[Congressional Record (Bound Edition), Volume 155 (2009), Part 15]
[Senate]
[Pages 20288-20291]
[From the U.S. Government Publishing Office, www.gpo.gov]




                            DEBT AND DEFICIT

  Mr. GRASSLEY. Mr. President, I thank the Senator from Rhode Island 
for his kind remarks.
  We are only 9 months into fiscal year 2009, and for the first time in 
American history the Federal deficit has reached and exceeded $1 
trillion. This is not one of those firsts for our great Nation that 
calls for celebration, and there will not be any celebration.
  Unfortunately, the bad fiscal news is not yet over for the year. We 
are still on track for a year-end deficit of over $1.8 trillion for 
fiscal year 2009. That is not according to this Senator, that is 
according to our official scorer, the Congressional Budget Office, the 
nonpartisan organization.
  This 2009 deficit as a percentage of gross domestic product will be a 
staggering 13 percent, the highest rate since the end of World War II. 
I have a chart that shows this, a chart that puts the deficit in 
context.
  Here is also a chart that puts the debt into context. I want to 
remind the Senate that I agree with President Obama that he did, in 
fact, inherit part of these deficits and debt. What is not often 
pointed out is this: The deficits and debt were bequeathed back then on 
a bipartisan basis because the Democrats controlled the last Congress. 
Starting in the year 2007 that Congress wrote the budget, it wrote the 
spending bills; that Democratically controlled Congress wrote the 
financial bailout bill. A Republican President, George W. Bush, signed 
those spending bills. President Bush signed the financial bailout bill. 
The chart shows the bipartisan deficit President Obama inherited--and 
that would be the gray part of the deficit chart--and the chart shows 
the bipartisan debt President Obama inherited. That would be on the 
chart as well.
  Today we have seen more revisionist fiscal history from many of my 
friends on the other side. It boils down to two very basic 
propositions. The first proposition is, all good economic policy and 
beneficial fiscal effects are due to the partisan tax hike of 1993. The 
second proposition is that all bad economic policy and detrimental 
fiscal effects of this decade are due to the bipartisan tax relief 
plans of 2001 and 2003.
  How convenient for my friends on the other side of the aisle. If we 
take this fiscal revisionism to its logical extreme, the answer of some 
on the other side might be to tax every dollar of income earned by the 
American taxpayer. There seems to be an attitude that any policy that 
allows Americans to keep more of their own money is just automatically 
bad, while any policy which takes more of their money and spends it is 
automatically good.
  I think it is fairly clear the fiscal revisionists on the other side 
do not have a problem with huge deficits; rather, they are threatened 
by the prospects of Americans deciding what they want to do with their 
very own money.
  In fact, the deficit effects of the stimulus bill passed within a 
short time after Democrats assumed full control of the Federal 
Government exceeded the deficit impact of the 8 years of the bipartisan 
tax relief. Again, this is comparing the tax relief with the stimulus 
as you see in the chart.
  Since the stimulus package spilled a lot of red ink, let's take a 
look at how the economy has done. Unemployment currently stands at 9.5 
percent, the highest rate in the last 26 years. The economy has shed 
6.4 million jobs since this recession began, and that also includes, 
though, 2.6 million jobs lost since President Obama took office.
  Even with the passage of the massive $787 billion stimulus bill in 
February, the promise of jobs, jobs, jobs that went with that $787 
billion stimulus bill, there is still no end in sight to the rise of 
unemployment and job losses.
  The President himself recently said:

       My expectation is that we will probably continue to see 
     unemployment kick up for several months.

