[Congressional Record Volume 156, Number 157 (Friday, December 3, 2010)]
[Senate]
[Pages S8449-S8451]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                          BAUCUS TAX PROPOSAL

  Mr. BINGAMAN. Mr. President, let me start by thanking Senator Baucus 
for putting forward his proposal on tax issues. It is a responsible 
course for us to follow. It is one I can vote for without reservation.
  He is basically saying: Look, let's ensure the first $250,000 that is 
earned by any and all Americans in this next year will be subject to 
the lower tax rates that were put in place during President Bush's time 
in office--the tax rates that were adopted essentially in 2001. Of 
course, it also contains other very useful provisions to reinstate the 
estate tax at a reasonable rate, with a significant amount exempted 
from the estate tax. It has provisions for energy tax--the extending of 
energy tax provisions, which I think are very important to the 
country. But we had a hearing yesterday in the Finance Committee. I am 
privileged to serve on that committee that Senator Baucus chairs. We 
had a very good hearing on the whole issue of Federal revenues and 
outlays. I thought some useful information came out there. I was able 
to speak very briefly with Doug Elmendorf, the head of the 
Congressional Budget Office. I was particularly impressed with one 
chart he presented in his materials. I have made a copy of that, 
essentially, that I want to go through and explain because I think it 
puts this entire discussion into context.

[[Page S8450]]

