop in the value of our currency. If you think
about it, the value of a currency is in part a reflection of supply and
demand. When you put out a tremendous supply of dollars, guess what
happens to the value of the dollar--it goes down. That is what has
happened.
You can see back in 2002, this is Euros per dollar. It was 1.13 in
January 2002. Through the end of last month, we were down to .63. The
value of the dollar against the Euro has dropped like a rock. It has
dropped 44 percent.
If anybody is wondering why food prices are going up so rapidly, why
oil prices are going up so rapidly, here is one of the key reasons.
Those commodities are sold in dollar terms in the world market. When
the dollar goes down in value, guess what happens to the value of
commodities: there is tremendous upward pressure on their value. That
is what, in fact, has happened.
We have also seen the economic growth of the country stagnate. You
can see, if we look at the nine previous business cycles we have
experienced since World War II, you can see that economic growth
averaged 3.4 percent a year during previous business cycle expansions.
But, if we look at average annual economic growth since the first
quarter of 2001, we see it is stagnating at 2.4 percent.
Something is happening in this business cycle that is unlike what we
have seen in the nine major business cycles we have seen since World
War II. We see this recovery is much weaker. We see it in job creation;
we see it in business investment.
For example, on job creation, if you look at job creation, again
looking at
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the nine previous business cycles since World War II, and you look at
the months after the business cycle peak and look at job creation--this
dotted red line is the average of the nine other major business cycles
since World War II--that is the dotted red line. Now, this other line
is the current business cycle. You can see that we are 10.3 million
private sector jobs short of the typical recovery since World War II.
In other words, if you take all the previous nine major business
recoveries since World War II and you average them, compare them to
this business recovery, we are running 10.3 million private-sector jobs
short in this recovery.
What does that tell us? That tells us something is wrong, something
is wrong with our economic performance.
We don't just see it in job creation. We see it in business
investment. Again, the dotted red line is the average of the nine
previous recoveries since World War II. The black line is this
recovery. You can see that we are now running 59 percent below the pace
of business investment at the same point during the nine previous
recoveries. Something quite significant is happening in terms of our
national economy. Anybody who does not see this and understand it and
seek to find solutions to it, I think is missing the point. There is
something wrong with the underlying economy that has been affecting us
since 2001. It is so atypical, it is so different than the other nine
recoveries since World War II.
This budget resolution seeks to address some of what we know. It
seeks to strengthen the economy and create jobs in several different
ways, first, by investing in energy, education, and infrastructure. We
think those are priorities to strengthen the economy. It expands health
care coverage for our children; it provides tax cuts for the middle
class; it restores fiscal responsibility by balancing the budget by the
fourth and fifth year of this 5-year budget plan.
It also seeks to make America safer by supporting our troops, by
providing for veterans health care, by rejecting our homeland and
rejecting the President's cuts in law enforcement, the COPS Program,
and for our first responders, our emergency personnel, our
firefighters, our emergency medical responders.
In terms of the tax relief that is in this budget resolution, this
budget conference report that has come back from an agreement with the
House of Representatives, we do the following things. We extend middle-
class tax relief, specifically: the marriage penalty relief is provided
for; the child tax credit is provided for; and an extension of the 10-
percent bracket.
We also provided for alternative minimum tax relief, because we know
if we did not, the number of people who would be exposed to the
alternative minimum tax would explode from roughly 4 million now to 26
million if we failed to take action.
We also provided for estate tax reform. Right now we are in this
bizarre situation where the estate tax goes up to $3.5 million of
exemption per person in 2009; the estate tax goes away completely in
2010, there is no estate tax; and then in 2011, it comes back with only
a $1 million exemption. We say that makes no sense at all. We should
extend the $3.5 million provision per person, $7 million a couple, and
index it for inflation.
We also provided for energy and education tax cuts to provide
incentives to develop alternative forms of energy and reduce our
dependence on foreign oil. We also provided property tax relief and, of
course, the popular and important tax extenders, things such as the
window energy credit, the solar credit, the research and
experimentation credit. All of those are provided for in this budget.
We balance the books by the fourth year, $22 billion in the black, or
in this case in the green, by 2012. By 2013 we maintain balance, all
the while we are bringing down the debt as a share of gross domestic
product from 69.3 percent of GDP to 65.6 percent of GDP in 2013. So we
are bringing down the debt as a share of gross domestic product each
and every year of this budget resolution. Let me be the first to say,
that is not enough. We need to be doing more. I will say in a minute
how I think we can and should do more. But this is an important
beginning.
One of the ways we do it is we restrain spending. Under this budget
conference report, we bring down spending as a share of GDP each and
every year of the 5-year plan from 20.8 percent of GDP down to 19.1
percent in 2012 and 2013.
The other side will be quick to say, but you are spending more money
than the President is. That is true, we are spending somewhat more
money than the President, because we have rejected his cuts to law
enforcement, to our first responders, and to other things we think are
priorities of the American people.
But when they talk about the difference in spending, they have a
tendency to dramatically overstate the difference. Here is the
difference between our spending line, which is in green, and the
President's spending line. If you are looking at this on television,
you probably cannot see any difference. That is because there is almost
no difference between our spending line and the President's spending
line.
In fact, for this year, the difference in total spending between our
budget and the President's budget is 1 percent. That is the difference,
1 percent. Over the life of this 5-year plan, you can see it is a very
modest difference.
Let me turn to 2009, because that is the most immediate year covered
by this budget plan. You can see the Bush budget calls for $3.03
trillion of spending. We call for $3.07 trillion of spending. Again the
fundamental differences are, we are investing in education, in energy
to reduce our dependance on foreign oil, and on infrastructure which is
so critically important to our future economic success.
On the revenue side of the equation, we also have somewhat more
revenue than the President's plan because we have lower deficits and
lower debt than the President's plan. Here you can see the difference.
The green line is our revenue line; the red line is the President's
revenue line. You can see in the first 2 years there is virtually no
difference between our revenue lines; they are right on top of each
other. In 2011 there is a slight difference, and 2012, 2013, as we
climb out of deficit and balance the books.
But again the differences are quite modest, and here they are over
the 5 years. We are calling for $15.6 trillion of revenue, the
President is calling for $15.2 trillion of revenue. That is a
difference of 2.9 percent. That is the difference between the revenue
we have proposed, which leads to lower deficits and lower debt than the
President's plan.
You will hear our friends on the other side say, this represents the
biggest tax increase in the history of the world. We beg to disagree.
We do not think any tax increase is necessary to meet these numbers. If
someone is listening and they heard me say, well, Senator, you said you
have got more revenue, although it is only 2.9 percent more revenue,
than in the President's plan, but you say you can do that without a tax
increase, how is that? How can you do that?
Well, here is how I would propose to do it. First, the Internal
Revenue Service estimates the tax gap, the difference between what is
owed and what is paid, is $345 billion a year, the difference between
what is owed and what is paid.
Now the vast majority of us pay what we owe. But unfortunately there
are an increasing number of people and companies who do not pay what
they owe. That difference is now estimated at $345 billion a year. That
goes back to 2001. I personally believe it has grown substantially
since then so it would be a higher number. But that is not the only
place where there is leakage in the system. I have shown this chart
many times on the floor of the Senate. This is a five-story building in
the Cayman Islands called Ugland House. This little building down in
the Cayman Islands is the home to 12,748 companies. Let me repeat that.
This little five-story building down in the Cayman Islands is the home,
at least they say it is their home, to 12,748 companies. They say they
are all doing business out of this building.
Now I have said that is the most efficient building in the world,
little tiny building like that, and it houses 12,000 companies. How can
any building be that efficient? Well, we know they are not doing
business there. They are doing monkey business, and the monkey business
they are doing is to avoid
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taxes in this country. And how do they do it? Well, they operate
through a series of shell corporations, and they show their profits in
the Cayman Islands instead of the United States to avoid taxes here.
Why would they do that? Do they not have taxes down in the Cayman
Islands? No. Is that not convenient? So they do not show their profits
here, even though they make their profits here, they show their profits
down in the Cayman Islands. That is the kind of scam that is going on.
If you doubt it, here is a story that came to us from the Boston Globe
on March 6 of this year:
Shell companies in the Cayman Islands allow KBR [that is
Kellogg, Brown and Root] the nation's top Iraq war
contractor, and until last year a subsidiary of Halliburton,
has avoided paying hundreds of millions of dollars in Federal
Medicare and Social Security taxes by hiring workers through
shell companies based in this tropical tax haven.
More than 21,000 people working for Kellogg, Brown and Root
in Iraq, including about 10,500 Americans, are listed as
employees of two companies that exist in a computer file on
the fourth floor of a building on a palm-studded boulevard
here in the Caribbean. Neither company has an office or phone
number in the Cayman Islands, but they claim it is their
home.
This is a scam. That is what is going on here. This is the largest
defense contractor in Iraq, and they are engaged in a total scam to
avoid taxes in this country. If this does not make people angry, I do
not know what it would take, because what they are doing is they are
sticking all of the rest of us who are honest with our tax obligations.
It does not stop there.
Here our own Permanent Committee on Investigations issued this report
last year:
Experts have estimated that the total loss to the Treasury
from offshore tax evasion alone approaches $100 billion per
year, including $40 to $70 billion from individuals, and
another $30 billion from corporations engaging in offshore
tax evasion. Abusive tax shelters add tens of billions of
dollars more.
So when somebody says: Well, you have got to raise taxes to produce
2.9 percent more revenue than the President has called for, I say, no,
you do not. Let us go after some of this stuff. Let us go after these
offshore tax havens. Let us go after these abusive tax shelters. Let us
go after this tax gap.
Now, the other side will say, well, there is nothing you can do about
it. Well, certainly there is nothing you can do about it if you do not
try. You cannot do a thing if you do not try. But if you try, you can
get this money. Let me say, I know you can, because I used to be the
tax commissioner for my State. I was the chairman of the Multistate Tax
Commission. I went after this money. I got hundreds of millions of
dollars for my little State of North Dakota going after some of these
scams. The United States could do much more.
