[Congressional Record (Bound Edition), Volume 152 (2006), Part 10]
[Senate]
[Pages 14152-14153]
[From the U.S. Government Publishing Office, www.gpo.gov]




                        MIDSESSION BUDGET REVIEW

  Mr. REED. Mr. President, when the administration released its 
midsession review of the fiscal year 2007 budget yesterday, it made a 
number of claims about how its policies have been successful at 
promoting economic growth and bringing down the budget deficit. In this 
case, however, as in so many others, the administration is looking 
through rose-colored glasses, exaggerating the successes of its 
policies and ignoring the true costs.
  Let's begin by putting the improvement in the fiscal year 2006 budget 
deficit in perspective. It is true that tax revenues have grown this 
year--as they always do in a business cycle expansion--and that 
revenues have been coming in stronger than expected. But the current 
projected 2006 deficit of $296 billion is just a little lower than the 
fiscal year 2005 budget deficit of $318 billion. It is still the fourth 
largest budget deficit on record in nominal terms.
  The Bush administration wants us to compare the current estimate of 
the fiscal year 2006 budget deficit with the exaggerated estimate of 
$423 billion they made in their February budget projection. As the 
noted budget expert Stan Collender wrote at the time:

       This President has a well-established history of 
     overstating the deficit early in the year and then taking 
     credit when it turns out to be lower than projected, even if 
     it has done nothing to make that happen.

  And, of course, that is exactly what we are seeing right now.
  The real story is the sharp deterioration of the budget in this 
administration. When President Bush took office, the Congressional 
Budget Office projected large and growing Federal budget surpluses 
under existing laws and policies--the so-called baseline projection--
including a budget surplus of over $500 billion in fiscal year 2006. 
However, the President has presided over an incredible reversal of 
fortune. A $128 billion Federal budget surplus in fiscal year 2001 
turned into a $318 billion deficit by fiscal year 2005 and a projected 
deficit almost as large in fiscal year 2006. This is not news to crow 
about. Frankly, it reveals, as I suggested, a tremendous reversal in 
the budget fortunes of this country.
  A $5.6 trillion, 10-year projected surplus from 2002 to 2011 has 
turned into a deficit of $2.7 trillion. So from the time the President 
took office until today, what we thought was going to be a $5.6 
trillion surplus is now a $2.7 trillion deficit, an extraordinary 
change in the fiscal year health of the United States.
  Realistically, this 10-year deficit is probably much higher because 
it does not include big-ticket items such as the war costs which are 
being funded on supplemental appropriations and not properly projected 
into the budget base; and the need to make tax adjustments like fixing 
the alternative minimum tax.
  Instead of sound budget policies aimed at preparing for the imminent 
retirement of the baby boom generation, the Bush administration and the 
majority in Congress have refused to adopt the kinds of budget 
enforcement rules that helped achieve fiscal discipline in the 1990s. 
They have pursued an open-ended commitment to stabilizing Iraq that 
relies on supplemental appropriations rather than the normal budget 
process, and they have remained committed to extending irresponsible 
tax cuts that will add further to the budget deficit. All of this comes 
at the cost of inhibiting greater economic opportunities for most 
American families.
  That, of course, is not what we are hearing from the administration 
and its supporters who keep telling us that the economy is doing well, 
and that their tax cuts are an important reason why, and that everyone 
is benefiting. It should not be surprising that this is not a message 
which is resonating with the American people because, in fact, the 
current economic recovery has been weaker than the typical business 
cycle recovery since the end of World War II, and large numbers of 
Americans are still waiting to benefit from the economic growth that we 
are purportedly seeing.
  Job growth has been very slow by the standards of past recoveries, 
real wages are stagnating, and disparities in income and earnings are 
growing wider. Last Friday we learned that employers added only 121,000 
jobs to their payrolls in June, and that employment growth over the 
past 3 months has averaged just 108,000 jobs per month. Those are not 
the kinds of figures you expect to see in a healthy job market. They 
are not even enough to keep up with normal growth in the labor force.
  You also don't expect to see the earnings of the typical worker 
fallin behind inflation year after year in a growing economy, but that 
is what has happened since 2003. Average hourly earnings have fallen in 
each of the past 2 years, and real median household income has declined 
by about $1,700 under President Bush.
  The benefits of economic growth over the last several years are 
simply not being shared fairly. Those at the upper income levels are 
seeing gains but, frankly, not the same robust gains of the 1990s, when 
we saw the proverbial picket fence, where there were positive gains at 
every level of income in the United States from the poorest to the 
richest. Now, we are seeing a distribution of income that is skewed to 
the very richest. At the bottom income and middle income level, there 
is a loss in real earnings since the President took office. They are 
not even keeping up.
  While wages have stagnated and incomes are falling for most workers, 
profits have grown to record levels. Corporate profits have grown at an 
annual rate of over 16 percent, more than twice the average growth rate 
in past recoveries. Strong productivity growth has shown up on the 
bottom lines of shareholders, but not in the paychecks of workers.
  It seems clear that investors are benefiting greatly from Bush 
administration policies, but hard work goes unrewarded. Most Americans 
depend on their salary, not their investments, to pay their bills. Too 
many Americans are being squeezed by stagnant incomes and rising costs 
for gasoline, health care, and education. Somehow, the Bush tax cuts 
are supposed to make up for this.
  However, the nonpartisan Tax Policy Center estimates that the tax 
cuts passed this year will only save the typical American family about 
$47--about what it now costs to fill up the gas tank of their minivan. 
But taxpayers making over $1 million will receive a tax cut of more 
than $42,000--enough to buy a new Mercedes.

