[Congressional Record (Bound Edition), Volume 157 (2011), Part 4]
[Senate]
[Pages 5812-5814]
[From the U.S. Government Publishing Office, www.gpo.gov]




                           BUDGET PRIORITIES

  Mr. GRASSLEY. Madam President, we are all kind of on pins and needles 
about what the President is going to say today in his speech on the 
budget at George Washington University. I hope he comes forward with a 
strong program to get the budget deficit down because Presidential 
leadership will help us get the job done. Congress can do it on its 
own, but it will be a lot easier if we know we are working with the 
President instead of against the President.
  I hope the President's remarks reflect the fact that elections have 
consequences and the consequence of the last election was a very strong 
message to Washington that we ought to get spending down and government 
ought to be smaller. In anticipation of what he says, I wish to make 
some remarks, and my anticipation is based upon things that have 
already been said from the White House by staff about the direction the 
President's speech is taking.
  If we learned anything during the last 2 years, it is that America 
can't tax and spend its way back to prosperity. The voters understood 
that and sent a powerful message to Washington last November: Stop 
piling debt on the next generation. Stop the overspending that 
mortgages our children's future and jeopardizes job creation.
  Thanks to the gravitational pull of the Republican majority in the 
House of Representatives responding to the results of the last 
election, the compass is starting to point in the right direction. 
Despite the two-against-one lineup of the debate, meaning the President 
and the Democratic Senate on one side and the House under the control 
of the Republicans on the other side--that two-to-one lineup--we have a 
continuing resolution at the start of what must be a long-haul, 
committed effort.
  The continuing resolution we will pass this week is just the 
beginning because the hard work has only just begun. That is reflected 
in the leadership demonstrated by the House of Representatives' Budget 
Committee chairman Paul Ryan. He did what the President failed to do in 
his budget proposal--get serious. Today, I hope we have evidence that 
the President is getting serious. But up until now, the President 
ducked, even ignoring his own deficit reduction commission report fresh 
off the printer. He hasn't said yes or no whether he supports the 
recommendations of the Bowles-Simpson commission.
  In sharp contrast, House Chairman Ryan stepped up and put ideas on 
the table for fiscal responsibility. Today, in response to this effort, 
to show the voters we got it in the last election and that it is time 
to reduce spending in Washington, the President is giving his speech on 
reducing the debt. After reluctantly coming to the table for very 
modest reductions in spending that are going to be in this continuing 
resolution we will hopefully pass this week, the President has quickly 
moved past any focus on getting spending under control and seems to be 
going back to that same old saw that we have to have tax increases to 
reduce the deficit. But history proves tax increases do not bring an 
additional dollar to the bottom line. Tax increases are a license to 
spend even more than the $1 that might come in from a tax increase, and 
we also know increasing taxes is not going to reduce the deficit. Only 
growing the economy is going to reduce the deficit. Tax increases can 
have a detrimental impact on growing the economy because government 
consumes well; it doesn't create well. Only workers and investors and 
people who invent and people who create, create wealth.
  There has always been a tug of war in Washington between tax-cutters 
and big spenders. There are those of us who believe taxpayers have a 
right to keep more of their own money and decide how best to save and 
spend and invest those dollars. Others in Congress and in Washington 
believe Washington knows best and work relentlessly to divert more 
private resources into the public coffers. Recycling even more tax 
dollars through Washington, especially during an economic downturn 
which we are in now, and eight-tenths percent unemployment proves it. 
Doing more of that doesn't make sense if we want recovery.
  Consider the work of two U.S. Presidents from opposite sides of the 
political spectrum. Study the history of John Kennedy on one end and 
Ronald Reagan on the other. They understood that raising taxes bore 
negative consequences for job creation and economic growth. My 
colleagues may remember that during World War II and afterwards, we had 
93 percent marginal tax rates. Who decreased that? Not some Republican 
President but a Democrat President. He reduced it because it was not 
raising revenue and it was hindering the economy. We had a situation 
when corporate and personal income tax rates climbed during the Great 
Depression, we have proof unemployment kept climbing as well. In fact, 
if there are two things we want to remember from Hoover that we should 
never make these mistakes again, they are that he raised taxes 
tremendously high and he signed the Smoot-Hawley tariff bill, leading 
us into the Great Depression. As America struggles to shake off the 
biggest economic downturn in decades, we can't afford to repeat the 
same mistakes. We should learn from history.
  In an economy where consumer spending accounts for nearly 70 percent 
of the Nation's gross domestic product and small businesses account for 
70 percent of the new jobs, it would be foolish to divert even more of 
America's taxpayer money into the Federal Treasury. With a smaller tax 
liability, small business owners can expand their operations, upgrade 
their equipment, and hire more workers in their hometown communities. 
But tax policies designed to increase revenues for more government 
spending will not help these hometown business leaders create new jobs 
that can attract and retain talent and vitality in those small towns. 
What is more, raising Federal tax rates would stunt the positive ripple 
effect that occurs in the local economy and in the local tax base when 
small businesses are able to grow and expand their sales output and 
profits.
  Raising taxes sets the stage for paralyzing setbacks for small 
business. So we should not forget that many small business owners are 
subject to the highest marginal tax rates and Federal estate taxes. I 
have worked for a long time for tax policies that give small business 
owners the freedom and opportunity to hire, expand, and grow their 
businesses without having profit-burning taxes and overly burdensome 
regulations get in the way of getting ahead and living the American 
dream and creating those jobs. Marginal tax rate increases are 
especially harmful to small businesses because small businesses are 
typically organized as flow-through entities. Since small businesses 
create 70 percent of the new jobs and unemployment, at 8.8 percent, 
remains historically high, it doesn't make sense to raise taxes on 
small businesses.
  Supporters of the tax increases for those earning $250,000 a year 
would like to camouflage the tax hit on small businesses, but their 
attempts to mislead cannot withstand an honest examination. The 
marginal tax rate hikes would directly target flow-through businesses 
that employ 20 million American workers. It is a waste of resources for 
Washington to recycle tax dollars through the public sector when small 
businesses can do more good and get more bang for their own buck and 
taxpayers, in general, deserve more bang for their buck.
  I have a chart that shows my colleagues an analysis by the 
Congressional Budget Office, the official nonpartisan scorekeeper for 
Congress. In

