[Congressional Record Volume 157, Number 50 (Thursday, April 7, 2011)]
[Senate]
[Pages S2219-S2220]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
THE BUDGET
Mr. ALEXANDER. Mr. President, if another Senator wishes to speak, I
will be succinct. I will try to do mine in a less period of time. I
thank the Chair for its courtesy.
I wish to speak on two subjects. First, there has been a good deal of
discussion in Washington about making sure we continue to operate the
government over the weekend and on into next week while we get about
the important business of reducing our debt. Our national debt is an
urgent problem. Members on both sides of the aisle understand this, and
have said this.
[[Page S2220]]
We have 64 Senators who have written the President to say we are
ready to go to work on reducing the debt on the whole budget. We have a
proposal from Congressman Ryan. We have a proposal from the Bowles
commission. We are ready to go to work. The House of Representatives
has made a proposal to, for the time being, continue the government
while we work on that, and that is eminently reasonable.
I ask unanimous consent to have printed in the Record a Wall Street
Journal op-ed from April 4 by Gary Becker, George Shultz, and John
Taylor that points out that the numbers in the House of Representatives
proposal would have the Federal Government spend for the rest of the
year basically what we spent in 2008, plus an allowance for inflation.
There is no reason, the authors say, why government agencies, from
Treasury and Commerce to the executive office of the President, cannot
get by with the same amount of funding they spent in 2008 plus
increases for inflation. This would be a reasonable first step as we
get to the larger issue of how we reduce the debt over a longer period.
There being no objection, the material was ordered to be printed in
the Record, as follows:
[From the Wall Street Journal, Apr. 4, 2011]
Time for a Budget Game-Changer
Assurance that current tax levels will remain in place
would provide an immediate stimulus.
House Republican budget planners are on the right track.
(By Gary S. Becker, George P. Shultz and John B. Taylor)
Wanted: A strategy for economic growth, full employment,
and deficit reduction--all without inflation. Experience
shows how to get there. Credible actions that reduce the
rapid growth of federal spending and debt will raise economic
growth and lower the unemployment rate. Higher private
investment, not more government purchases, is the surest way
to increase prosperity.
When private investment is high, unemployment is low. In
2006, investment--business fixed investment plus residential
investment--as a share of GDP was high, at 17%, and
unemployment was low, at 5%. By 2010 private investment as a
share of GDP was down to 12%, and unemployment was up to more
than 9%. In the year 2000, investment as a share of GDP was
17% while unemployment averaged around 4%. This is a regular
pattern.
In contrast, higher government spending is not associated
with lower unemployment. For example, when government
purchases of goods and services came down as a share of GDP
in the 1990s, unemployment didn't rise. In fact it fell, and
the higher level of government purchases as a share of GDP
since 2000 has clearly not been associated with lower
unemployment.
To the extent that government spending crowds out job-
creating private investment, it can actually worsen
unemployment. Indeed, extensive government efforts to
stimulate the economy and reduce joblessness by spending more
have failed to reduce joblessness.
Above all, the federal government needs a credible and
transparent budget strategy. It's time for a game-changer--a
budget action that will stop the recent discretionary
spending binge before it gets entrenched in government
agencies.
Second, we need to lay out a path for total federal
government spending growth for next year and later years that
will gradually bring spending into balance with the amount of
tax revenues generated in later years by the current tax
system. Assurance that the current tax system will remain in
place--pending genuine reform in corporate and personal
income taxes--will be an immediate stimulus.
All this must be accompanied by an accurate and simple
explanation of how the strategy will increase economic
growth, an explanation that will counteract scare stories and
also allow people outside of government to start making
plans, including business plans, to invest and hire. In this
respect the budget strategy should be seen in the context of
a larger pro-growth, pro-employment government reform
strategy.
We can see such a sensible budget strategy starting to
emerge. The first step of the strategy is largely being
addressed by the House budget plan for 2011, or H.R. 1.
Though voted down in its entirety by the Senate, it is now
being split up into ``continuing'' resolutions that add up to
the same spending levels.
To see how H.R. 1 works, note that discretionary
appropriations other than for defense and homeland security
were $460.1 billion in 2010, a sharp 22% increase over the
$378.4 billion a mere three years ago. H.R. 1 reverses this
bulge by bringing these appropriations to $394.5 billion,
which is 4% higher than in 2008. Spending growth is greatly
reduced under H.R. 1, but it is still enough to cover
inflation over those three years.
There is no reason why government agencies--from Treasury
and Commerce to the Executive Office of the President--cannot
get by with the same amount of funding they had in 2008 plus
increases for inflation. Anything less than H.R. 1 would not
represent a credible first step. Changes in budget authority
convert to government outlays slowly. According to the
Congressional Budget Office, outlays will only be $19 billion
less in 2011 with H.R. 1, meaning it would take spending to
24% of GDP in 2011 from 24.1% today.
If H.R. 1 is the first step of the strategy, then the
second step could come in the form of the budget resolution
for 2012 also coming out of the House. We do not know what
this will look like, but it is likely to entail a gradual
reduction in spending as a share of GDP that would, in a
reasonable number of years, lead to a balanced budget without
tax rate increases.
To make the path credible, the budget resolution should
include instructions to the appropriations subcommittees
elaborating changes in government programs that will make the
spending goals a reality. These instructions must include a
requirement for reforms of the Social Security and health-
care systems.
Health-care reform is particularly difficult politically,
although absolutely necessary to get long-term government
spending under control. This is not the place to go into
various ways to make the health-care delivery system cheaper
and at the same time much more effective in promoting health.
However, it is absolutely essential to make wholesale changes
in ObamaCare, and many of its approaches to health reform.
The nearby chart shows an example of a path that brings
total federal outlays relative to GDP back to the level of
2007--19.5%. One line shows outlays as a share of GDP under
the CBO baseline released on March 18. The other shows the
spending path starting with H.R. 1 in 2011. With H.R. 1
federal outlays grow at 2.7% per year from 2010 to 2021 in
nominal terms, while nominal GDP is expected to grow by 4.6%
per year.
Faster GDP growth will bring a balanced budget more quickly
by increasing the growth of tax revenues. Critics will argue
that such a budget plan will decrease economic growth and job
creation. Some, such as economists at Goldman Sachs and
Moody's, have already said that H.R. 1 will lower economic
growth by as much as 2% this quarter and the next and cost
hundreds of thousands of jobs. But this is highly implausible
given the small size of the change in outlays in 2011 under
H.R. 1, as shown in the chart. The change in spending is not
abrupt, as they claim, but quite gradual.
Those who predict that a gradual and credible plan to lower
spending growth will reduce job creation disregard the
private investment benefits that come from reducing the
threats of higher taxes, higher interest rates and a fiscal
crisis. This is the same thinking used to claim that the
stimulus package worked. These economic models failed in the
1970s, failed in 2008, and they are still failing.
Control of federal spending and a strategy for ending the
deficit will provide assurance that tax rates will not rise--
pending tax reform--and that uncontrolled deficits will not
recur. This assurance must be the foundation of strategy for
a healthy economy.
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