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Mr. President, this week the Senate began a debate about nothing less than the future of this country. Next year we face a $1.65 trillion deficit, the third year in a row where the United States will run a deficit of over a trillion dollars. Even more daunting, we are over $14 trillion in total debt.
According to the non-partisan Congressional Budget Office, or CBO, the debt held by the public is projected to reach $18.3 trillion--or 77 percent of GDP--by the end of 2021. This is a problem that truly threatens the well-being of this Nation.
CBO projects that the cost of simply paying the interest on all of this debt will rise to $792 billion--or 3.3 percent of GDP--in 2021. When you are pushing $1 trillion a year in interest payments alone, you are reaching a day when the national government will not have the resources to accomplish even the limited mission delegated to it by the Constitution This is what ADM Mike Mullen, the Chairman of the Joint Chiefs of Staff, meant when he testified today that ``our debt is the greatest threat to national security.''
The President could have led on this issue, when he released his budget earlier this week. But he took a pass instead. Apparently he and his Democratic congressional allies have done some polling that tells them two things.
First, the American people are demanding that Washington tackle our annual deficits and skyrocketing debt.
And second, Democrats can benefit politically by standing aside, letting Republicans propose solutions to this problem, and then demagoguing the daylights out of any effort to restrain spending.
The coming debate is going to be a bruising one. But as we go forward, it is critical that we keep one thing in mind. We cannot get out of this hole by taking more of taxpayers' hard-earned money. Our debt and deficit problems exist because Washington spends too much, not because taxes are too low. It is a terrible idea to propose raising taxes by over $1.6 trillion on net over the next 10 years alone. Yet, that is exactly what the Obama administration's budget, released earlier this week, proposes.
I said it earlier this week, and I will say it again. This budget proves once and for all that our deficits and debt are not caused by our taxes being too low.
The President has proposed a net tax increase of over $1.6 trillion. Yet for next year--and every year--of his 10-year budget, he runs a deficit. At their best, the annual deficits dip to roughly $600 billion. Even after these astronomical tax increases, the President is still unable to balance the budget. And there are not many more easy targets for Democrats to tax.
In 2012, in a foolish attempt at class warfare, Democrats are prepared to let the tax rates expire with far reaching consequences for the small business owners who account for half of all small business flow-through income. Those small business owners would see their marginal rates hiked by 17 percent to 24 percent under this budget. In Obamacare they taxed medical devices, insurance plans, prescription drugs, small businesses, and individual Americans. The result--a surprise only to the most hardened ideologues--is the loss of 800,000 jobs according to the Congressional Budget Office. And yet they still can't balance the budget. So who else do they propose to tax?
The bottom line is that there isn't anyone left to tax, unless the President and his Democratic allies are willing to crush the middle class with additional tax burdens. There is only one way out. We need to restrain spending. As the chairman of the House Budget Committee, Congressman PAUL RYAN, explained, we need to get spending in line with revenue, not the other way around. The analyses of the Congressional Budget Office, or CBO, confirm this.
The CBO is the nonpartisan official scorekeeper for Congress. According to its January 2011 Budget and Economic Outlook, from 1971 to 2010, taxes have averaged 18 percent of gross domestic product, or GDP. So in recent history, we have had an average level of taxation of 18 percent of GDP.
Take a look at this chart that was made using CBO's January 2011 document. CBO explains that if no changes in law are made, taxes will go up to 20.8 percent of GDP by 2021, and will average 19.9 percent from 2012 to 2021. Taxes at 20.8 percent of GDP would represent a tax increase of 16 percent from their recent historical average.
CBO also states that if most of the provisions from the December 2010 tax act were made permanent, then ``annual revenues would average about 18 percent of GDP through 2021--which is equal to their 40-year average.'' So, according to CBO, even if all the Bush-era tax rates were permanently extended, taxes would still be high enough when measured against the level of taxation in recent history.
So, if taxes are high enough already, should we raise them anyway? I will go ahead and answer my own rhetorical question. Of course we shouldn't raise taxes any higher.
On August 14, 2008, Jason Furman and Austan Goolsbee wrote a Wall Street Journal editorial. In that editorial, Furman and Goolsbee stated that Candidate Obama's tax plan would reduce ``revenues to less than 18.2% of GDP--the level of taxes that prevailed under President Reagan.'' Today, Austan Goolsbee is the Chairman of the Obama administration's Council of Economic Advisers and Jason Furman is the Deputy Director of the Obama administration's National Economic Council. The President must have missed their editorial, because his recently released budget ignores the campaign promises of these top officials, and raises taxes well above their historical levels. As one writer has put it, all of the President's campaign promises seem to come with an expiration date.
As this debate over the debt and deficits rages on, pay close attention to the words that Republicans and Democrats use. You will hear Republicans say that we need spending restraint. By contrast, you will hear Democrats say that we need to deal with the deficit.
Let's be clear. Dealing with the deficit is code for raising taxes. Liberal pundit after liberal pundit will pronounce confidently that you can't deal with the deficit solely with spending restraint. Yet they won't say why, and they won't explain how you can deal with the deficit and debt through tax increases. That is because they can't. If they came clean with the American people, they would have to admit that their intention is to raise taxes on everyone and everything.
As I have already shown, taxes are high enough already, and we should not be raising them even higher.
