[Congressional Record Volume 157, Number 54 (Wednesday, April 13, 2011)]
[Senate]
[Pages S2436-S2438]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
THE BUDGET
Mr. GRASSLEY. Mr. President, I suppose I and a lot of my colleagues
had an opportunity to hear the President's speech this afternoon. It is
very nice that the President is being engaged for the first time in the
budget debate and the long-term fiscal problems of this country, and
the deficit problems of this country. It is good he is following on
with some of the recommendations of his own deficit reduction
commission. We have to remember a little less than a year ago he
appointed a deficit reduction commission. They reported on December 5.
It seems as though they had broad bipartisan support because the four
Senators on the commission--two Democrats and two Republicans with
probably very different political philosophies of the four--have
endorsed it. Then, all of a sudden, since December 5 until today, there
has been a lot of quiet on the part of the President of the United
States about whether he
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likes what his deficit commission suggested.
I don't know the details of where he is coming from, whether he
agrees with every detail that is in the deficit reduction commission
recommendations, but at least he is getting on board along the lines of
what 64 Senators--32 Republicans and 32 Democrats--said in a letter
about a month ago to the President: We are ready to start tackling some
of these big problems, but we need leadership. Maybe this speech today
is an answer to that leadership. Or, if I want to be cynical about it,
I could say maybe the President gave his speech today because of the
very positive comments that Congressman and Chairman Paul Ryan got for
his budget ideas that he released last week.
But the President also took advantage to renew the class warfare--the
demagoguery of taxing the wealthy. It doesn't contribute much to the
debate. In fact, I think it makes it very difficult to bring people
together. Or, if I want to be cynical, I could say this is maybe the
President's first speech about his reelection. But either way, I think
there is analysis that we have to look at very carefully and see if it
does the economic good that is intended in the speech, even though it
is welcome that the President is being engaged at this time.
So I would give some reaction to some of the things the President
said, but I want this as background: From World War II through 2009,
every dollar of new Federal tax revenue coming into this Treasury
resulted in $1.17 of new spending. Think of that: Every new dollar
coming in wasn't a dollar that reduced the deficit, it was a dollar
that resulted in $1.17 of additional spending. That is like a dog that
chases its tail and never catches it. So we are sending a new dollar to
Washington to do something about the budget deficit and nothing happens
as a result of that, except more deficit.
The President made the point that tax reductions in 2001 and 2003
added tremendously to the deficit he inherited or the part of the
deficit that now exists. But, in fact, the tax reductions of 2001 and
2003 resulted in more revenue to the Federal Treasury. The expanding
economy, spurred by the Tax Relief Acts of 2001 and 2003, helped to
reduce the annual budget deficit from $412 billion in 2004 to $160
billion in 2007, not because we taxed more but because we taxed less
and we had more economic activity as a result. That brings me around to
the principle of deficit reduction. Obviously, when I say a dollar of
additional taxes doesn't go to the bottom line, that doesn't do
anything about the deficit. But on the expenditure side, reducing that
and the economic growth that comes from it is what reduces the
deficit--more economic activity.
Even the most sincere arguments that raising taxes would reduce the
deficit and the debt do not have history to back them up. Outside of
Washington, it is obvious to people the problem is not that people are
undertaxed but Washington overspends. The voters said this so loudly
and clearly in the last election, and elections are supposed to have
consequences. I think the budget agreement of midnight Friday night is
evidence of words from the grassroots of America getting through to
Washington, DC. I think most people at the grassroots are cynical
whatever happened, and I suppose we have to do a lot more to prove to
them there might be a different day in Washington. But it was pretty
loud and clear the results of the last election and the message sent to
Washington.
Government spending increased by 22 percent during the last 2 years,
a nonsustainable level of increased expenditures. If we follow the
budget proposed this year by President Obama, we would add another $13
trillion to our national debt over the next decade. This debt gets in
the way of economic activity that creates jobs, and it is a terrible
burden to leave to future generations. We talk dollars and cents when
we talk about the deficit and the debt, but it is a moral issue of
whether those of us of our generation ought to live high on the hog and
leave the bill to young people such as these pages here who have to pay
for it. It is a moral issue as much as it is an economic issue.