Here is a picture of a foreign sewer system. This is a sewer system
that is in France. Why do I put up a picture of a sewer system in
Europe when I am talking about the budget of the United States? Well,
because the two have a linkage. What is the linkage? The connection is
that we actually have investors in this country buying European sewer
systems, not because they are in the sewer business, no, no, no. They
are buying European sewer systems to reduce their taxes in this
country. How do they do it? It is very simple. They go over, they buy a
European sewer system, they then show that on their books as a
depreciable asset. They depreciate it over a period of years to reduce
their taxes in this country, and then lease the sewer system back to
the European city or municipality that built it in the first place.
Now, why should we allow that? This is the kind of thing I think we
can shut down and easily achieve 2.9 percent more revenue than the
President has proposed. The question comes, well, why haven't you done
something about shutting down these scams already? There is a very
simple reason we have not. It is called the President of the United
States. Because the President of the United States has repeatedly
blocked attempts to shut down these scams.
Here are a few of the examples. We tried to codify economic
substance, prohibiting transactions with no economic rationale, things
that were done solely to avoid taxes. The President threatened a veto.
We tried to shut down schemes to lease foreign subway and sewer
systems and depreciate the assets in this country. The President
threatened a veto.
We proposed ending deferral of offshore compensation by hedge fund
managers trying to evade taxes in our country. The President threatened
to veto it.
We proposed expanding broker information reporting so we could close
down some of this tax gap. The President threatened a veto.
We proposed taxing people who give up their U.S. citizenship in order
to evade taxes here in America. The President threatened a veto.
Now, I have indicated, I have acknowledged, we have 2.9 percent more
revenue in our plan than in the President's budget.
The other side will say: Biggest tax increase in the history of the
world. That is exactly the same speech they gave last year. Now we have
the benefit of a record. Because we can look back, we can look at the
speeches they gave last year, and we can look at what has actually
happened this year. We can see, what did this Democratic Congress do?
Did they raise taxes? No. In fact, here is precisely what happened:
They reduced taxes in the House and the Senate by $194 billion. They
had offsetting loophole closers, for a net tax reduction of $187
billion.
Anybody who is listening can reality test. Just go to your mailbox.
Have you gotten a little check from the U.S. Treasury representing a
tax cut as part of a stimulus package? Millions of Americans have, and
millions more will. That is part of this $194 billion of tax reduction
that has occurred with Democrats running both Houses, despite claims of
our colleagues on the other side that we were going to have the biggest
tax increase ever.
We all know some of the things that are happening in this economy.
One is that gasoline prices are soaring. I filled up my car last week.
I have a 1999 Buick. I know people think all Senators have limousines
and drivers. Not me. I have a 1999 Buick that I drive myself. I filled
it up last week, $52.19. The price of gasoline has soared.
In January of 2001, gas was $1.47 a gallon; in May of 2008, $3.79. We
are hearing by Memorial Day gas average $4 nationwide. We have
addressed that in this budget by investing in energy, creating green
jobs, reducing dependence on foreign oil, and strengthening the
economy.
We have provided for energy tax incentives in this budget. We have
provided for $2.8 billion over the President's budget for energy to
provide for alternative sources of energy, homegrown sources of energy
so we are less dependent on foreign oil. We have also created an energy
reserve fund to invest in clean energy and the environment. But we know
skyrocketing gas prices are not our only problem.
We also know if we look at what is happening to education, we are
falling behind our global competition. This is one metric to look at
that, the number of engineering degrees in China and the number of
engineering degrees in this country. The red line is China's
engineering degrees. You can see they are absolutely soaring. There are
over 350,000 a year graduating as engineers in China. In this country,
we are down here at about 75,000 engineering graduates. Engineering is
critical to future economic growth. We know that. So that has to be a
concern. Here, China is now graduating 350,000 engineers a year; we are
in the 75,000 range. That is something we have to pay attention to.
Obviously, I have used one example. There are many others.
This budget resolution invests in education to generate economic
growth and jobs, to prepare our workforce to compete in a global
economy, to make college more affordable, and to improve student
achievement. We have provided for education tax incentives to encourage
people to go to college. We have provided $5.5 billion over the
President's budget in discretionary funding for education, and we have
created an education reserve fund for school construction and for the
reauthorization of the higher education legislation.
It doesn't stop there. We also have serious infrastructure issues in
this country. Here is a picture of the dramatic collapse of the bridge
on 35-W between Minneapolis and St. Paul last year. I am acutely
familiar with this bridge because when my wife was in
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medical school, I went across that bridge many times a week. Can you
imagine the absolute horror of the people who were on that bridge? Here
are the cars of people who were on that bridge when it fell out from
underneath them. This was at rush hour last year, one of the most
heavily used bridges in the State of Minnesota.
This budget seeks to address infrastructure by providing targeted
investments to repair crumbling roads and bridges, improve mass
transit, expand airports and schools. It creates a reserve fund to
allow for major infrastructure legislation. It provides $2.5 billion
more than the President for key discretionary transportation accounts.
It fully funds highways, transit, and increases funding for the Airport
Improvement Program.
This budget resolution also deals with other critical national
priorities, including fully funding the defense requests of the
President. The President has asked for $2.9 trillion over the next 5
years. This budget provides $2.9 trillion. We also provide $3.3 billion
more for our veterans health care than the President. The President has
called for $44.9 billion over a 5-year period. We have adopted the
independent budget, which is a budget that was put together by the
veterans organizations to more fairly reflect the needs we see coming
because of veterans coming back from Iraq and Afghanistan. We have
allocated $3.3 billion more than the President for that purpose. We
think we owe these veterans the high-quality care they were promised.
All of us who have been to our VA hospitals, who have been to Walter
Reed, are acutely aware of the need for more investment in those
facilities. We have also provided in this budget, in fiscal year 2009,
$2.8 billion more than the President's budget for law enforcement and
first responders. Inexplicably, at least to this Senator, the President
has called for the complete elimination of the COPS Program. The COPS
Program has put 100,000 police officers on the street, over 200
officers on the street in my home State of North Dakota. The President,
in his budget, didn't just call for cutting that program. He called for
its total elimination. It makes no sense to me. I just had my house
here broken into while I was back home during the break. I have a
fellow who rents from me in the basement. He came home from work and
our place had been broken into. The place was totally trashed. Many of
his things were stolen. Why we would take police off the street when,
in jurisdiction after jurisdiction, we are facing heightened criminal
activity doesn't make any sense.
I am getting to the end. I know my colleague has been riveted
listening to me talk about these charts. He has only had a chance to
see them maybe 12 times. I thank him for his patience.
We also have budget enforcement in the budget resolution,
discretionary caps for 2008 and 2009. We maintain a strong pay-go rule
that I know my colleague will probably want to comment on. We also have
a point of order against long-term deficit increases, a point of order
against short-term deficit increases. We allow reconciliation for
deficit reduction only. I know this is a place where my colleague will
agree. I am sure he is pleased that we don't have a reconciliation
instruction in this conference report for any other purpose, and we
have no reconciliation instruction for any purpose.
We also have a point of order against mandatory spending on an
appropriations bill. Again, this is something the Senator will strongly
support because we have seen the games that were beginning to be played
when the appropriators figured out they could start to do that. We
tried to shut it down or at least to create a budget point of order,
maintain a budget point of order to prevent that practice from
expanding.
The budget conference report also addresses long-term fiscal
challenges. I don't want to overstate this because, the truth is, I
don't believe an annual budget resolution is the place to deal with the
long-term fiscal challenges facing the country. The annual resolutions
tend to be done on a partisan basis. Our fiscal challenges are so big,
so deep, my own conviction is this has to be done with a special
process, a special procedure.
The Senator, who is the ranking member of the Budget Committee, and I
have teamed up to offer our colleagues legislation that would create a
bipartisan task force that would be responsible for coming up with a
plan to deal with our long-term challenges, our fiscal challenges, the
imbalance between spending and revenue, and the overcommitments we have
made on the entitlement programs.
The proposal we have made is very different from what others have
made because our proposal would require a vote in the Congress, not
another commission report that sits on a dusty shelf somewhere. That is
not going to cut it. We need a plan. We need a plan that is bipartisan.
We need a plan that gets a vote. The Senator and I have a plan to do
that.
While we are getting ready for that process to occur--and I hope it
will--we have provided for a comparative effectiveness reserve fund to
deal with health care, a health information technology reserve fund--
the Rand Corporation has told us we could save $80 billion a year if we
had information technology widely deployed in the health area, program
integrity initiatives to crack down on waste, fraud, and abuse in
Medicare and Social Security, and a long-term deficit point of order to
guard against legislative initiatives that would increase the long-term
deficit.
Finally, as I mentioned, Senator Gregg and I have a proposal to
address these long-term imbalances, a panel of lawmakers and
administration officials with an agenda of everything being on the
table, with fast-track consideration, and a requirement that Congress
must vote. If the members of this task force, at least a supermajority
of them, were to agree on a plan, that plan would come to Congress for
an assured vote and a further assurance that there would be a
bipartisan outcome because we would require not only a supermajority of
the task force to report a plan but a supermajority in Congress to pass
it as well.
Before surrendering the floor, I thank Senator Gregg for his many
courtesies and the very constructive way that he has helped run the
Committee on the Budget throughout this year. He is a gentleman, a
person of honor whose word is gold. I deeply appreciate that. I also
appreciate very much the professionalism of his staff.
I yield the floor.
The PRESIDING OFFICER. The Senator from New Hampshire.
Mr. GREGG. Madam President, first, I thank the chairman of the
committee, the Senator from North Dakota, for his generous comments and
reciprocate by saying it is a pleasure to work with him. Obviously, we
have disagreements or we wouldn't be in different parties. That is the
purpose of democracy. You have disagreements and reach some conclusion
that, hopefully, is constructive for all.
The budget, unfortunately, tends to be a uniquely partisan statement
of a party's political positions. Therefore, it is more difficult to
reach agreement, especially when the Congress has both Houses of the
same party. But that doesn't mean you can't do it in a cordial and,
hopefully, constructive way, have your disagreements, and make your
points.
I appreciate that the Senator from North Dakota has always been
cordial and professional and constructive, as has his staff, to say the
least.