  While the short-term news is bad, I have bad news for you. The long-
term news is much worse. If the Obama budget is adopted, by 2019 we 
will have added over $9 trillion to the national debt held by the 
public, and our debt as a percentage of the economy will grow in excess 
of 80 percent, in excess of 80 percent, a level also that has not been 
seen since this country was in World War II.
  Let me say, the 50-year average of that national debt, according to 
the economy, has been about 40 percent. So we are talking about more 
than doubling what it has been over the last 50 years.
  The huge spike in spending that we have seen over the course of the 
past 9 months has been advertised as temporary. But even so, the 
deficit as a percentage of GDP in 2019 is projected to be 5.5 percent, 
a level that everybody, including the President, agrees is 
unsustainable. You can see that on our charts as well.
  Looking beyond the 10-year window paints an even bleaker picture. I 
have a

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chart from the Congressional Budget Office that projects a terrifying 
rise in debt held by the public as a percentage of GDP over the next 40 
years. As we can see from the dotted line, the highest level of debt 
held by the public as a percentage of GDP, 107 percent, occurred in 
1945 as a result and at the end of World War II. In either of the two 
scenarios outlined in the Congressional Budget Office's long-term 
budget outlook, shown by the red and green lines on the chart 
respectively, we are on a course to break this record sometime in the 
next 15 to 35 years and reach ratios of debt to GDP of up to 128 
percent or, at the extreme, 321 percent by 2050.
  The Congressional Budget Office's own words are these:

       The systemic widening of budget shortfalls projected under 
     CBO's long-term scenarios has never been observed in U.S. 
     history.

  Some may ask: Why is this a big deal? What does debt held by the 
public have to do with my everyday life? The Congressional Budget 
Office makes three points answering this question. This is the 
Congressional Budget Office, a nonpartisan group of experts whose sole 
job is to project, at least 10 years ahead of time, what the situation 
is with every spending bill and the impact of the deficit. This is what 
they say: If the ratio of debt to GDP continues to rise, lenders may 
become concerned about the financial solvency of the government and 
demand higher interest rates to pay for the increasing riskiness of 
holding government debt. No. 2, if the debt-to-GDP ratio keeps 
increasing and the budget outlook is not improved, both foreign and 
domestic lenders may not provide enough funds for the government to 
meet its obligations. And No. 3, if the first two points happen, no 
matter whether the government resolves the fiscal crisis by printing 
money, raising taxes, cutting spending or going into default, it is 
certain that economic growth will be seriously disrupted.
  Whenever economic growth is seriously disrupted, job growth is 
seriously disrupted as well. Clearly, a debt-to-GDP ratio approaching 
100 percent would have a disastrous impact on everybody's everyday 
life.
  So where do we go from here? Clearly, we are well on our way to 
fiscal catastrophe unless we change course. What is the best way to 
break out of this recession, to start creating jobs, to reverse the 
mountainous growth of deficit and debt and get the economy moving 
again? That is a very important and long question. Let me see if I can 
answer. In general, Democrats and Republicans seem to have opposing 
viewpoints when it comes to the solution to this problem, with 
Republicans favoring lower taxes and lower spending, while Democrats 
favor higher taxes and higher spending. However, both Republicans and 
Democrats agree that health care reform is a crucial ingredient to 
solving the long-term budget crisis.
  Both Republicans and Democrats agree health care reform needs to be 
paid for as well. The Congressional Budget Office is also on the same 
page, asserting that, in their words:

       In the absence of significant changes in policy, rising 
     costs for health care will cause federal spending to grow 
     much faster than the economy, putting the federal budget on a 
     nonsustainable path.

