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Public Statements

A Threatening Budget

Floor Speech

By:
Date:
Location: Washington, DC

Mr. McCONNELL. Mr. President, Americans are beginning to get a sense of what the administration's budget means to them. I think it is fair to say that most of them are worried that it spends too much, it taxes too much, and it borrows too much.

At a moment when the economy is already seriously challenged, when more people every day are struggling just to make ends meet, and when the national debt is already staggeringly high, Americans were hoping for relief. Instead, they got a budget that threatens the biggest tax hike in history, record spending, and massive debt. This budget literally shocked a lot of people. Spending in this budget is so massive that some estimate more than 250,000 Government workers will be needed to spend it all.

This is consistent with the approach the administration and the Democratically controlled Congress have taken since the beginning of the year. In just 50 days since Inauguration Day, the Democratically controlled Congress voted to spend $1.2 trillion, which works out to $24 billion a day or $1 billion an hour--most of it borrowed--and we are doing this all, of course, in the midst of a recession.

People across the country are understandably nervous about this kind of spending which won't create the jobs that are promised and which will cause further tax hikes in the future to pay for all the borrowing.

Today, I wish to focus on the tax portion of the budget, the various tax hikes the administration, of course, will need in an attempt to cover the budget's $3.6 trillion price tag.

The administration says that 95 percent of Americans will not see a tax increase under this budget plan. Well, Americans might not see an immediate increase in their income taxes, but there is more than one way, as they say, to skin a cat, and there is more than one way for Government to take money out of your pocket. I will mention just three that the administration has proposed.

First, there is the proposed new energy tax which would tax everyone who uses energy, which, of course, is 100 percent of the population.

The administration estimates that its cap-and-trade proposal would raise about $650 billion from gas and electric companies and other businesses. The first thing to note about this tax is that no one, not even administration officials, thinks this figure is even close to the amount that will actually be raised, and no one, not even administration officials, believes that every cent of it won't be passed along to consumers. The President himself said during the campaign that his cap-and-trade plan would cause utility rates to ``skyrocket.'' This is President Obama himself who indicated during the campaign that he thought utility rates under his plan would skyrocket. More recently, OMB Director Orszag publicly reaffirmed the administration's view that cap and trade would increase energy taxes for everyone. This means that anybody who turns on a lightbulb will feel the pain. How bad will it be? Well, researchers at MIT were a little more specific than the President and Mr. Orszag. These researchers at MIT predicted that the proposal would cost the average American household $3,128 a year. Now, this is the average American household under this budget and the energy taxes it will levy: $3,128 per household.

Most of the utilities and manufacturers that take a direct hit from the energy tax are big businesses, but what about the small businesses which account for nearly three-fourths of all new private sector jobs? Well, there is a tax for them too. Thanks to an income tax hike on anyone earning more than $200,000 a year, many will see their taxes go up significantly. Think of a general contractor, a family restaurant, a startup technology firm. These are the engines of our economy. They are struggling now. They will struggle even more once these tax hikes go into effect.

Businesses with 20 or more employees get hit particularly hard. These businesses account for two-thirds of the small business workforce. The President's budget includes a tax increase on more than half of those businesses.

It is an iron rule of economics that taxes influence the decisions of those who are taxed. And businesses that have less income as a result of higher taxes are likely to do three things: cut jobs, put off buying new or better equipment, and take fewer risks. The real-world consequences of those decisions are immense: more jobs lost, less innovation, fewer new products, and lower salaries for employees, almost all of whom are probably making less than $200,000 a year.

Hundreds of thousands of Americans are losing their jobs every month. Millions fear losing their homes. In response, the administration has promised in this budget a tax hike on the Nation's biggest job creators. These businesses are shedding workers already. Higher taxes will force them to shed even more.

I understand the administration's desire to make good on its promise of reforms. Most Americans understand that reforms are needed in health care, education, energy, and other areas. But they want the administration to fix the crisis in the financial sector first. Until we devote our full attention to that crisis, all other recovery efforts will be in danger of coming undone. With the highest unemployment rate in 25 years, Americans simply don't see the sense in raising taxes on small business.

Americans from all walks of life--and both political parties--are worried about something else in the budget. They don't understand why charitable organizations and the people they serve should suffer in order to pay for new or expanded Government programs. Yet in an attempt to pay for all of its spending proposals, the Obama budget reduces the deductions for charitable donations.

At a time of economic distress, when more people than ever depend on these organizations, the administration's budget reduces the incentive for people to donate to them. This will affect donations everywhere, from the Salvation Army to the Juvenile Diabetes Research Association, to educational nonprofits such as universities and art museums. According to one study, this proposal can lead to $9 billion less in charitable giving each year.

The proposal on charitable giving appears to follow the European model, where people rely on the state to support cultural institutions. In Europe, people rely on the State to support cultural institutions, but nonprofits across our country are mobilizing against the idea and for good reason: people who give money to these institutions should not be penalized for it, and charities and nonprofits themselves certainly should not be expected to subsidize the administration's policy dreams.

These are hard times. Why make them even harder? That is the question a lot of people who have seen this budget are beginning to ask. They are looking at the highest tax increase ever, higher taxes on small business, a proposal that would divert billions of dollars away from the Nation's charities, and a light-switch tax that will touch every single American, and they see a lot more hardship. These tax hikes are precisely the wrong prescription at a time of already serious economic distress.

The budget plan has a number of fatal flaws. But in the midst of a financial crisis, American workers don't need another reason to fear they will lose their jobs, small business owners shouldn't be further discouraged from investing, and the Nation's charities should not have to fear that even less money will come in. This budget doesn't just spend and borrow too much, it taxes too much.


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