[[Page 14153]]

  Ironically, the sources of the revenue surprises that have led to the 
improvement in the fiscal year 2006 budget prospectus mirror the 
growing disparity between incomes at the top of the distribution and 
incomes for typical American families. Corporate tax receipts are 
substantially higher than originally projected, and much of the 
unexpected increase in individual income taxes appears to come from 
income gains by high-income taxpayers.
  In particular, tax receipts for income not automatically subject to 
withholding, known as nonwithheld receipts, were 20 percent greater 
during the first 9 months of 2006 compared to 2005. Nonwithheld income 
is not ordinary wages; it is income such as capital gains, executive 
bonuses, noncorporate business income, and interest on dividends.
  Unfortunately, middle- and lower-income families are paying the price 
for the President's tax cuts for the wealthiest, as investments in 
programs that promote greater economic prosperity for ordinary 
Americans have become candidates for budget cutting.
  The President's budget includes cuts to elementary and secondary 
education, student financial aid for higher education, job training for 
displaced workers, child care assistance so that parents can go to 
work, and community development grants aimed at expanding small 
businesses.
  Getting our fiscal house in order is the first step toward keeping 
our economy strong. But we also can't shortchange investments in 
research and technologies that will create the high-wage jobs of the 
future. Our policies should be refocused toward promoting lifelong 
education and training for our citizens in order to allow Americans to 
increase their earnings, their personal savings, and their ability to 
own a home.
  Today, we are at war and yet there is no sense of the shared 
sacrifice that has united this country in past conflicts. Our military 
families are making tremendous sacrifices, and too many of them have 
made the ultimate sacrifice in service to our country.
  With $320 billion appropriated or pending for Iraq operations to date 
and more than 2,500 service men and women killed, the human and 
financial tolls are both more staggering than imagined.
  With mounting war costs, the impending retirement of the baby boom 
generation, and deficits as far as the eye can see, it is 
unconscionable to think that we are being asked to make the President's 
irresponsible tax cuts permanent. Those tax cuts were poorly designed 
to stimulate job creation and broadly shared prosperity when they were 
first passed, and they have produced a legacy of large budget deficits 
that leave us increasingly hampered in our ability to deal with a host 
of challenges that we face as a Nation.
  Large and persistent budget deficits have contributed to an ever-
widening trade deficit that forces us to borrow vast amounts from 
abroad and puts us at risk of a major financial collapse if foreign 
lenders suddenly stop accepting our IOUs. We had a current account 
deficit of nearly $800 billion last year and our international 
financial debt continues to mount.
  Raising our future standard of living and preparing adequately for 
the retirement of the baby boom generation require that we have a high 
level of national investment and that a high fraction of that 
investment be financed by our own national saving--not by foreign 
borrowers. We followed such prosperity-enhancing policies under 
President Clinton, but that legacy of fiscal discipline has been 
squandered under President Bush.
  No matter how rosy a picture the administration tries to paint, 
neither the present nor the future fiscal outlook seems terribly 
bright. Instead of more tax cuts for the wealthiest among us, we need 
to invest more in hard-working families and create greater 
opportunities for every American. We cannot afford the costs of failing 
to meet that challenge

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