  Over the past few months, the rising cost of health care has been 
characterized by a few creative illustrations. First, we have heard the 
chairman of the Budget Committee refer to the rising cost of health 
care as ``an 800-pound gorilla.'' Second, we have heard the President 
describe the rising cost of health care as ``a ticking timebomb.''
  Today I wish to add a third illustration. The rising cost of health 
care is a massive, fire-breathing debt and deficit dragon. In the King 
Arthur legend, the greatest knight among the Knights of the Round Table 
was Sir Lancelot. Sir Lancelot was also a dragon slayer. In order for 
Sir Lancelot to strike down the dragon, he had to be equipped with 
suitable weapons. The same is true today with the rising cost of health 
care. As Congress contemplates ways to cut down on the massive, fire-
breathing debt and deficit dragon, it must wield the proper weapons.
  As you can see here, we have the debt and deficit dragon.
  A few weeks ago, House Democrats proposed a graduated surtax of up to 
5.4 percent on taxpayers making over $280,000 to partially offset their 
health care reform bill. This small business surtax would push the top 
marginal tax rates up to between 43 percent and 46.4 percent, a rate 
that would jump to over 50 percent in 39 States with Medicare and State 
and local taxes added in. This is according to the Tax Foundation. So 
is this small business surtax the proper weapon to strike down the debt 
and deficit dragon? I have a chart that shows not Sir Lancelot but Sur 
Taxalot on his way to slay the debt and deficit dragon with his mighty 
surtax. This is Sur Taxalot, as we can see. The surtax is a large, 
heavy, painful weapon and lethal to America's job engine, the goose 
that lays the golden egg, small business America.
  Take a good look at Sur Taxalot.
  However, it is not effective against the debt and deficit dragon 
because it does nothing to slow the dragon's exponential growth. The 
cost of health care that the dragon feasts upon will continue to 
increase much faster than the revenues that Sur Taxalot can collect 
with his surtax.
  CBO Director Doug Elmendorf testified in front of the Budget 
Committee 2 weeks ago. Dr. Elmendorf stated: None of the legislative 
changes looked at by CBO so far, including the House Democrats' small 
business surtax, ``represent the sort of fundamental change of the 
order of magnitude that would be necessary to offset the direct 
increase in federal health costs from the insurance coverage 
proposals.''
  Clearly, unlike Sir Lancelot, Sur Taxalot is no dragon slayer.
  Now let's look at how House Democrats' small business surtax works. 
In 2011 and 2012, singles making between $280,000 and $400,000 and 
families making between $350,000 and $500,000 will pay an extra 1-
percent surtax. Singles making between $400,000 and $800,000 and 
families making between $500,000 and $1 million will pay an extra 1.5 
percent. Finally, singles making more than $800,000 and families making 
more than $1 million will pay an extra 5.4 percent. Then in 2013 and 
after, these surtax rates go up to 2 percent, 3 percent, and 5.4 
percent, respectively. The only way these rates would not go up in 2013 
is if the President's adviser, the Director of OMB, determines in 2012 
that there will be more than $675 billion realized in estimated health 
care savings by the year 2019.
  That is right: The trigger mechanism is back. The House Democrats 
have made the surtax rate increase subject to a trigger. They have left 
the judgment on whether to pull the trigger in the hands of a partisan 
Presidential adviser, not a nonpartisan organization such as the 
Congressional Budget Office.
  As Members of Congress, we should jealously guard our constitutional 
prerogatives to be the one branch of government tasked with deciding 
whether revenue is raised by increased taxes or revenue is reduced 
through decreased taxes. As the great Chief Justice John Marshall said 
almost 200 years ago:

       The power to tax is the power to destroy.

  So why would we hand such an enormous power over to the executive 
branch? I recall, over the last 8 years, hearing from the other side of 
the aisle that the executive branch was attempting to usurp 
congressional authority. So where is that jealous guardian of 
congressional authority now? It seems to be absent.
  We have seen this trigger mechanism from the Democrats before. While 
it has been a couple years, I have spoken at length about this trigger 
right here on the floor of the Senate.
  I ask unanimous consent that a copy of my speech of May 9, 2007, 
entitled ``A Trigger and a Tax Hike on the American People'' be printed 
in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

 Statement of Senator Chuck Grassley: A Trigger Will Not Prevent a Tax 
                      Hike on the American People

       Mr. President, press reports indicated we may be in the 
     ninth inning of the budget season. The President sent his 
     budget up to Capitol Hill over three months ago. The Senate 
     Budget Committee marked up a budget resolution. It passed the 
     Senate. That resolution

