[Congressional Record (Bound Edition), Volume 157 (2011), Part 4]
[Senate]
[Pages 5374-5375]
[From the U.S. 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.
  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.

[[Page 5375]]

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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