I don't want to start off with too much hat tipping to the Senator
from North Dakota; I don't want to get carried away. Let me simply say
this: It is important that the Congress have a budget. It is uniquely
the Congress's responsibility to have a budget. Although the
President's budget gets soundly beaten about the ears here, the
President's budget is not a factor in the sense that it is part of the
congressional budget process.
The congressional budget is uniquely an entity of the Congress. The
Congress passes it. It does not go to the President for his signature.
The elements of the budget which are most important, such as the
allocations to the Appropriations Committee, such as reconciliation
instructions, are uniquely the purpose of the Congress as a way of
giving a blueprint and defining spending and tax revenues within the
fiscal policy of the Congress.
The Congress retains, under the Constitution, the right to the purse
strings, and the budget is an element of exercising that right. So
although the
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President sends up a budget under the Budget Act, that budget rarely,
if ever, becomes law. I am not aware it has ever become law. It is
simply a point for discussion. When you have a Democratic Congress and
a Republican President, it tends to be discussed less other than in
opposition by the Congress.
So this budget is totally the responsibility of the Democratic
Congress. It is passed by the Democratic membership of the Congress,
not by the Republican membership of this Congress, and the President's
input is at the margins, to say the least. But it is important there be
a budget. Even though I may strongly disagree with it, I do think it is
the responsibility of the Congress to do a budget.
Thirdly, as a note of appreciation, I do thank the Senator from North
Dakota for his insistence that reconciliation instructions not be
included in the bill. Reconciliation is an extraordinarily strong
hammer which is contained within the Budget Act which allows basically
the Budget Committee to, hopefully, control the expansion of
entitlement programs. Unfortunately, last year, it was used to expand
Government, not to control the rate of expansion of Government, and
that was a mistake, a serious mistake that undermined, in my opinion,
the integrity of the act. I am glad we are not doing it this year, and
I appreciate the Senator from North Dakota insisting on the Senate
position on this issue.
To address the budget specifically, this budget, as it is brought
forward by our colleagues, by the Democratic membership, is a ``back to
the future'' budget. You hear Senator Obama say he wants change. Well,
this is ``back to the future'' change. It is essentially a restatement
of things which always happens under a Democratic Congress. It says:
Yes, we can raise taxes and a lot of taxes. It says: Yes, we can
increase spending and a lot of new spending. It says: Yes, we can run
up the debt and a lot of new debt. It says: Yes, we will not address
entitlements and the fact that entitlement spending is a major threat
to our fiscal integrity.
It is a ``back to the future'' budget. The term ``tax and spend''
exists. It may be trite, but it exists because it is accurate. This
budget has the largest increase in taxes in the history of the world.
It has one of the largest increases in spending. It has a $500 billion
increase in entitlement spending, a $200-plus billion increase in
discretionary spending. The debt goes up $2 trillion under this budget.
And it is on the watch of the other party. Those are policies of the
other party that are being put in place, and they are not good
policies. They are not healthy. They are not constructive for the
American people.
The budget, as I outlined, has the largest increase in taxes in the
history of this world, especially this country, and it has an impact on
working Americans. You hear a great deal, especially from Senator
Obama, who is the presumptive nominee now of the Democratic Party after
last night, that he is going to raise taxes to pay for all his
programmatic activity, but he is only going to raise it from the
wealthy.
Well, this budget does not assume, to begin with, most of the
proposals by Senator Obama to spend money, but it does assume a tax
increase. It assumes a $1.2 trillion tax increase, and that tax
increase cannot be paid for only by wealthy Americans. If you take the
top tax rate in America, and you raise it back to the top tax rate
under the Clinton years, which would be 39.5 percent, every year you
will add $25 billion of new revenue to the Federal Government, assuming
people do not try to avoid taxes and reduce their tax liability, which
wealthy people tend to do because they get accountants to show them how
to do that. Well, that does not come anywhere near covering the
additional taxes which are proposed in this budget, the $1.2 trillion--
the $25 billion a year.
No, it is the families who are going to pay that. Forty-three million
families in America will be hit under this budget, in the year 2011,
with a tax increase of $2,300 or more. Those are working families, by
the way. A family of four making $50,000 will have a $2,300 tax
increase.
Seniors. Eighteen million seniors under this budget, in 2011, will
see a $2,200 tax increase. Small businesses--the engine for economic
activity, the engine for jobs in this country--27 million small
businesses will see a $4,100 increase. There will be 7.8 million people
brought onto the tax rolls who were taken off the tax rolls by
President Bush. These are low-income individuals who no longer have to
pay taxes as a result of the tax policies of the early 1980s. Those tax
policies, by the way, worked. They worked. Yet there is tremendous
opposition around here from the other side of the aisle to continuing
those tax policies, as this budget points out.
The capital gains--I think we have a capital gains chart in the
Chamber--the capital gains revenues during the last 4 years have jumped
dramatically--dramatically--as a result of getting a capital gains rate
which Americans feel is fair and are willing to pay. In fact, over $100
billion has been collected in the last 4 years from capital gains--$100
billion--more than was expected to be collected by the Congressional
Budget Office.
Now, why is that? Why, when we cut the capital gains rate down to 15
percent, did we get more revenue? Well, as I have said before on the
floor of the Senate, it is called human nature. If you say to somebody:
We are going to give you a fair tax rate on your capital gains income,
people will do things that generate capital gains. People do not
necessarily have to do anything to generate capital gains. If you own a
stock or you own a home or you own a small business and you feel the
capital gains rate is too high, you would not want to sell that stock,
home or small business because you would not want to pay all that money
to the Government. But if the Government sets a fair capital gains
rate--15 percent--then you say: All right, I will pay that tax in order
to turn over that stock, in order to sell my business, in order to sell
my home. I am willing to take that tax rate.
So people go out and they do things which generate economic activity.
They generate capital gains. That generates revenue to the Federal
Government. That is what has happened here. We have generated
significant amounts of revenue we did not expect because people were
willing to undertake activity which was taxable.
It has a second very positive effect, besides getting a lot of
revenue in the Federal Government. A low capital gains rate--a
reasonable capital gains rate--causes people to invest their money more
productively. They go out and they take risks. Entrepreneurs take
risks. Job creators take risks. Small businesses are started and jobs
are created as a result of money being invested in a way that generates
more jobs. It generates more activity, more entrepreneurship, more
jobs.
This bill assumes the capital gains rate will be doubled. This bill
assumes the rate on dividends may be more than doubled, depending on
what your bracket is. This bill is a massive tax increase on working
Americans and seniors. By the way, it is senior citizens who take the
most advantage--and that is logical--of capital gains and dividend
income. Most seniors have a fixed income. It is a dividend income. It
usually comes from a pension they are getting or they invested in while
they were in their working years or they have a home they sold, so they
have a capital gains.
So the idea in this bill, which is to end the capital gains rate as
it presently exists and raise it and to end the dividend rate as it
presently exists and doubling it, that idea is going to
disproportionately hit senior citizens. It is not going to raise the
revenue that is projected in the bill because people are going to take
tax-avoidance action.
But because of the way CBO scores things--it is static around here;
there is no dynamic scoring--they claim this is going to raise all this
revenue. It will not. But the fact is, those tax increases will slow
this economy and damage working Americans and working families, as was
shown by the prior chart. That is not fair.
Now, my colleague on the other side of the aisle will argue--and he
argues all the time--that, no, we are not going to have a tax increase,
even though the tax increase in the bill is the exact amount of money
that CBO scores the ending of the capital gains rate and its increase
and the ending of the dividend rate and its doubling--the exact amount
of money that generates by CBO scoring.
[[Page S4595]]
So CBO at least is presuming, and the Democratic Party in setting
forward this budget is taking advantage of, revenues that are expected
to come from a significant increase in capital gains rates, dividend
rates, and general rates. But we hear from the other side: Oh, we don't
have to do that. We don't have to do that. They try to fudge this issue
by claiming: We are going to collect this all from the tax gap.
As to the tax gap--the Senator from North Dakota probably went on for
15 minutes showing us buildings here and buildings there and subway
systems here and subway systems there. Well, do you know something. We
had testimony which totally rejects that. The Commissioner of the IRS
came in and said: You couldn't possibly collect the type of dollars
that are represented in this bill in tax increases from closing the tax
gap. You can claim it in theory, but it will not happen in practice.
This canard, so to say, has been used for years--years.
In 1987, the Senator from North Dakota said: I pound away at the need
for a share. He said: That includes the tax gap between what is owed
and what is paid. He said that in 1987.
In 1990, he said: It is both fiscally irresponsible and insulting to
the vast majority of honest taxpayers in this country if we fail to tap
this revenue from those who have not complied.
Then again, last year, he said: If we collect 15 percent of the tax
gap, it would be over $300 billion, and that alone would come close to
meeting the revenue needs under our budget.
That was last year's budget, by the way. How much did they collect
from the tax gap? Zero. How much did they collect from the tax gap in
1987, when he first made this statement? Zero. How much did they
collect in 1990, when he made the statement again? Zero. Throughout the
1990s, through the 2000s, the tax gap is not being closed.
In fact, instead of being closed, last year, they cut the funding to
the IRS, those elements of the IRS who would most logically be people
who would go out and collect extra money if it was owed. So this whole
tax gap thing is nice rhetoric, but it has no substance, and it is not
defensible on its face in light of the numbers in this bill. What is in
this bill is the largest increase in taxes in the history of this
country--$1.2 trillion.
Now, there is, in addition, the issue of the debt. The Senator from
the other side is fond of pointing to the President, saying: He has
increased the debt this much, he increased the debt this much. Yes, the
debt has gone up significantly. I do not like that. Nobody likes that.
But you cannot wash your hands of it when you produced the budget last
year that added $200 billion to the debt--well, $400 billion it was
going to add to the debt. I am sorry. I misstated. Over $400 billion
will be added to the debt for the first Democratic Congress's budget--
$400 billion. This budget presumes another $370 billion to that debt.
So this wall of debt chart--yes, the President of the United States,
because he put forward budgets that increased the debt, deserves some
significant responsibility here, but so do our colleagues on the other
side of the aisle who are producing this budget. There is $2 trillion
of new debt added to the wall of debt under the Democratic budget.