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     lays out the Democratic Leadership fiscal priorities for the 
     next five years. As everyone knows, the American People spoke 
     last November and sent a Democratic Majority to both Houses 
     of Congress. For the first time in 12 years, Democrats have 
     the privilege and the responsibility for our budget.
       The Senate spoke very clearly in support of some tax 
     relief. The voice came in the form of the Baucus amendment. 
     My friend, the Chairman, secured $180 billion to prevent part 
     of the big tax increase that will go into effect on January 
     1, 2011. Although the Baucus amendment only provides 44 
     percent of the tax relief room needed, it is far superior to 
     the House position. The House position is zero tax relief. 
     That's right, Mr. President, zero tax relief. Zero tax relief 
     means a total tax increase of $936 billion over 5 years. 
     That's the largest tax increase in history and one that 
     occurs without a vote of Congress.
       That tax increase means real dollars out of the wallets of 
     real middle income families. I've got a chart here. The chart 
     shows a wall of tax increase. This chart shows that a family 
     of four at $40,000 will face a tax increase of $2,052. Now, 
     for a lot of my rich liberal friends that may not seem like a 
     lot of money. For a hard working family of four in Iowa, that 
     $2,052 matters.
       As a senior Republican member of the Budget Committee, I've 
     not been consulted on the budget by our Chairman, but I've 
     made my views clear to our distinguished Chairman. What I 
     know about the budget I've learned from press reports. If 
     those reports are true, I'd encourage the Chairman and Senate 
     Leadership to stand strong for the Senate position.
       Press reports indicate that the Democratic Budget Committee 
     chairmen are working on a compromise that would condition the 
     tax relief on a surplus. That is, the Baucus amendment would 
     be subject to a trigger. Now, Mr. President, what's a 
     trigger?
       I have another chart. This chart deals with perhaps the 
     most famous trigger. The chart shows ``Trigger,'' the cowboy 
     actor, Roy Rogers', horse. You can see from the chart that 
     Trigger is a pretty impressive looking horse. Would 
     definitely like to have Trigger on my farm to help with the 
     chores. Am sure my grand kids would want to ride him if 
     Trigger were stabled on my farm.
       As Western movie buffs know, Trigger is no longer with us. 
     Trigger is stuffed and on display at the Roy Rogers-Dale 
     Evans Museum in Branson, Missouri. Although Trigger was an 
     impressive looking horse, this trigger device the Democratic 
     Leadership is looking at is not impressive.
       The trigger notion is something that has a long history 
     with the Democratic Leadership. Back in 1996, the Clinton 
     Administration and Democratic Leadership argued for a trigger 
     for the $500 per child tax credit and other family tax relief 
     proposals. They took this position after President Clinton 
     had vetoed the bill containing the family tax relief 
     proposals. If the Clinton Administration and the Democratic 
     Leadership had prevailed, millions of American families would 
     have received the $500 per child tax credit perhaps in 1999 
     through 2001 only. If the President Clinton and the 
     Democratic Leadership had won and the trigger were in place, 
     millions of families would have lost the child tax credit in 
     the years 2002 to now.
       The same dynamic occurred in 2001. With surpluses, the 
     Democratic Leadership opposed broad-based bipartisan tax 
     relief, including a doubling of the $500 per child tax 
     credit. One of the ideas the Democratic Leadership flirted 
     with was a trigger. There were a few Republicans attracted to 
     the idea.
       The trigger was debated somewhat, but never found to be 
     workable. It is a complicated matter. It could be suggested 
     that the mechanics of a broad-based tax trigger are like 
     trigonometry. Trigonometry is a division of mathematics that 
     deals with triangles. It is simple on its face, but you can 
     see from this text book, can become complicated quickly.
       Interweaving the complexity and uncertainty of triggered 
     tax relief with the vast American economy could lead to a new 
     term. That new term would be ``trig-o-nomics.'' As much as 
     folks complain about uncertainty and complexity in tax 
     policy, I don't think the Democratic budget negotiators 
     should want to take us to the land of trig-o-nomics.
       To some degree, the current law sunset of the 2001 and 2003 
     is a de facto trigger. If you look at those in opposition to 
     permanence of the bipartisan tax relief, you'll find that it 
     is, with very few exceptions, the same folks who like 
     triggers.
       The tax system is a very complex and pervasive force in our 
     society. It affects all Americans and all economic activity. 
     Creating conditional tax relief through a trigger mechanism 
     would de-stabilize an already unwieldy tax system. How are 
     families, businesses, and investors supposed to plan their 
     affairs with a trigger hanging over current law tax rules 
     that keep taxes low? Think about that, Mr. President. What 
     would we be doing to the hard working American taxpayer?
       As an aside, those taxpayers, by the way, are sending 
     record amounts of revenue to the Treasury. The bipartisan tax 
     relief plans of 2001 and 2003 are growing the economy. 
     Revenues are ahead of projections by double digit figures for 
     the third year in a row. It's there in the black and white of 
     Treasury and CBO reports. The American taxpayer is doing his 
     and her part to reduce the deficit. I ask unanimous consent 
     to insert in the record a couple of articles from the BNA 
     Daily Report for Executives, one dated May 3, 2007 and 
     another dated May 7, 2007.
       So, why trigger on tax increases, when the current law tax 
     levels are bringing in plenty of money to the federal 
     Treasury? It makes no sense to punish the American taxpayer.
       The biggest problem I have with a trigger is that it 
     creates yet another budget process bias for higher federal 
     spending. If Congress decides to spend more than planned, the 
     trigger gives the American taxpayer the shaft. Spending 
     taxpayers' money trumps future promised tax relief if a 
     trigger is in place.
       The American taxpayer need look no further than the budget 
     resolution conference to see triggered future tax relief's 
     futility. After winning the November elections by claiming to 
     enforce fiscal discipline, Democrats have done three things 
     with the budgets in conference. One, they've guaranteed new 
     spending of at least $205 billion over the budget baseline. 
     Two, with multiple reserve funds, they've set up many arenas 
     of new spending and new taxes. Three, for the first time in 
     six years, a tax hike on virtually every American taxpayer is 
     built into the budget in future years. Did the American 
     People know that this was how fiscal discipline would be 
     defined after the votes were counted? Higher taxes and higher 
     spending? Did the American People vote for this definition of 
     fiscal discipline in last year's campaign? My guess is the 
     answer is the American taxpayer didn't think fiscal 
     discipline meant higher taxes and higher spending.
       If fiscal discipline were the real goal of the Democratic 
     Leadership, they'd employ a trigger on the new spending 
     they've baked in the budget cake. Mr. President, how about 
     that? The new spending in this budget would only be triggered 
     if the federal budget were in surplus. Do I have any takers 
     among the Democratic budget negotiators?
       Mr. President, before the Democratic Leadership rolled out 
     its budget, I challenged them to show a proposal with a 
     single dollar of spending restraint dedicated to deficit 
     reduction. It's a challenge I've issued for several years as 
     bipartisan tax relief has been attacked on fiscal discipline 
     grounds. My challenge has not been met. If you go back a 
     decade, you won't find a proposal for spending restraint from 
     the Democratic Leadership. Check the record. You won't find 
     anything on the spending side of the ledger.
       The use of a trigger is more evidence of this obsession 
     with taxing and spending. Instead of accepting the Baucus 
     amendment, which is supported by strongly-bipartisan votes in 
     both bodies, the Democratic negotiators are taking a 
     different path. They want to use a trigger as cover. The 
     trigger will likely mean future Democratic spending proposals 
     will gut future tax relief, thereby guaranteeing a tax 
     increase on virtually every American taxpayer.
       Mr. President, it's not too late. I suggest that, if the 
     Democratic budgeteers want to talk the talk of fiscal 
     discipline, they need to walk the walk of fiscal discipline. 
     Apply the trigger. But apply it to the $205 billion in brand 
     new spending. Don't build a wall of tax relief on America's 
     families. Build a wall of fiscal discipline against runaway 
     federal spending.
       I yield the floor.