This trillions of dollars of debt gets in the way of economic
activity that creates jobs, and it is a terrible burden on future
generations. Washington needs to get behind policies that clamp down on
spending and, as a result, we will grow the economy. Increased economic
activity increases revenue to the Federal Treasury, enabling deficit
and debt reduction. We know that to be a fact, because from 1997 to the
year 2000, we actually, because of the growth of the economy, paid down
$568 billion on the national debt during that period of time. The
answer is not ways to grow government. We need to grow the economy, but
we don't grow the economy by growing government.
Getting back to the issue of the President making a big deal in his
speech about the 2001 tax cuts being a major cause of the budget
deficit, and probably the implication of the unfairness of it because
there weren't higher taxes on higher income people, I would suggest
that the President is wrong in both regards.
In 2001, the tax cut included an across-the-board income tax
reduction and reduced the tax rates on the lowest income people from 15
percent to 10 percent. It resulted in removing millions of low-income
people from the Federal income tax rolls entirely. It increased the
child tax credit from $500 to $1,000. The legislation included marriage
penalty relief and the first-ever tax deduction for tuition.
Two years later, after 9/11, the 2003 dividends and capital gains tax
rate cuts spurred economic growth and created jobs.
The result was more revenue to the Federal Treasury, not less. The
expanding economy helped reduce the annual budget deficit--and I am
repeating these numbers because they are significant--from $412 billion
in 2004 to $160 billion in 2007.
I know it is counterintuitive to a lot of people to hear a Member of
the Senate say if you reduce marginal tax rates, you are going to bring
revenue into the Federal Treasury, because the obvious common sense
tells people that if you increase taxes, you are going to bring in more
revenue. As I said earlier in a speech today, it doesn't work out that
way because some people in this country can decide I have paid enough
taxes, I am not going to pay any more. So they disincentivize to be
productive, probably do leisure or invest in nonproductive activity.
When you lower marginal tax rates, it encourages those people to be
productive and, at the same time, creating jobs, growing the economy,
and bringing more money into the Federal Treasury.
When you look at the sources of the deficit, contrary to the
President's claim, tax relief has been a small part. Unprecedented
spending contributed much more to the deficit than the tax relief did
and particularly in the last 2 years--a 22-percent increase in
expenditures on top of the $814 billion stimulus.
Here is something that probably is counterintuitive as well and
probably something the President misses from his analysis of the 2001
and 2003 tax relief bills, which he blames the big budget deficit on.
Those reductions actually ended up with taxes being more progressive.
The effective Federal tax rate on the top 1 percent of households is
more than seven times the rate paid by the bottom 20 percent of
households. That is up from less than five times as much in the year
1979.
If tax relief enacted since 2001 is allowed to expire in a little
more than a year and a half--because last December we only extended the
existing tax policy until December 31, 2012--if that happens at that
time, a family of four with two kids who earns $50,000 today would see
a $2,155 increase in their tax bill. More than 6 million low-income
people who currently have no Federal income tax liability would be
subject to the individual income tax, and that would be at a rate of 15
percent instead of the current 10 percent.
Washington needs to learn that leaving more money in the pockets of
the taxpayers unleashes a positive chain reaction in our economy. On
the other hand, government spending doesn't create wealth because
government is not an institution that can create wealth. Government is
an institution that can only provide an environment for people outside
the government to create wealth. In fact, what the government does is
it consumes wealth and, as a result, doesn't generate a stronger
economy.
Instead of growing the government, Washington needs to focus on
helping
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create private sector jobs. The President's new plan will reduce the
deficit by $4 trillion over 12 years. He does that by reducing spending
by $2 trillion but raising taxes by $1 trillion, and, thus, lowering
interest payments by $1 trillion. The President has again failed to
realize that we don't have a revenue problem, we have a spending
problem.
At least a couple times since I have been in the Senate, I have heard
this argument: Let's increase taxes $1, and we will reduce expenditures
$2 or $3 or $4--sometimes it is $2, sometimes $3, and sometimes $4
behind those ideas. That sounds very good, doesn't it? But here is why
it doesn't work and why bringing in $1 in new taxes actually leads to
spending of $1.17. I often quote Professor Dave Vedder of Ohio
University, who has studied tax increases and spending for a long
period of time. In fact, you increase taxes until you decide to do
something else with the taxes. But appropriations are reviewed annually
and, for some reason or other, after that first year, appropriations
tend to creep up and up and up. Consequently, the well-intentioned
raising of taxes $1 and reducing expenditures by $3 or $4--as well
intended as it is, it gradually is eroded on the expenditure side--that
half of that proposition--so you end up not reducing expenditures as
you have originally indicated.