You could reduce that. You could reduce that by not spending so much
money, which gets us to the next point. The spending in this bill goes
up significantly. We passed the trillion-dollar threshold--$1 trillion
of discretionary spending--in this bill.
Now, I suggested--and I agree it would maybe be a statement more of
an attempt to make a point than a substantive event, but I suggested we
set spending limits in this bill which would keep discretionary
spending under $1 trillion. That would have meant that instead of
increasing spending in this bill, as the Democratic proposal does, by
$24.5 billion next year--which, by the way, is the 1-year number that
goes up over 5 years and represents over $200 billion in new
discretionary spending--they would have only been able to increase
spending by $10 billion and then they would have stayed under the $1
trillion limit. But they couldn't even do that. I mean the desire to go
out and spend is a genetic effect; it is a genetic existence in the
Democratic position. That is why we have different parties. They
believe the Government is better when it is bigger. They believe the
Government is better when it takes your money and spends it. They
believe Government knows how to spend your money better than you do and
therefore, when they are in control--which they are and which they have
been--they significantly raise your taxes and they significantly
increase spending.
This budget isn't any different. As I said, it is back to the future.
Is this change? It is change that takes us back to where we were when
we had the last Democratic Congress. Significant increases in spending,
and the budget doesn't even account for most spending which we know is
coming down the pike which has already been signed on to by the
majority of this party on the other side of the aisle.
For example, we have pending in the wings later today or tomorrow a
supplemental that is going to add spending in the area of unemployment
insurance of $15 billion, spending in the area of veterans of $54
billion. We have a farm bill coming at us that is a $300 billion bill.
We have an AMT fix which this budget claims to pay for, but which we
know won't be paid for, of $70 billion. The numbers go up and up and up
and up, the debt goes up and up and up and up, the spending goes up and
up and up, and the taxes go up and up and up. There can be no denying
that. It is the way it is. I understand there is a difference of
opinion, but I think it ought to be admitted to by the other side.
There shouldn't be an attempt to obfuscate it by claiming we are going
to get taxes from the Oz somewhere behind the curtain. The tax revenues
are going to come out of working Americans. It shouldn't be claimed we
are going to generate a reduction in spending when we are generating an
increase in spending, and a fairly significant one. The other side of
the aisle holds up this chart and says there is no real difference
between the President's number and our number. ``Ours is a 1 percent
difference.'' But 1 percent on $3 trillion is $300 billion. I don't
know where they come from, but $300 billion is a huge amount of money--
a huge amount of money.
Mr. CONRAD. Would the Senator yield on the math?
Mr. GREGG. I would yield.
Mr. CONRAD. I say to the Senator a 1-percent difference is a 1-
percent difference, whatever the denominator is. One percent is a very
small amount of money. I think the Senator would acknowledge that 1
percent difference is--
Mr. GREGG. I reclaim my time then. The point is I don't consider $300
billion a small amount of money. Now, maybe it is a small amount of
money in North Dakota, but I do know that $300 billion would run the
State of New Hampshire for I think approximately 10 years. Maybe it
would only run the State of North Dakota for a couple of years, because
I know you have big budgets up there, but I think it is a lot of money,
$300 billion. So that is--
Mr. CONRAD. Would the Senator yield for one more moment on the
numbers? One percent of $3 trillion, I think the Senator would
acknowledge, is not $300 billion, it is $30 billion?
Mr. GREGG. Well, Madam President, I am happy to reclaim my time.
Thirty billion dollars is a lot of money in New Hampshire. It would run
the State for 10 years.
Mr. CONRAD. But would the Senator acknowledge that the $300 billion
that he referenced is simply not accurate.
Mr. GREGG. No, I wouldn't, because $300 billion is a 5-year number.
But I thank the Senator for making it clear that he agrees with the
fact that $30 billion is a lot of money. Maybe he doesn't agree that
$30 billion is a lot of money. I think $30 billion is a lot of money.
Mr. CONRAD. I would say--
Mr. GREGG. I have the time, Madam President. I have the time.
So we are talking about big dollars, real dollars and lots of new
spending. Under any scenario, we are talking a number which is going to
drive large tax increases not only next year but in the outyears for
working Americans in this country, and it is not right to do that to
them, in my humble opinion--well, in my opinion. It is not necessarily
humble. I apologize.
There is another point here that needs to be made, which is there is
a claim in this budget that they have put
[[Page S4596]]
in some sort of enforcement mechanisms called pay-go. They keep
returning to pay-go as an enforcement mechanism. To begin with, they
have waived pay-go, adjusted pay-go or manipulated pay-go on at least
17 different occasions for well over $175 billion in new spending. Pay-
go is only used as a vehicle to try to increase taxes. If somebody
wants to cut your taxes, they will claim pay-go and you have to
increase somebody else's taxes to do that. But when it comes to
spending around here, as we saw with the farm bill that rolled through
here, pay-go has no relevance at all. It is adjusted by changing years.
It is adjusted by moving numbers around. It is adjusted by, as in the
SCHIP bill, artificially ending a program when you know the program is
not going to end. It is scammed. So there is no credibility to claiming
pay-go is in this bill.
Furthermore, real pay-go isn't even in this bill. Real pay-go says
you match the year of the spending to the year of the cost, the year it
is going to be offset against. This bill doesn't do that. The first
year of pay-go under this bill--- you can claim you are going to offset
a new spending program in the fifth year under this bill. So you game
that system right to the end.
Then there is the alleged tax proposal in this bill--the Baucus
amendment, as it is referred to. Well, we went through this exercise
last year. The Baucus amendment was brought forward last year and the
other side of the aisle put out a lot of press releases claiming they
had extended the tax cuts within the Baucus amendment which included
things such as the childcare tax credit and the spousal marriage
penalty and I think R&D tax credit. They did a lot of press on that and
there was a great deal of fanfare after they took the vote on the
budget that claimed they were going to pass a bill which would
accomplish these tax cuts, extending them. Where is the bill? Where is
the bill? It never passed. There were no extenders passed. The whole
amendment turned out to be a fraud. So they--well, it worked so well
last year with the press release, they have done it again this year.
They have done it again this year. They have claimed they are going to
pass those extenders, which they didn't do last year, and they may do
it this year, I don't know. I haven't seen anything yet that implies to
me they are going to do it. But if they did do it, just to make darn
sure that it actually never had any serious effect, they put language
in the bill which basically creates a Rube Goldberg system where they
take back the tax deductions if a deficit occurs. Well, they know a
deficit is going to occur because they have already put in place
spending initiatives which exceed the alleged surpluses they have in
this bill. Just the veterans benefit we are going to vote on tomorrow
theoretically, and which will pass here at some point, is going to
knock out the alleged surplus. So all of these alleged tax extenders
which theoretically they are going to pass and at least they are going
to put press releases out on are not going to occur, because they put
language in this budget which says if there is a deficit, those tax
extenders are recaptured, and they end. They come to an end.
So this budget is obviously, from our point of view--and it is our
point of view. It is not their point of view. I don't argue with the
fact that they believe they have put together a great budget. I mean in
their mind, in the mind of the person who believes we should
dramatically expand the size of government, dramatically increase taxes
on the American people, this is a heck of a good budget. I don't argue
with that. But from our perspective, when we think Americans should
keep as much of their tax dollars as we can leave them with, because it
is their money and they will spend it better, and they are more
efficient using it than we are--we should keep a low capital gains
rate; we shouldn't penalize seniors who have dividend income as their
main source of income--from our perspective, this budget has the wrong
priorities because it raises the taxes on capital gains and raises the
taxes on dividends significantly.
In addition, it has the wrong priorities because it expands spending
significantly--$500 billion in new spending and entitlements. Remember:
Probably the biggest threat we face as a nation--fiscal threat--in
fact, the biggest threat after, in my opinion, the threat of Islamic
fundamentalism and the terrorists using a weapon of mass destruction
against us--is the impending economic meltdown of this country as a
result of the burden that our generation, the baby boom generation, is
putting on the next generation through the entitlement accounts. There
is $66 trillion of unfunded liability, $66 trillion--a huge number.
Nobody knows because it is hard to define what $1 trillion is. But if
you take all the taxes paid since the beginning of this Republic--I
think you are talking about something like $37 trillion--and if you
take all of the net worth of the American people--all their cars, all
their homes, all their stock--and add it together, you come up with
something like $45 trillion.
So we have a liability on our books which involves three programs--
Social Security, Medicare, and Medicaid--that exceeds the net worth of
the Nation and exceeds the amount of taxes paid in this Nation since we
began as a nation. That is a huge problem for us. You have to start to
address it.
One of the good things the President's budget did was suggest a
couple of ways to address it. In fact, he sent up a proposal which
would take about 20 percent of this problem as it relates to Medicare,
which is the biggest part of the $66 trillion, and would have made
Medicare 20 percent less insolvent--which is a big number, by the way.
That was a big step. The proposals he sent us had no impact on the vast
majority of beneficiaries--no impact at all. He suggested that wealthy
Americans such as Warren Buffett, for example, qualify for the Part D
premium under Medicare, under the Medicare drug program, or some other
extraordinarily wealthy person, should pay a fair share--not all, but
should pay a fair share of the cost of the premium of their drug
program. That was a reasonable suggestion. What happened to it? It was
rejected by the other side of the aisle.
The President suggested that we use IT and disclosure of performance
at different levels that medicine integrates with the patient so people
could make more intelligent purchasing decisions, so employers and
insurers could make more intelligent decisions but, more importantly,
Medicare could. What happened to that idea? It was rejected by the
other side of the aisle.
The President suggested we should do something about the runaway cost
of malpractice, about the trial lawyers essentially running up
extraordinary costs on health care providers, especially doctors, and
that we should do something to limit that. It is a reasonable
suggestion rejected by the other side of the aisle.
How much entitlement saving is in this bill? Zero. Zero entitlement
saving is in this bill. Here we are facing probably the most
significant fiscal issue of our time and we do nothing about it in this
budget. In fact, under the present law, we as a Congress are required
by something called the Medicare drug trigger to adjust Medicare
spending to bring it down under what is known as a trigger level. It is
a technical point, but Medicare Part D premium isn't supposed to exceed
45 percent from the general fund. And we have now gotten a directive
from the trustees in the Medicare trust fund to act, and it would cost
not a large amount of money in the context of this entire budget--$1.3
trillion.