  Mr. GRASSLEY. I have a chart here from the 2007 speech that deals 
with perhaps the most famous trigger. Of course, I refer to Trigger, 
the horse belonging to the cowboy actor Roy Rogers. As I mentioned in 
the past, Trigger is no longer with us. Today he is stuffed and on 
display at the Roy Rogers-Dale Evans Museum in Branson, MO. Even so, 
Trigger, in his current stuffed state, is still much more imposing than 
the House Democrats' trigger device.
  While past Democratic trigger proposals were bad, the current House 
Democrats' trigger proposal is even worse because it is under the 
control of a partisan OMB Director and is based upon an OMB Director's 
estimate--I repeat, an estimate--of health care savings for the years 
2013 to 2019.
  I do not think anyone really expects this trigger to be pulled. Even 
the nonpartisan Joint Committee on Taxation, in its $544 billion 
revenue estimate of the House Democrats' small business surtax 
proposal, assumes that the estimated savings targets will not be 
reached and the rates will go up, for sure, in 2013.
  Clearly, on the question of how to pay for health care reform, 
Republicans and Democrats appear to be drifting in different 
directions. Republicans want to pay for health care reform through 
changes in the health care system--mostly on the spending side but also 
on the revenue side--to make health care more accessible and more 
affordable. In contrast, House