I yield the floor and suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. NELSON of Florida. Mr. President, I ask unanimous consent that
the order for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. NELSON of Florida. Mr. President, may I address the Senate?
The PRESIDING OFFICER. Without objection, it is so ordered. The
Senator is recognized.
Mr. NELSON of Florida. Mr. President, we have come through a crisis.
It is not over yet because we don't have a law that has been passed by
both Houses averting the shutdown of the government, and once it has
passed both Houses--which we anticipate tomorrow--then it will be
signed into law by the President, and we will avert the shutdown.
Had there been a shutdown or, in the alternative, had a law proposed
in the House of Representatives, H.R. 1, been law, what we would have
seen is a number of the hunger programs we have being savaged. There
would have been a huge savaging of the feeding programs around the
world--USAID, an arm of the State Department, which saves untold
thousands, if not millions, of lives, particularly of children. They
have a program right now in Africa, for example, of just providing
mosquito netting, which cuts malaria by 30 percent. But also, USAID
uses a lot of American agriculture to help feed hungry populations.
Those programs would have been cut significantly had H.R. 1, the House
of Representatives' appropriations bill, been the final decision.
Fortunately, it wasn't and, fortunately, for the hunger programs,
both abroad and at home, the least among us will not have to suffer
those cutbacks to the budget for the duration of this fiscal year--for
the next 6 months.
Even so, there were some significant cuts in what has been agreed to
in the funding for hunger programs here in America. There was a $500
million cut in the Women, Infants, and Children Program, otherwise
known as WIC, the Federal health and nutrition program for women,
infants, and children. We will have to deal with this, as we are now
putting together the mathematics in building the next budget for 2012.
I decided to come over and talk because I wish to talk about one of
my closest personal friends, former Congressman and former Ambassador,
Tony Hall of Ohio, who started a fast 16 days ago. That fast he is
going to continue, only having water. He is going all the way through
Easter, which is another week and a half away. The duration of that
fast will be somewhere around a month.
You can imagine what happens to your body when you don't take in any
nourishment other than water for 30 days. That is what Tony Hall is
doing. It is very interesting that people are joining him. Some 35,000
people nationwide have joined Tony in a fast. It may not be a complete
fast such as he is doing, with only water, and it may be just that they
are doing a fast 1 day a week. It is interesting that 30 Members of the
House of Representatives have joined their former colleague,
Congressman Tony Hall, in this fast, and that includes--as just
announced--14 U.S. women lawmakers who plan to protest the deep cuts in
the programs that help the poor and battle hunger in the United States
and overseas.
In conclusion, you can tell a great nation by how it takes care of
the least of those among us. It is certainly a part of our Judeo-
Christian heritage, throughout the Hebrew Scriptures and the New
Testament, that, over and over, the most referenced part of the
Scriptures is the obligation of a society to take care of the least
privileged among us.
Back in the old days, some 2,000 years ago--and even before--they had
a social security system in that agricultural economy of the time
called gleaning. Those who owned the wheat fields would go in and reap
the wheat, but it was the standard practice of the day that they would
leave enough wheat on the stalks so the poor could come in and glean
the fields in order that they would have sustenance. That was their
social security system of the day. Our systems of aiding the poor are
much more sophisticated and include the programs of USAID, and here at
home a lot through the Department of Agriculture. But as we have to cut
the budget, we must constantly remind ourselves, as Ambassador Tony
Hall is reminding us right now with his fast for a month, that it is an
obligation of all of us to take care of the least among us.
I will close by quoting that passage from Matthew 25: When you did it
for the least of these, my brothers and sisters, you were doing it for
me.
Mr. President, I yield the floor.
The PRESIDING OFFICER (Mr. Bennet). The majority leader is
recognized.
Mr. REID. Before my friend leaves the floor, I had the good fortune
to serve in the House, as my friend did, with Tony Hall, a very
dedicated, thoughtful man. I wasn't aware of his doing this fast. That
is a real fast. It shows how strongly he feels and has felt for many
years about this. So it is nice my friend from Florida brought this to
the attention of the American people.
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