Mr. CONRAD. Billion.
Mr. GREGG. Billion, thank you. Billion. I got into my trillions. It
would cost $1.3 billion to correct this. That proposal is nowhere in
this budget; nowhere in this budget. It is hard to believe we couldn't
even do $1.3 billion when we have been directed to do it, when we
passed the law. It was our law that said we would do this if this
problem occurred. Yet the courage isn't there to do even that in the
area of entitlements, which is truly irresponsible, an act of
malfeasance by the Congress. So entitlement spending remains
unaddressed.
Interestingly enough, I heard Senator Obama on the stump a couple of
days ago--maybe it was a week ago--talking about how he was never going
to allow anything to happen to the Social Security recipient or the
Social Security trust fund. It is that type of language which
absolutely guarantees our children are going to get a bill here that
they can't afford, that our generation, the largest in the history of
the
[[Page S4597]]
country, which will double the number of retirees, is going to
basically put a weight on our children and our children's children that
will make their lives less enjoyable than ours because they will not be
able to afford the dollars it costs to support our generation and still
be able to buy their homes, send their children to college, and buy
their cars because of the tax burden generated by the entitlement
costs.
So that irresponsibility is permeated in this budget when it does
nothing on the issue of entitlements. Speaking of Senator Obama, I am
entertained by the fact that this budget, which will have three-fourths
of its life under the next President, must assume that the next
President will not be Senator Obama because he has proposed $300
billion of new spending--$300 billion--in the first year of his
Presidency. He proposed 187 new programs. We can only score 143 of them
because the other ones were not specific enough. But if you score 143
of them, they add up to $300 billion of new spending just in the first
year.
As I said earlier, Senator Obama said he is going to pay for this by
taxing the wealthy. That is what he said. But if you look at this
budget, they have already spent that money. This budget already assumes
the wealthy are going to be taxed. The $1.2 trillion tax increase in
the budget assumes the top rate in the 2010, 2011, and 2012 period
jumps back to President Clinton's level of 39.5 percent. So the budget,
which already is projecting deficits in the $400 billion range, already
presumes inside of it, as it is presented here, a jump in the top
marginal rate, which is the rate on the richest Americans. That money
is already spent. It was spent when the other side of the aisle decided
to increase entitlement spending by $500 billion under this budget and
increase discretionary spending by close to $300 billion under this
budget. So where is he going to find the money to pay for his $300
billion of new programs? I don't know. But one thing is pretty obvious:
We are going back to the future with enthusiasm. Yes, we can raise
taxes and, yes, we can raise spending; that will become the theme not
only of this budget but future budgets should we have a Democratic
President and a Democratic Congress.
This budget really doesn't do much to address the issues the American
people need to have addressed. Those issues involve, No. 1, doing
something on the issue of entitlements; No. 2, maintaining a tax law
which creates productivity, which energizes entrepreneurship and says
to small business people, go out and create jobs; No. 3, disciplines
our fiscal house by containing discretionary spending under a trillion
dollars.
Those are not really that dramatic or that heavy a lift to undertake.
There is no reason we could not keep spending under a trillion dollars
on the discretionary side, no reason we could not have taken the small
steps, like asking wealthy people to pay a bigger part of--or any part
of--their Part D drug premium. There is no reason this budget could not
have contained within it some initiatives which would have controlled
discretionary spending and would have continued to promote the tax
policy we have seen for the last 3 years, which has generated a massive
increase in revenues for the Federal Government, especially from
capital gains.
Another course that was chosen--the course that is circular--goes
back to the way we did things in the past when we had the last
Democratic Congress. That course said you have to raise taxes because
the American people don't know how to spend their own money, so we have
to do it for them. It is a course that says the Government should
always grow, and grow fast. There is nothing in the Government that
should be reduced. It is a course that says we should add to the
Federal debt at a radical rate. It is a course that says we should
ignore real problems--the biggest problem we have, which is entitlement
spending.
I want to put in one footnote because I think it sort of encapsulates
the whole discussion about discretionary spending. The Senator from
North Dakota got up and said we had to keep the COPS Program, which was
a great program, and put cops on the street. There isn't one program
that their budget proposes that we eliminate on the discretionary side
that I found. Everything either gets increased or is maintained.
The COPS Program is uniquely appropriate to be eliminated. Why? Don't
listen to me. Listen to President Clinton. He created the COPS Program,
and he created it with this caveat: This will be a 3-year program.
That is what President Clinton said--that when we get to 100,000
police officers on the street as a result of this program, this program
will be terminated. That was the program that was proposed. Not only
did we get the 100,000 police officers on the street--because I chaired
the committee of jurisdiction at that time--we put 110,000 new police
officers on the street using Federal funds. Then, following on the
suggestion of what the original program was, and following the edict of
President Clinton, we started to phase out that program. It should have
been completely phased out. That was 8 or 9 years ago that we hit what
the number was under this Federal program. The program is still here.
It is a classic example of how programs work. Once they are in place,
the interest groups that support them demand that they stay in place
forever. Obviously, we all believe police officers do a great job. We
admire them, respect them, and they protect us. But this program
fulfilled its obligation. It did what it said it would do, and it
worked. It should have been terminated, just like President Clinton
suggested.
Now, the other side of the aisle, 8 to 9 years after that event, is
still claiming this program has to be kept and grown. That is the
difference between our parties. We think when somebody puts in a
program that says it will last 3 years, with certain goals, and those
goals are met and the 3 years are over, the program should be ended and
the American taxpayer should get to keep the money from ending that
program.
The other side of the aisle thinks we should continue the program
forever, grow it, and take money out of the American taxpayers' pockets
to pay for something on which we have already fulfilled the
responsibility. That is the difference. It is a fundamental difference
between our parties. They are in the majority. They have the right to
write a budget however they want it. They have done that. It is a
budget that has the world's largest tax increase, has significant
increases in spending, significant increases in entitlement spending,
crosses the trillion-dollar line on the discretionary side, does
nothing about containing entitlements, and plays games with enforcement
mechanisms relative to the budget. We would not have written this
budget. That is why we are opposed to it.
I yield the floor.
The PRESIDING OFFICER. The Senator from North Dakota is recognized.
Mr. CONRAD. Madam President, I am delighted that our colleague talks
about our fiscal record and theirs. He talks about circling back to the
policies when the Democrats controlled the White House. He is right
that there is a difference. The difference is that when the Democrats
last controlled the White House, we had record surpluses, and we were
paying down the debt. Under the current President, we have record
deficits and record debt.
I am delighted to talk about the record because here is their record:
In each of the last 3 years of the Clinton administration, we had
achieved a budget surplus, we were paying down the debt, and the CBO
was projecting that the budget would remain in surplus for years to
come. By the time the Bush administration came into power, we had
achieved three consecutive years of surplus and were expecting more.
But, the Bush administration squandered every dime. By the time this
President is done with his responsibility, they will have run up the
debt from $5.8 trillion to over $10 trillion. That is the difference in
the record. Under the last Democratic administration, we ran surpluses
and paid down the debt. Since then, under the Bush administration, the
Nation has been beset by record deficits and record levels of debt.
That is a fact.
Now, my favorite quote of my colleague on the other side--first, let
me say I have respect for the ranking member. I have affection for him,
and we are friends. But we have a big divide when it comes to fiscal
policy. I think the policies of this administration have been reckless.
I think they have dug an enormously deep hole for this country.
[[Page S4598]]
I think the factual record is very clear on the differences between
our two parties. Under President Clinton, we achieved record surpluses,
and we were paying down the debt. Under President Bush, the Nation was
plunged right back into record deficits and debt. That is a fact.
But the thing I enjoy most about my colleague's speech is how similar
it was to the speech he gave last year. This is what he said last year:
It includes, at a minimum, a $736 billion tax hike on
American families and businesses over the next 5 years--the
largest in U.S. history.
The only difference is that now he is saying this budget is the
largest tax increase in the history of the world. We can now go back
and look at the factual record about what our budget did that was put
into place last year.
Did it increase taxes? Did it increase them by the largest in U.S.
history, as he asserted last year? Well, let's look. Here is the
record--not a speech but the factual record. We had Democrats
controlling the House and the Senate, and the assertion last year by
the Senator from the opposite party was that there would be the largest
increase in the history of the United States. But what happened? Was
there the largest tax increase in the history of the United States? No.
Was there a tax increase? No. Was there a tax reduction? Yes. Here it
is: Tax cuts enacted, $194 billion; offsets and closing loopholes, $7
billion; net tax reduction, $187 billion.
Now, that is the fact. So much for speeches and for hyperbole. Let's
deal with facts.
Debt: The President's budget has $83 billion more of debt than the
budget we have offered from our side. The Senator questions the Baucus
amendment, which is included in this budget, that extends key middle-
class tax cuts. That is included in the conference report. We provide
$340 billion of tax cuts in this budget.
What is he talking about, the biggest tax increase? There is no tax
increase in this budget. None. Zero. There are $340 billion of tax
reductions for the middle class in this country who deserve it.
The Senator says: Why haven't they presented a bill, because they had
the Baucus middle-class tax cut extension in last year? Why haven't we?
Because, as the Senator well knows, those tax cuts are in place until
2010. We didn't need to take action last year. We don't need to take
action this year. Those tax cuts are in place now. But in this 5-year
budget, we have provided for their extension because we know they run
out in 2010. But there is absolutely no need to have taken the action
to extend them last year or this year because they are already in
place.
Let's deal with facts. The Senator talks about Barack Obama's budget.
Barack Obama doesn't have a budget. Barack Obama is not the President
of the United States. He is asserting he has $300 billion of spending
increases. I notice he didn't say anything about the McCain budget
because while John McCain is not the President, either, he has proposed
$3 trillion--not $300 billion but $3 trillion--of additional tax cuts,
and we already can't pay our bills. We already are borrowing hundreds
of billions from China and Japan. So apparently the McCain plan is to
borrow some more money from China and Japan. That is what the party of
the other side has become, a party of borrow and spend--they've spent
$600 billion so far in Iraq with no end in sight, and they've borrowed
so much that the debt will have increased from $5.8 trillion to $10.4
trillion by the time this President is done.