[[Page 5813]]

its January 2011 ``Budget and Economic Outlook'' report, CBO reports 
that taxes have averaged 18 percent of the gross national product from 
1971 to the year 2010. So this is the historical average. What is very 
significant about an average going back to 1971--is it seems to me a 
level of taxation the people of this country have not revolted against. 
It is a level of taxation that has not been harmful to the U.S. 
economy, as we have seen great growth during this period of time.
  So here is where we are. Beyond the very negative impact of tax 
increases, there is no evidence that tax increases lead to deficit 
reduction. In fact, if history is any guide, Washington will simply 
spend the money.
  I often quote a Professor Vedder of Ohio University who has studied 
tax increases and spending for more than two decades. This is the very 
same study I was referring to as I started my remarks today. ``Over the 
entire post World War II era through 2009, each dollar of new tax 
revenue was associated with $1.17 in new spending.''
  So it is akin to a dog chasing its tail. It is never going to catch 
it. If we raise $1 and it doesn't go to the bottom line, and Professor 
Vedder says it doesn't go to the bottom line, it is a license to spend 
$1.17. How do we ever get ahead? Then we have people who want to 
increase taxes because another dollar coming in is going to lead to 
$1.17 of spending. It would be one thing for me to vote for a tax 
increase if it went to the bottom line. It is another thing to vote for 
a tax increase that just allows more spending and raises the deficit 
instead of getting the deficit down. People in my State of Iowa don't 
tell me they are undertaxed. They know all too well the problem is that 
Washington overspends.
  Before this chart is taken down, just so my colleagues can 
understand, there is no reason to raise taxes above this historical 
average to bring in more revenue because we can see the projection by 
CBO. The existing tax rates are going to bring in more revenue without 
increasing tax rates just because of the economy growing.
  With the existing tax rates, revenues coming in will return to the 
level we had after the 2001 tax bill--that bill reduced taxes by 
providing the biggest tax decrease in the history of this country. We 
brought in additional revenue with reduced rates--more revenue than 
would come in by raising marginal tax rates. That ought to be 
calculated. You should not do anything that is going to destroy this 
situation.
  Some are proposing eliminating the cap on wages for social security 
taxes. This would result in a huge tax increase of 6.2 percent on 
income over $106,800. Both employees and employers pay these taxes. 
Those in favor of this will argue that it is needed to protect benefits 
for social security beneficiaries. We have been down that road before. 
We raised the tax rate in the 1980s. This was supposedly also to 
protect benefits, but look where we are now. There is no guarantee that 
raising taxes in that way will guarantee benefits.
  Referring to this chart again, to be specific on this growth out 
here, CBO projects that taxes will average 19.9 percent of gross 
national product from 2010 to 2021, rising to 20.8 percent of GDP by 
2021. If we increase taxes, I think it will put that economic growth in 
jeopardy.
  I ask unanimous consent to have printed in the Record an article from 
Investors Business Daily.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                  [From Investors.com, Apr. 11, 2011]