  This chart shows what has happened with both outlays--and that is the 
light blue line--and revenues--the darker black line--outlays and 
revenues of the Federal Government for a 40-year period starting in 
1970 and ending, essentially, right now. One useful thing about the 
chart is it has an average. It shows that, on average, outlays were 
about 21 percent, and that is the dotted blue line across here. It also 
shows, on average, revenues--what the government collects in taxes--was 
about 18 percent, and that is the dotted black line down here. You can 
see there is--I don't know if you call it a structure gap but a 
persistent gap between what we raise for the operation of the Federal 
Government and what we spend. Every year we spend more than we raise.
  There is an exception to that. There is a period here where these two 
lines cross, and that is the period at the end of the Clinton 
administration where we got to a balanced budget and a surplus. That 
was achieved for a variety of reasons, and let me talk a little about 
those reasons.
  There was a 4-year period there, 1998 through 2001, where the Federal 
Government essentially did not spend more than it took in. In 2001 
again, as you can see from this chart, beginning in 2001 with this 
precipitous dropoff in revenue, the deficits began to grow. We now have 
a very large deficit. What is particularly disturbing is when you look 
ahead and project where we are going to be over the next 5, 10, 20 
years, we are projected to have a very large deficit indefinitely 
unless we change some things.
  Changing either the outlay numbers, what we spend, or the revenue 
numbers, the level of taxes that are collected, is not easy. It is not 
easy in this Congress. It has never been easy. So how did we produce a 
surplus during the 4 years we had a surplus? I think there were three 
main factors that account for that.
  In 1990, the Congress and President George H.W. Bush were able to 
agree to legislation that controlled spending and increased revenues as 
well. That was the Omnibus Budget Reconciliation Act of 1990. It, for 
the first time, enacted pay-go rules. It also increased taxes on the 
wealthiest Americans by raising the top income tax rate from 28 percent 
to 31 percent.
  At the time, President George H.W. Bush said--this is a quote from 
him--``It's time, I think it's past time, to put the interests of the 
country first.''
  Over the next 5 years, this legislation did reduce the deficit by a 
total of $480 billion. That was one of the factors that got us to that 
period of balanced budget and surplus.
  The second factor was in 1993, when the Congress and President 
Clinton agreed, again, to legislation that increased revenue and 
controlled spending. This legislation once again raised taxes on the 
wealthiest Americans. Over the 5 years following, the legislation 
reduced the deficit by $430 billion and revenue increases were 
responsible for over half that deficit reduction that occurred in that 
period.
  Of course, the third factor, which is the most important, is that the 
country enjoyed very strong economic growth during the 1990s, 
particularly the latter part of the 1990s. That allowed revenues to 
rise above the historical average we see down here, this 18 percent 
historical average for revenues. We were able to get that up 
significantly, both because of the changes in law that occurred under 
President George H.W. Bush and under President Clinton and the very 
good economic circumstances we enjoyed in the 1990s.
  What caused the situation to reverse? Was it an increase in spending 
or was it a decrease in revenue? I think this chart makes the point 
very clearly that initially what caused the situation to reverse was 
the Bush tax cuts of 2001. They reduced revenue by $70 billion in that 
exact same year, 2001. In total, the tax cuts President George W. Bush 
signed into law reduced revenue by an estimated $1.6 trillion over a 
10-year period. The actual costs may have been significantly greater.
  Simply put, the Congress and the President, when we enacted those 
Bush tax cuts, so-called Bush tax cuts, cut taxes more than we could 
afford to unless we were willing to also dramatically cut spending, and 
we did not cut spending. In fact, we increased spending. We increased 
it fairly dramatically to fund the Afghanistan war, to fund the Iraq 
war, to fund Medicare Part D. None of that new spending was paid for.
  Former Congressional Budget Office and Office of Management and 
Budget Director Peter Orszag estimates that because they were not paid 
for, the Bush tax cuts, if extended again, and Medicare Part D, those 
together would add $5 trillion to the debt over the next decade.
  So the votes we are casting on this tax issue are significant votes 
that will reverberate for some time and affect our economy and the 
deficit and the debt. People need to understand that.
  Of course, in the last 3 years since we have been in this recession, 
the deficit has worsened very substantially. Revenue dropped to 
historic lows as the economy contracted. Spending also increased due to 
the Recovery Act and also due to the automatic stabilizers we have 
built into the law, such as unemployment compensation.
  It is important to note that only about 10 percent of the debt we 
incur over the next 10 years--the debt over the next 10 years--is due 
to the Recovery Act.
  With the economic recovery underway, the size of the deficit is 
beginning to stabilize. You can see that at the far right end as part 
of this chart. You can see these numbers, you can see the outlay number 
beginning to come down, you can see the revenue number at least 
leveling off, and that is positive. But the obvious point I think we 
need to understand is, we cannot solve the deficit problem by simply 
reverting to the situation before the economic crisis. The chart shows 
that, on average, outlays have exceeded revenues by about 3 percent of 
gross domestic product. That is about $450 billion under the current 
size of our gross domestic product. In other words, if Congress can 
only accomplish an average performance, we are looking at a $\1/2\ 
trillion deficit going forward even after we are fully out of this 
recession.
  Clearly, we need to do better than that. Congress needs to make some 
tough choices, both to control spending and to increase revenues, just 
as we did in the 1990s. Both the President's Deficit Reduction 
Commission, which I know is having its final vote today, and the 
bipartisan commission led by my former colleague, Senator Pete 
Domenici, and Alice Rivlin, former Budget Director--both of those 
Commissions recognize we will need revenue increases as well as 
spending cuts to solve the deficit problem.
  The proposal that Senator Baucus has come forward with is to allow 
everyone in the country to enjoy the lower tax rates that were adopted 
under President Bush but only to enjoy those lower rates for the first 
$250,000 of income each year. I know Senator Schumer has a proposal 
which says we will allow the lower rates on taxation of earned income 
to apply to the first $1 million of income of all Americans. All 
Americans will get the tax cut, as they will under the proposal by 
Senator Baucus, but Senator Schumer's proposal would be to give them 
the lower rates on the entire $1 million that they earn in the first 
year. Above that they would have to pay the rates that were in place 
under President Clinton's time in office, in the 1990s, when the 
economy was so strong.
  The question is, Can we in this Congress do what needs to be done to 
deal with the deficit issue and particularly on this tax bill to do 
what needs to be done to raise revenue? Tomorrow we will be voting on 
whether to let the Bush tax cuts expire for income above $250,000. One 
of these votes will be to effectively raise taxes on annual income 
above $1 million, as I said. Compared to other choices we have, it 
seems to me this is a fairly easy choice. If we are not willing to 
revert to the Clinton-era tax rates on any income, no matter at what 
level, then it is going to be very difficult for us to make a credible 
claim that we are serious about the deficit.
  I urge my colleagues to support the Baucus proposal, and I hope we 
can get a good, strong bipartisan vote on that. It is clear to me 
Americans do want to see the taxes they are paying on the first 
$250,000 of their income remain where they are today. That will only 
happen if we are able to pass this proposal Senator Baucus has put 
forward.
  I yield the floor and suggest the absence of a quorum.

[[Page S8451]]

  The ACTING PRESIDENT pro tempore. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. McCONNELL. I ask unanimous consent that the order for the quorum 
call be rescinded.
  The PRESIDING OFFICER (Mr. Bingaman). Without objection, it is so 
ordered.

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