Then there is one other item to which I need to respond, and that is
on the question of the pay-go. The Senator says that pay-go is
meaningless. What is it? It requires that if there is new mandatory
spending or new tax cuts, they must be offset. That is pay-go.
The Senator used to support pay-go. This is what he said in 2002:
The second budget discipline, which is pay-go, essentially
says if you are going to add a new entitlement program or you
are going to cut taxes during a period, especially of
deficits, you must offset that event so that it becomes a
budget-neutral event. . . . If we do not do this, if we do
not put back in place caps and pay-go mechanisms, we will
have no budget discipline in this Congress and, as a result,
we will dramatically aggravate the deficit which, of course,
impacts a lot of important issues, but especially impacts
Social Security.
The Senator was right in 2002, and, in fact, his prediction came true
because his party abandoned pay-go, drove up deficits, drove up debt,
and we are the worse for it as a nation.
If you wonder about pay-go, here is the record. We had strong pay-go
in effect between 1993 and 2000. The deficit was reduced each and every
year between 1993 and 1997 and, by 1998, we actually got into
surpluses, as I indicated before, which rose in each year through 2000.
Then our friends on the other side took charge of the White House. They
immediately weakened pay-go, and we plunged right back into deficit. We
put pay-go back into effect, and we are starting to dig out of the very
deep hole they have dug.
On the issue of pay-go being waived, pay-go has been raised 16 times;
pay-go has been waived once--once.
The Senator says pay-go is not working. I disagree. Excluding the
alternative minimum tax provisions that were put in place last year to
prevent the alternative minimum tax from costing 20 million people more
taxes, instead of offsetting that, the alternative minimum tax was
prevented from being expanded without paying for it. If you leave out
that one item, the Senate pay-go has a scorecard with a positive
balance of over $1.5 billion over 11 years.
Every bill sent to the President, other than the alternative minimum
tax and the stimulus, which, of course, could not be offset if it was
to have a stimulative effect--that was totally bipartisan, both those
were totally bipartisan--every bill sent to the President other than
those two has been paid for or more than paid for.
Pay-go also has a significant deterrent effect, preventing many
costly bills from being offered.
With respect to the specifics of my colleague's criticism, I will
enter into the Record every one of the items he referenced: immigration
reform, the Energy bill, mental health parity, prescription drug user-
fee amendments, minimum wage, Water Resources Development Act. Every
one of them is paid for. CHIP reauthorization, the farm bill--he just
talked about the farm bill. The farm bill, which we will vote on
sometime later today or tomorrow to overturn the President's veto, is
totally pay-go compliant. It is paid for and without tax increases.
Higher education, the reconciliation bill, the 2007 supplemental--every
one of them in terms of the bill that actually went to the President is
paid for.
When the Senator from New Hampshire calls pay-go ``swiss cheese-go,''
I call their budget approach ``easy cheese'' because they have faked
fiscal responsibility around here long enough, and we are calling them
on it because now we have their record, and their record is record
deficits, record debt, record borrowing from abroad. That is their
fiscal record. It is a fact. It can be checked. They are going to have
a hard time running away from their record as we go into an election
year.
Madam President, I see my colleague, Senator Murray, is here. How
much time does the Senator wish?
Mrs. MURRAY. Ten minutes.
Mr. CONRAD. I yield her 10 minutes.
The PRESIDING OFFICER. The Senator from Washington is recognized for
10 minutes.
Mrs. MURRAY. Madam President, I thank my colleague, the chair of the
Budget Committee. He has done an amazing job putting together a budget
of which we can all be very proud.
For the last 7\1/2\ years, the current administration has really
mismanaged our economy and failed to make the kinds of investments that
keep our country strong. We all know American families have really paid
the price. We have gone from a budget surplus to a record deficit, our
infrastructure is crumbling, and our economy is now nearing a
recession, if we are not already there. So as we finalize this year's
budget, we have to ensure that we are investing in our future and
addressing our country's real priorities.
It seems that every day the news we hear gets worse about job loss,
about skyrocketing gas prices, about the number of families who risk
losing their homes in the mortgage crisis. And in the eighth and final
budget this President has sent to us, he has really sent us off on a
fiscally irresponsible path. He has given us a dishonest budget that
fails to own up to the true cost
[[Page S4599]]
of the war, and it will require us to borrow billions of dollars from
foreign governments to meet our expenses.
I want to give a few examples of how out of touch President Bush's
budget is.
People today are struggling to pay for heat and rent. Yet President
Bush sent us a budget that proposed to cut low-income heating
assistance and housing and neighborhood revitalization programs, such
as section 8 and CDBG, right when our constituents are fighting so hard
to pay their mortgages to make sure they stay in their homes.
The wars in Iraq and Afghanistan are creating thousands of new
veterans every single year, many of them, as we know, with severe
injuries and specialized needs. But President Bush sent us a budget
that cut critical programs at the VA, including medical research and
State extended-care facilities.
More than 1 million people are going to lose their jobs this year.
What did President Bush do in his budget proposal? He cut $484 million
from critical workforce training programs.
Health care continues to be out of reach for millions of Americans
who don't have insurance or, in some cases, don't have access to
doctors or nurses. Yet the President sent us a budget that freezes
Medicare reimbursement levels for our hospitals and hospices, for our
ambulance services, long-term care facilities, and he decimated funding
for training programs for our health care professionals.
It is past time that this administration joined with the majority in
Congress and the majority of people in this country to make America's
families, the working families, our first priority.
The budget conference resolution makes responsible choices that will
help get our economy rolling again and invest in our country's real
priorities. With this budget which will be before the Senate shortly,
Democrats are investing in programs that help families meet expenses
and get ahead, things such as schools and health care and job training.
Our budget makes up for President Bush's misguided proposals to flat
line funding for education and rob students of the opportunities they
need to get ahead.
We are restoring the vital funding the President has slashed from our
Nation's job training programs to help youth and adult and dislocated
workers get the skills they need so they can succeed in our global
economy.
We are investing in health care by adding much needed funding for our
health professions, the National Health Service Corps, our community
health centers, and other programs that help to ensure Americans can
see a doctor when they are sick.
We are ensuring our communities at home are safe by funding the
homeland security grants and restoring cuts to local law enforcement
programs.
Our budget fully funds the port security grants which the President
proposed cutting in half. And it restores his dangerous proposal to cut
almost $750 million from State homeland security programs and grants.
Those are programs that help pay for security improvements, training,
and equipment--all of the items that our first responders need so they
can prepare for the worst in our communities at home.
Democrats are making critical investments in infrastructure in this
budget which will help boost spending and create jobs, while making
much needed repairs to our roads and our bridges. We are also
preventing a projected shortfall in the highway trust fund so we can
keep our commitment to States and communities and ensure that our
roads, bridges, and highways are safe and up to date.
This budget ensures we are not turning our backs on the Hanford
Nuclear Reservation in my home State or the many other States in our
nuclear complex where workers sacrificed to help make nuclear material
during the Cold War. Hanford and other sites like it are still home to
millions of gallons of nuclear waste and other dangerous material, and
the Federal Government has to live up to its promise to clean them up.
The longer we stretch it out, the more the cleanup is going to cost
over the long run. The budget that will be before us reverses the trend
of failing to invest, and it is a big step toward getting us back on
schedule.
Finally, in this budget, we are doing the right thing for our
veterans. The number of veterans is increasing every day, and the list
of needed repairs and expanded facilities in the VA system is stacking
up as well. But what does the administration send us? A budget that
proposes new fees and increased copays that will essentially discourage
millions of veterans from even accessing the VA. In his budget, the
President also underfunded VA medical care, VA medical and prosthetic
research, and he cut funding for major and minor construction by nearly
50 percent.
I have made it clear over the last several years that I believe
denying access or discouraging veterans from seeking care because of
their income is morally wrong, and I believe it will also make it
harder in the long run for us to maintain a strong voluntary military.
Democrats are making sure that we keep our promise to the men and women
who have served us so bravely.
I thank our chairman, Senator Conrad, for his leadership and his
tremendously hard work to get us to this point. I urge all of our
colleagues to support this budget. This budget sets priorities and
gives us critical direction as we begin the appropriations process. The
American people desperately want us to take the steps that have been
laid out in this budget. Our budget creates jobs, it rebuilds our roads
and our bridges, it cares for our veterans, it invests in education, it
helps our families meet their basic needs, and it gets us to surplus by
2012. After years of this President's unrealistic policies, Democrats
with this budget are making sure that working families are again
priority No. 1.
Madam President, I yield the floor.
The PRESIDING OFFICER. The Senator from North Dakota.
Mr. CONRAD. Madam President, I thank the Senator from Washington, who
is an extraordinarily able member of the Budget Committee, someone upon
who I rely for much of the very hard work of the committee. She is
simply outstanding, and I thank her for her leadership and most of all
for her friendship.
Madam President, I ask unanimous consent that the gentleman from
Iowa, Senator Grassley, be given 30 minutes on the bill.
The PRESIDING OFFICER. Without objection, it is so ordered. The
Senator from Iowa is recognized for 30 minutes.
Mr. GRASSLEY. I thank the Senator for providing time for me.
For 6 years, and those would be the years 2001 and 2003 through 2006,
the budget resolutions provided the necessary resources that allowed
the Finance Committee, the tax-writing committee, usually in a
bipartisan manner, to realistically address the demands of tax policy.
I am disappointed to say that this year, like last year, is different.
The people spoke in November of 2006, and for this year--and last
year--the Democrats are in the majority and in control of the
congressional budget process. As ranking Republican on the Finance
Committee, a committee I used to chair, like last year, I was not
consulted at any point by our distinguished chairman on this budget
resolution. Unfortunately, after reviewing the resolution conference
agreement, it is clear it does not realistically address the tax policy
needs the Finance Committee is very concerned about and has the
responsibility to do something about.
I am going to take a look at what the budget means to the American
taxpayers in two timeframes, from now until January 20, 2009, and then
for the period of time long term. Short term first; long term, the
period of time after the new President is sworn in starting January 20,
2009.