                   Tax the Rich? Good Luck With That

                          (By Walter Williams)

       I've often said that I wish there were some humane way to 
     get rid of the rich. If you asked why, I'd answer that 
     getting rid of the rich would save us from distraction by 
     leftist hustlers promoting the politics of envy.
       Not having the rich to fret over might enable us to better 
     focus our energies on what's in the best interest of the 
     99.99% of the rest of us. Let's look at some facts about the 
     rich laid out by Bill Whittle citing statistics on his 
     RealClearPolitics video ``Eat the Rich.''
       This year, Congress will spend $3.7 trillion dollars. That 
     turns out to be about $10 billion per day. Can we prey upon 
     the rich to cough up the money?
       According to IRS statistics, roughly 2% of U.S. households 
     have an income of $250,000 and above. By the way, $250,000 
     per year hardly qualifies one as being rich. It's not even 
     yacht and Learjet money.
       All told, households earning $250,000 and above account for 
     25%, or $1.97 trillion, of the nearly $8 trillion of total 
     household income. If Congress imposed a 100% tax, taking all 
     earnings above $250,000 per year, it would yield the princely 
     sum of $1.4 trillion. That would keep the government running 
     for 141 days, but there's a problem because there are 224 
     more days left in the year.
       How about corporate profits to fill the gap? Fortune 500 
     companies earn nearly $400 billion in profits. Since leftists 
     think profits are little less than theft and greed, Congress 
     might confiscate these ill-gotten gains so that they can be 
     returned to their rightful owners.
       Taking corporate profits would keep the government running 
     for another 40 days, but that along with confiscating all 
     income above $250,000 would only get us to the end of June. 
     Congress must search elsewhere.
       According to the Forbes 400, America has 400 billionaires 
     with a combined net worth of $1.3 trillion. Congress could 
     confiscate their stocks and bonds, and force them to sell 
     their businesses, yachts, airplanes, mansions and jewelry. 
     The problem is that after fleecing the rich of their income 
     and net worth, and the Fortune 500 corporations of their 
     profits, it would only get us to mid-August.
       The fact of the matter is there are not enough rich people 
     to come anywhere close to satisfying Congress' voracious 
     spending appetite. They're going to have to go after the non-
     rich.
       But let's stick with the rich and ask a few questions. 
     Politicians, news media people and leftists in general 
     entertain what economists call a zero-elasticity view of the 
     world. That's just fancy economic jargon for a view that 
     government can impose a tax and people will behave after the 
     tax just as they behaved before the tax, and the only change 
     is more government revenue.
       One example of that vision, at the state and local levels 
     of government, is the disappointing results of confiscatory 
     tobacco taxes. Confiscatory tobacco taxes have often led to 
     less state and local revenue because those taxes encourage 
     smuggling.
       Similarly, when government taxes profits, corporations 
     report fewer profits and greater costs. When individuals face 
     higher income taxes, they report less income, buy tax 
     shelters and hide their money. It's not just rich people who 
     try to avoid taxes, but all of us--liberals, conservatives 
     and libertarians.
       What's the evidence? Federal tax collections have been 
     between 15% and 20% of GDP every year since 1960. However, 
     between 1960 and today, the top marginal tax rate has varied 
     between 91% and 35%.
       That means whether taxes are high or low, people make 
     adjustments in their economic behavior so as to keep the 
     government tax take at 15% to 20% of GDP. Differences in tax 
     rates have a far greater impact on economic growth than 
     federal revenues.
       So far as Congress' ability to prey on the rich, we must 
     keep in mind that rich people didn't become rich by being 
     stupid.

  Mr. GRASSLEY. According to this article, even if the government 
confiscated all of the income of people earning $250,000 a year, the 
money would fund the Federal Government today for a mere 140 days. CBO 
statistics tell us that the top 5 percent of households earn 29 percent 
of the income and pay 43 percent of the income tax collected by the 
Federal Government. This chart here shows that these 5 percent of 
households have seen their taxes go up or hold steady while the other 
95 percent of households have seen their taxes go down.
  We are in a situation where people are talking about increasing taxes 
on higher income people because, supposedly, they can afford it--and 
probably they can afford it. But I get sick and tired of the 
demagoguery that goes on in Washington of taxing higher income people. 
This group of people is already paying 43 percent of all of the income 
tax coming in to the Federal Government, while 47 percent of the people 
in this country don't pay any income tax whatsoever. How high do taxes 
have to go, generally, to satisfy the appetite of the people in this 
Congress to spend money? And particularly, how high do marginal tax 
rates have to go to satisfy those clamoring for higher taxes that the 
wealthiest in this country are paying enough money?
  In addition to the CBO statistics on households, IRS statistics show 
that 1 percent of the wealthiest people make 27 percent of the income 
and pay 40 percent of the income taxes. If it be 41 or 42 percent, 
maybe we can look at it. But I never get the sense from anybody who is 
proposing these higher marginal tax rates on upper income people that 
they are ever going to be satisfied that