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Democrats' most recent proposal to pay for health care reform--the 
small business surtax--goes far outside the universe of health care.
  By abandoning the universe of health care in their financing scheme, 
House Democrats are clearly indicating that the goal of their health 
care reform proposal is increased coverage at any cost. Even the New 
York Times--now, believe this: Even the New York Times, hardly a 
strident critic of the Democrats in Congress or the White House, 
cautions against this coverage-at-any-cost approach:

       If the government simply extends subsidized insurance to 
     millions of uninsured people but fails to force fundamental 
     changes in the delivery or financing of health care, then 
     federal health care costs will keep escalating at excessive 
     rates. That will drive up deficits in subsequent decades 
     unless new taxes are imposed or new savings found.

  That is the end of the quote from the New York Times.
  We need to reform our health care system, but we need to do it right. 
That is why I am working with Senator Baucus, chairman of the Senate 
Finance Committee, along with Senators Snowe, Enzi, Conrad, and 
Bingaman, to reach a bipartisan solution. My Finance Committee 
colleagues and our staffs have been working hours and hours each day 
and night, and weekends, to navigate through the numerous complex 
issues of health care reform. Has it been easy? Obviously not. However, 
I am very hopeful we can reach a bipartisan agreement that makes health 
care in America more accessible and more affordable, while at the same 
time protecting taxpayers and preventing the Federal Government from 
taking over health care.
  President Obama, in his prime time press conference last week, 
expressed his agreement with these principles. While stating generally 
that the reform he is proposing will keep government out of health care 
decisions, President Obama specifically made the following promises:

       I'm not going to sign a bill that, for example, adds to our 
     deficit. I won't sign a bill that doesn't reduce health care 
     inflation so that families as well as government are saving 
     money. I'm not going to sign a bill that I don't think will 
     work.

  I will take the President at his words on these promises, but I am 
going to hold him to them. The President is sending a clear signal that 
he could not sign the Pelosi bill, the Health, Education, Labor, and 
Pensions bill, or similar pieces of legislation. Why? Because each of 
those would drastically expand the Federal Government's control of the 
health care system, increase the deficit, and fail to reduce long-term 
health care inflation.
  Here is the bottom line. When the long-term budget outlook warns that 
rising health care costs will cause Federal spending to grow so fast as 
to put the Federal budget on an unsustainable path, Congress needs to 
take action. But, at the same time, when our goal is to reform 17 
percent of the economy, while facing a nearly $2 trillion annual 
deficit, more than $9 trillion in new debt over the next decade, and a 
projected debt-to-GDP ratio of over 300 percent by 2050, we have to 
make sure we are doing this job right. That is what we are trying to do 
in the Senate Finance Committee. When we get finished, however long it 
takes, I hope we can send a deficit-neutral health care reform bill to 
President Obama that increases access, cuts costs, and puts us on a 
fiscally sustainable path for years to come.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER. The Senator from Georgia.

                          ____________________