Let's take a look, then, at what this budget says to the American
taxpayer near term. For the hard-working American taxpayer, the news is
not all bad. I complimented the distinguished chairman for preserving
the ``unoffset'' AMT patch for this year in the budget. He had to
concede a new point of order to the House, but my guess is there will
be 60 votes to waive it when the AMT patch is brought up. The problem
that 26 million families face is uncertainty of the action on the AMT
patch this very year. In other words, right now.
I have a chart here I wish to put up. It is the estimated tax
voucher, a form that people fill out for making quarterly payments.
Many of the 26 million families facing the AMT technically should be
adjusting their withholding
[[Page S4600]]
upward and filing the 1040-ES form with a check for a portion of the
AMT they already owe because Congress hasn't acted yet to prevent the
AMT from expanding to almost 25 million more Americans, which I don't
think will happen, because I think we will take care of it in time, but
who knows. But right now, those filing quarterly should have made this
payment, filled this form out, on April 15. That is when the first
quarter's estimated tax is due, and that is what the tax law says right
now.
This is all a problem because the House Democratic leadership won't
send us an ``unoffset'' AMT patch. Now, let's make it clear what the
Constitution says, so people don't think I am only blaming the House of
Representatives. The Constitution says tax laws must start in the House
of Representatives. So why then won't the House Democratic leadership
send us an ``unoffset'' AMT patch bill so we can get it to the
President? Here is the problem. The House Blue Dog Democrats will not
support an ``unoffset'' AMT patch bill.
Now, why wouldn't the Blue Dogs do that? And I am not accusing them,
I am stating what their position is. The answer is the Blue Dogs are a
growing presence in the House of Representatives. Most of the seats
that shifted from the Republican column to the Democratic column in the
2006 election are occupied by Blue Dogs.
The Democratic-leaning Washington punditry and the Democratic
leadership have gloated recently about the trifecta that has happened
because of the House special congressional elections this year. By
trifecta, I am referring to the three House races that were switched
from Republicans to Democrats this year, not something this Republican
is proud about. All three of those Members have joined or intend to
join the Blue Dog coalition in the other body.
Lord knows we have heard a lot of gloating from the other side about
these three new so-called conservative Democrats. We have also heard
from a lot of Republicans crying in their favorite beverage about this
outcome.
The Blue Dogs have had a heavy hand in this budget and are the
leading obstacle to getting the ``unoffset'' AMT patch bill done and to
the Senate so we can send it to the House. So if the Blue Dogs are
representing themselves as strict agents of fiscal responsibility, it
is a fair question for every one of us to ask about their definition of
fiscal responsibility.
Let's take a look at it. I have another chart here. This chart
contains a depiction of the most famous Blue Dog. Here he is, the most
famous Blue Dog, Huckleberry Hound, showing us the definition of fiscal
responsibility from his Blue Dog perspective. Now, here we have
Huckleberry Hound barking ``fiscal responsibility.'' American taxpayers
should beware. Huckleberry Hound's bite happens to be higher taxes.
With respect to spending cuts, all we get is a whimper. No spending
cuts.
Maybe I am being too tough on Huckleberry Hound and his Blue Dog
friends, but I have yet to see the empowered Blue Dogs propose spending
cuts for deficit reduction. All I have seen is higher and higher taxes.
Like their liberal brethren, Blue Dog Democrats only look to the
American taxpayers to fund new spending. We are seeing it once again on
the war supplemental bill. Why couldn't they find a spending cut here
or there to pay for the popular veterans' benefit package? Why always
go to tax increases?
The reason I point this out is this group of House Members is holding
up our ability to pass an AMT patch bill in a form that can pass the
Senate and in a form that can be signed by the President. The Blue
Dogs' bark of fiscal responsibility is stalling relief for 26 million
AMT families. The Blue Dogs insist on getting their bite of $62 billion
in new taxes as a condition to sparing these 26 million families from
the AMT.
I agree with the Blue Dogs on the importance of
fiscal responsibility. And as I have stepped up to the plate over the
years with plenty of revenue raisers, well, if you have any questions,
ask the people downtown in what we call the K Street crowd who think of
defending all these tax loopholes we are trying to close. But the Blue
Dogs whimper when it comes to spending cuts. They only look at the
taxpayers for fiscal responsibility. This obsession with raising taxes,
most pointedly advanced by Blue Dogs, is a theme that runs through this
budget.
I am going to turn now to the short-term tax legislative agenda and
examine how the budget squares with what we need to do.
As a farmer, I would like to think we country folks can teach city
folks a lesson or two. The first chart I am going to put up here
involves the method a lot of us farmers use to get our water. You will
see a well in this chart. You can see it as a long well. There is a
little bit of water way down there at the bottom of the well, but most
of the well is dry.
Now, what we are told by those who drew up the budget is that the
tax-writing committees will somehow plain find the money. Well, find
the money. You have to have some sort of consensus to do that, because
in the Senate, to get anything done, you have to have some
bipartisanship. We will find the money, they say, to pay for this time-
sensitive tax business we have to deal with. Now, these are not just
abstract things; these are pending matters. They are pieces of
legislation on both sides that we say we want to get done before this
session ends.
The offset well here shows about $58 billion that is known, that is
identified, and that is scored revenue raisers that the Senate
Democratic caucus supports. I used this chart several months ago trying
to make similar points. I have updated it to assume that the farm bill
will become law, and I think that is going to happen within 48 hours.
As a rule of thumb, the Finance Committee tax staff, in a bipartisan
way, has developed about $1 billion per month in new offsets. That
figure of $1 billion per month is in line with our historical average,
the success we have had of gleaning money by closing loopholes. How
reliable is that average, and can we count on it?
As a farmer, I know something about the predictability of rainwater.
You hope you will get rain and that will give you a decent level of
well water. As a former chairman and now ranking member of the Finance
Committee, I know something about revenue raisers. I have been there
and done that. When I was chairman, I aggressively led efforts to
identify and enacted sensible revenue raisers aimed at closing the tax
gap and shutting down tax shelters. And as ranking member, I continue
to look for ways to shut off unintended tax benefits. So I consider
myself to be a credible authority on what is realistic when it comes to
revenue raisers.
From 2001 through 2006, Congress enacted over 100 offsets, with
combined revenue scores of $1.7 billion over 1 year, $51\1/2\ billion
over 5 years, and $157.9 billion over 10 years. So if you look at
recent history, we can realistically figure the tax staff will find
about $1 billion a month. Let taxpayers who are trying to avoid
honestly paying taxes beware of that.
Right now, however, all we can find that is specified, that is
drafted and is scored, is that $58 billion. The revenue-raising well
shows about $58 billion in available, defined, and scored offsets.
Defenders of the resolution before the Senate will say a virtual
cornucopia of revenue raisers is there from the tax gap and from
shutting down offshore tax scams. I take a backseat to no one on
reducing the tax gap or shutting down offshore tax shelters. I have
scars to show from my efforts over the years. But the defined as well
as the scored tax gap proposals are included.
We have that here already.
Likewise, we have a proposal targeted at tax haven countries and
other off-shore activities on this chart. The well has, then, about $58
billion of offset water. This budget anticipates Congress will be
thirsty for this limited group of offsets. On the thirst or demand
side, you will see the bucket will be busy bringing up that water. On
the demand side, I have talked about next year's AMT patch--there is
$74 billion for the patch for next year. There is $16 billion for tax
provisions that ran out at the start of this year. That estimate, by
the way, is probably low. Then there is $29 billion for next year's
extenders, and there is $15 billion for the energy tax package we want
to pass.
If you add up those things--and we have to add the $5 billion we have
there
[[Page S4601]]
for the Federal Aviation Administration reauthorization bill, if we get
to it--and I hope we get to it. So the pending, the time-sensitive tax
business totals what? It is $139 billion that we have to bring up in
that bucket.
You see $59 billion of real money is available. That is quite a
difference. We are short about $80 billion. I have not even included
the demands from the myriad of reserve funds that are mentioned in this
resolution. Since we know from almost a decade of fiscal history that
the Democratic leadership cannot propose spending cuts, we know the new
reserve funding spending will be paid for with tax increases. It has
been shown to be the case since the Democrats took power in January
2007.
As I said earlier, the Blue Dogs in the House of Representatives are
leading proponents of this tax and this spending practice. You can see
it doesn't add up. The budget plan for tax legislative business is very
much out of balance. It is out of balance by at least $80 billion. Even
if the Senate were to adopt some of the new tax hikes that the House
has come up with, we would be substantially still out of balance.
I might add I have included in the Senate offset accounting proposals
the House has rejected. So I think on this chart is a fairly
conservative estimate.
What is going to happen? How do we then bridge that $80 billion gap?
Either the tax relief is not going to happen or we will add that to the
deficit. That is a frightening proposition. I had hoped that the
shortfall would be confined to the short term, but that is not the
case. Over the long term--and I said I had a short-term view and a
long-term view of this budget resolution. So what does it look like
after January 20, 2009? It gets much worse.
Let's take a look at the budget's assumptions about revenues over
that long term. Over the 5-year budget window going out to the year
2012, keeping existing policy in place will have a revenue effect of
over $1.2 trillion. This includes AMT relief, extension of bipartisan
2001 and 2003 tax relief, and extending other broadly supported
expiring provisions.
In the aggregate, this budget appears to provide $340 billion in new
resources for extending these policies over the 5-year window. Let's
look further, and you will find a complicated obstacle course to making
any of this tax relief happen. To me, the conditional tax relief
language is almost bait and switch. Senator Gregg has described in
great detail how this mechanism would work. To me, it is as convoluted
as a Rube Goldberg type of invention. So I have another chart.
The chart shows a Rube Goldberg potato peeler invention. If you want
to peel potatoes, I would tell Rube Goldberg to use a simple potato
peeler. If you really mean to deliver tax relief, I would tell the
majority, the Democratic majority, write it into the resolution. Make
it very clear. Don't use a Rube Goldberg mechanism.
Suffice it to say, the supposed $340 billion in tax relief targeted
to 2011 and beyond assumes it will not be used for future spending.
Does anybody really believe this new majority will not spend future tax
relief if given the chance? If your answer is yes, then I have a few
bridges in Iowa that I will sell you.