[[Page 5814]]

those people are paying enough taxes. So I will get back to what I 
said. You could confiscate all the income earned by people that make 
over $250,000 a year but you are only going to run the government for 
140 days. What do you do for the rest of the year if you only want the 
wealthy to pay all the taxes?
  We ought to have some principles of taxation that we are abiding by. 
I abide by the principle that 18 percent of the GDP of this country is 
good enough for the government to spend. That leaves 82 percent in the 
pockets of the taxpayers for them to decide how to spend. Because if 
535 of us decide how to divide up the resources of this country, it 
doesn't do as much economic good. If the money is left in the pockets 
of the 137 million taxpayers to decide whether to spend or to save it, 
and how to save it, or what to spend it on, it responds to the dynamics 
of our economy. They would be participating in the American free 
enterprise system in a way that the 535 Members of Congress don't know 
enough how to do. If we relied upon the 535 of us to decide how to 
spend more resources of this country, we would not have the economic 
growth we have. We would be Europeanizing our economy, and we know that 
is bad.
  This principle of 18 percent of gross domestic product is good and it 
has been consistent throughout recent history. This chart here shows 
that it is not a straight line, but it is pretty even over a 50-year 
average. I think it averages out at about 18.2 percent. You have the 
marginal tax rates going back to 93 percent during World War II and 
staying there until, as I said, Senator Kennedy becomes President and 
he decides the marginal tax rate is too high for the good of the 
economy and he reduces it. I am told because of the Vietnam war, it 
went up. It stayed even at 70 percent until President Reagan. Then it 
goes down to a 50 percent marginal tax rate. Then it stays there a 
while. In 1986, it goes down to 28 percent. Then we have the promise of 
no new taxes when President Bush reneged on that promise, and it went 
back up to almost 40 percent. Then they went up again here and stayed 
here, and then we had the tax decrease of 2001.
  Do you know what this shows? Everybody has an idea that if you raise 
the marginal tax rates, you will bring in more revenue. But the 
taxpayers, workers, and investors of this country are smarter than we 
are. We have had a 93-percent marginal tax rate--then 70 percent, 50 
percent, 28 percent, and now a 35-percent marginal tax rate. But, 
regardless of the rate, you get the same amount of revenue, because 
taxpayers have decided they are going to give us bums in Washington 
just so much of their money to spend, and it works out to be about 18 
percent of gross domestic product.
  So we have a President who will probably give a speech today and say 
we are going to raise taxes on higher income people because, like him, 
they ought to pay more money. What do you get out of it? You can mess 
with these marginal tax rates all you want to, but you will bring in 
about the same amount of revenue. Why? In part because people have 
decided that, if we are going to tax them to death, they are going to 
take more leisure and they are going to invest in nonproductive 
investments. Bottom line--increasing taxes doesn't bring more revenue 
into the federal Treasury.
  You have to keep marginal tax rates low so you can expand this 
economy. As we have seen, when taxes go down, unemployment goes down; 
when taxes go up, the incentive to employ is gone. So here we are.
  The national debt poses serious risk to the long-term economic health 
of the United States. It puts a heavy burden on taxpayers who will have 
less take-home pay to save, spend and invest if they have to send more 
money to Washington.
  Washington needs to champion policies that grow the economy and 
create jobs, and in turn, increases revenue to the federal Treasury, 
enabling deficit and debt reduction, not defend ways that grow the 
government.
  The President and 535 Members of Congress collectively represent many 
different constituencies across the ideological, political, geographic 
and demographic spectrum. Although representing many, we can work as 
one to make America an even better place for posterity. If we continue 
to live beyond our means and get in the way of job-creating economic 
opportunity, we will push future generations over a fiscal cliff of no 
return. That is why Washington must clamp down on new spending and 
shrink the national debt.
  I hope we have a President who is willing to look at history and 
learn from history in his speech today.
  I yield the floor and suggest the absence of a quorum.
  The ACTING PRESIDENT pro tempore. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. BARRASSO. Madam President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.
  Mr. BARRASSO. I ask unanimous consent that I be allowed to speak 
until 11:30 in morning business.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.

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