[Congressional Record (Bound Edition), Volume 157 (2011), Part 4]
[Senate]
[Pages 5839-5841]
[From the U.S. 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 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

[[Page 5840]]

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

[[Page 5841]]

 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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