Under this budget, $1.3 trillion in expiring entitlement spending is
assumed to continue. It is right in the CBO outlook. So, Mr. and Mrs.
Taxpayers, that is right, your taxes will go up by almost $1.2 trillion
unless Congress raises taxes to offset the revenue loss.
When it comes to expiring entitlement spending, it is quite a
different story. There is no requirement in this resolution for
Congress to do any heavy lifting. This emphasis upon higher taxes and
higher spending is reinforced by the pay-as-you-go rules, or we say
pay-go around here. That is this budget's notion of fiscal
responsibility--unrestrained spending is good, higher taxes are good.
Over the 5 years of this budget resolution, it assumes a dramatic tax
increase--at least $1.2 trillion. In 2011 the bipartisan tax relief
plan will expire. Some folks will call these provisions the Bush tax
cuts. I suppose that term, ``Bush tax cuts,'' arises from polling by
campaign outfits on the other side. It is true President Bush signed
both bills, but the bipartisan compromises occurred in the Senate
Finance Committee. In 2011 President Bush will have been gone from
office for a couple of years. You can call this package of tax relief
for virtually every American the Bush tax cuts, but for the taxpayers,
if Congress does not intervene, it will be a tax increase and it will
be the biggest tax increase in the history of the country and it is all
going to happen without a vote of the Congress.
So I would like to run through a couple of examples. The first would
be a family of four. There is the husband, his wife, and their two
children. This family makes $50,000 in income. That is right about the
national median household income today. For example, the Census Bureau
stated that for 2006 the national median household income was $48,200.
Under the Democratic leadership's budget this family will face a tax
increase of $2,300 per year. That is a loss in their paycheck of about
$200 per month. It is a hit on their yearly budget of $2,300. Where I
come from, that is real money.
I will give another example, this one a single mom, two children. She
earns $30,000 a year. In 2011, under this budget, she and her family
run straight into a brick wall--that is a brick wall of $1,100-per-year
taxes. That is $100 a month out of the family's budget.
Some on the other side will say they only excluded top-rate taxpayers
or other high-income folks from tax relief. I am going to tell you
don't believe it. We have tax bills of the previous several decades to
prove it, that you don't tax just the wealthy when you raise taxes. The
facts are otherwise. Low-income folks, including millions of seniors,
pay no tax on their dividends or their capital gains income. If this
budget stands, even with the Baucus amendment, millions of these low-
income taxpayers, especially seniors, will pay a 10-percent rate on
capital gains and could pay as high as a 15-percent rate on dividends.
Nationally, over 24 million families and individuals reported
dividend income. Let's say that again--24 million Americans reported
dividend income--because you think it is just a few hundred thousand of
very wealthy people--24 million families. In Iowa, for instance, we
have 299,000 families and individuals claiming dividend income on their
income tax returns. There are not 299,000 millionaire families and
individuals in Iowa. Nationally, we are talking about over 9 million
families and individuals reporting capital gains income. In Iowa we are
talking about 127,000 families and individuals.
There are many marginal rates other than the top rate that would rise
if this budget stands, even with the amendment of Senator Baucus. The
25-percent rate--which for 2007 starts at $31,850 for singles and
$63,700 for married couples--would rise by 3 percent, to 28 percent.
The 28-percent rate would go up 3 percentage points to 31 percent. The
33-percent rate would go up 3 percentage points to 36 percent. The top
rate would go up from its current 35 percent level to 39.6 percent.
To sum up, even with the Baucus amendment added to this budget, there
would be marginal rate increases on millions of taxpayers, and not just
millionaires. Those marginal rate increases would reach taxpayers with
taxable incomes as low as $31,850 for singles and as low as $63,700 for
married couples.
What I just described is accurate only if the Democratic leadership
intends to follow the letter and the spirit of the Baucus amendment. If
you look at last year's track record, the House neutered the effect of
the amendment in the conference committee. They created a Rube Goldberg
type of mechanism to impede the amendment.
As I pointed out a few minutes ago, that mechanism is right back
again. Of course, after the budget conference report was agreed to, all
talk and action around the amendment then somehow ceased.
I wouldn't put much stock on the followthrough on the Baucus
amendment. The distinguished chairman and friend of mine points out
that since last year's budget, we passed tax relief of $50 billion for
last year's AMT patch. He will also point to the stimulus package
passed earlier this year. The senior Senator from North Dakota is
correct that those tax relief packages did pass. He used the assertion
to counter the assertion on our side that there is a $1.2 trillion tax
increase in the budget.
The distinguished chairman omits a critical fact in his assertion,
and that
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is the ``unoffset'' AMT patch passed only because Senate Republicans
and the administration insisted that they would not use the AMT problem
as a money machine for current and future spending. If the Democratic
caucus had prevailed, the AMT patch would have been offset.
Likewise, on the stimulus bill, there was bipartisan consensus that
economic stimulus should not be a tax increase.
When you step back from the differences across the aisle on this
budget, you probably will not be surprised to find some differences
among Presidential candidates. Generally, the candidates on the other
side have proposed to take heavily from the taxpayers under the guise
of fiscal responsibility. This is true when they are talking about
ending the bipartisan tax relief plans of 2001 and 2003. It is true
when they are talking about the same loophole closers for a myriad
number of expansions of existing entitlements and creating new ones.
Nowhere is there discussion of reining in spending.
So the tax side of the Federal ledger is the only route to fiscal
responsibility from the perspective of Presidential candidates on the
other side of the aisle.
I wanted to give you one telling example. One Democratic candidate
has proposed to repeal the bipartisan tax relief plans for taxpayers
earning above $250,000. This proposal raises $226 billion over 5 years
and 10 years. A key fact is that the source of that revenue peters out
over the next few years because under current tax law, the tax relief
sunsets at the end of 2010.
Madam President, I ask unanimous consent for an additional 4 minutes.
Mr. CONRAD. I say to the Senator through the Chair that we would be
happy to accede to the request if the Senator could say something nice
about the chairman of the committee.
Mr. GRASSLEY. Besides the work of Senator Harkin, we have an
outstanding farm bill because of the hard work of the Senator from
North Dakota.
Mr. CONRAD. What a kind and gracious thing to say. We would be happy
to agree to the request. The Senator would like 4 additional minutes.
Mr. GRASSLEY. I think that is it.
Mr. CONRAD. Why don't we give the Senator 5. You can give back any
time.
Mr. GRASSLEY. Sure.
Mr. CONRAD. May I interrupt the Senator and ask unanimous consent
when the Senator has concluded, we go to Senator Wyden?
How much time would the Senator speak?
Mr. WYDEN. I think it would range up to 10 minutes.
Mr. CONRAD. Are we confident that 10 is sufficient?
Mr. WYDEN. Yes.
Mr. CONRAD. Then I ask unanimous consent to go to Senator Wyden for
10 minutes after Senator Grassley.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. GRASSLEY. Well, I was talking about Presidential candidates and
what their budget plans might do.
Like the Democratic leadership's budget, the candidates on the other
side oversubscribe the revenue sources from proposals that are popular
with the Democratic base. The deficiency can only be made up in three
ways: One, other undefined sources of revenue would need to be tapped.
The taxpayers should rightly be worried about that avenue. Two, the
proposed spending plan would need to be abandoned or curtailed. There
is not much history on the Democratic side of this avenue being taken.
Three, add to the deficit for the cost of the new programs.
Unfortunately, this avenue has been taken too many times.
We will hear a lot of criticism of the Republican candidate, Senator
McCain, from those on the other side. They will argue, like the
President's budget, a continuation of current-law levels of taxation
somehow costs the Federal Government too much revenue, just like all
the money every worker makes belongs to the Government and we let the
taxpayers keep a little bit of it. They will argue that the spending
increases they propose are more important than the restrained levels of
the President's budget, and they will argue that despite the record tax
hikes in their budget, entitlement reform is a matter for another day.
In fact, Senator McCain's plan intends to keep the revenue take where
it is as a share of the economy. You see revenue averages of about 18.3
percent of the economy. That is 18.3 of the GDP.
The state of the economy affects revenues more than anything else.
There are dips when we have been in recession and peaks when growth is
high. Our side cares about keeping the revenue line at a reasonable
level, about 18 to 19 percent.
We do not see the merits of an imperative behind a growing role for
Government in the economy. The other side disagrees. That is their
philosophy, they are entitled to it. I think they are wrong.
They impliedly or explicitly reject our premise that the size of
Government needs to be kept in check. That view has been best expressed
in an editorial of October 22, 2007, in the New York Times. The lead
paragraph says it best:
President Bush considers himself a champion tax cutter, but
all the leading Republican presidential candidates are eager
to outdo him. Their zeal is misguided. This country's meager
tax take puts its economic prospects at risk and leaves the
Government ill equipped to face the challenges from
globalization.
But the bottom line is the New York Times directly states the view
behind this budget and the position of the Democratic candidates. From
this perspective, the historical level of taxation is not somehow
appropriate as a measure for the next decade.
The New York Times implies that the Federal Government must grow as a
percentage of our economy by at least 5 to 8 points. That is more than
ever in the history of the country. If we were to follow the path
suggested by the Times, the Government's share of our economy would
grow by one-third. One-third. One-third is a great big increase in
Government. The Democratic leadership budget takes some big steps on
that path. So do the campaign proposals of the Democratic candidates.
They go in the same direction.
Our Republican conference takes a different view. America is a
leading market economy. American prosperity and economic strength, in
our view, is derived from a vigorous private sector that affords all
Americans the opportunity to work hard, to save, and to invest more of
their money.
A growing economy is the best policy objective. It makes fiscal sense
as well. Fiscal history shows that despite criticism to the contrary,
the bipartisan tax relief plan drove revenues back up after the
economic shocks we suffered earlier this decade. I am referring to the
stock market bubble, corporate scandals, and the 9/11 terror attacks.
Revenues bounced back when the economy bounced back. The revenue
outperformed CBO's projections by a significant extent.
I yield the floor.
The PRESIDING OFFICER (Mr. PRYOR). Under the previous order, the
Senator from Oregon is to be recognized for 10 minutes.
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