Yet the bottom line is that rather than dealing seriously with out-of-control spending, tax-and-spend Democrats want to raise taxes to pay for more out-of-control spending. And guess what: If we raised taxes to eliminate the deficit, the current levels of spending would just cause a new deficit to arise.
I have a chart here that demonstrates just how futile it is to raise the top tax rate if the goal is to raise more money. When the top tax rate has been raised over the years, taxes as a percentage of GDP still hovered around their historical average of 18 percent. This held true even when the top tax rate was raised to a confiscatory level of over 90 percent.
The conventional wisdom on the other side of the aisle is that we can simply raise more tax revenue by increasing tax rates. However, the history is pretty clear. This strategy simply does not work. Just take another look at this chart if you don't believe me. Instead of raising tax rates, what we need to do is implement a pro-growth tax policy. That starts with not raising taxes.
For 2 years, we were able to fight off tax increases on small businesses proposed by President Obama and congressional Democratic leadership. However, I have another chart here that shows the relationship between the annual growth of Federal revenues and GDP. As you can see from this chart, when GDP increases, Federal revenues increase. Similarly, when GDP decreases, Federal revenues decrease. This should not be a shocking revelation.
When the economy is growing, the government collects more money in tax revenues because there is more taxable income being earned. The key is to have commonsense, pro-growth tax and regulatory policies. And as I mentioned before, a pro-growth agenda starts with refusing to raise taxes. Part of the difference between Republicans and Democrats on whether to increase taxes comes from different ways of looking at the world. Conservative Republicans look at the money earned by the American people and understand that it belongs to the people. As free men and women, America's citizens have a right to the fruit of their own labors. Americans work too hard--they sacrifice too much--for Washington to blithely raise their taxes to pay for an ever expanding Federal Government.
Yet liberal Democrats have a different view. Listening to President Obama and many congressional Democrats, it is clear that they view the money earned by the American people as the Federal Government's money first. It is only by the grace of the Federal bureaucracy that citizens are given an allowance to live on. This is a huge difference. You hear it when liberals talk about the cost of tax cuts. The cost of tax cuts? Cost to whom? When Democrats talk like this, they are effectively saying that anything you earn is the government's to spend. And it is a cost to the government when they decide to let you keep your money. For most Americans, this is an odd way of looking at the world.
Government costs money when it spends trillions of dollars on who-knows-what. The taxpayer does not cost the government money when he keeps what he earns. Yet this liberal worldview was on clear display in the recent debate about whether to extend the 2001 and 2003 tax bills.
President Obama and many congressional Democrats said that we shouldn't be giving tax breaks to certain taxpayers. Since when did keeping your own hard-earned money constitute the government giving you anything? That is not how the American people view it. And it is not how I view it.
President Obama and many congressional Democrats viewed a failure to increase taxes as a giveaway to taxpayers that increased the deficit. Republicans view the job-killing tax increase with nearly 10 percent unemployment as a terrible idea. The way to deal with the deficit is not to raise taxes. The way to deal with the deficit is to live within our means, as families and individuals do across America. The Federal Government should only spend what it takes in.
The President and his allies like to say they inherited these deficits. That is only a half truth. They inherited some debt and deficits. But they have helped create much more. For example, nearly $1 trillion was added to our debt by President Obama's partisan stimulus bill. That bill was loaded with pent-up Democratic agenda items and was sold with the promise that it would keep unemployment below 8 percent. We all know that by the President's own standard the stimulus bill has failed miserably. Unemployment has been at or above 9 percent for the last 21 months. That stimulus debt was not inherited by President Obama, it was created by President Obama, and he is bequeathing it to all of our children and grandchildren.
The numbers do not lie. When Democrats took over Washington, it was like setting Homer Simpson loose at an all-you-can-eat buffet. For too long, the desire of unions and government workers and special interest groups to create new programs and grow the size of government had gone unfulfilled, and when they finally seized the reins of power in 2008, liberal Democrats went hog wild. Our Nation's deficit has gone from $161 billion in 2007, when Democrats took over control of Congress--remember, they had 2 years before President Obama even got elected. The Democrats were in control of Congress. It went from $161 billion in 2007 to $1.65 trillion in 2011.
With respect to the debt, when congressional Democrats took over control of Congress in 2007, the debt was $8.68 trillion. It is now over $14 trillion. So when Democrats are talking about what a bad situation they inherited, let's remember that these folks have been in charge of Congress for the last 4 years. They acted as though the bills on their spending would never come due. And like a college student who maxed out his parent's credit card, Democrats are now looking for someone to bail them out.
Unfortunately, they are looking to the American taxpayers to foot the bill. This cannot happen. The American taxpayer is already overburdened. Citizens are not going to stand for tax hikes when spending restraint is called for. The bottom line is simple. We cannot tax our way out of this problem. I personally will resist any effort to do so.
That is one of the reasons why I am for a balanced budget constitutional amendment. I have found Congress is incapable, fiscally incapable, of getting this mess under control. It is hard to believe we are that incapable, but we are. So we need to put some restraints on Congress, and the best way to do that, in my opinion, is a balanced budget amendment. I think that would be the best way.
There are some who are looking at putting caps on spending, and that sounds good, except for one thing. If you break the caps, you have got to increase taxes. I think we would find ourselves increasing taxes all the time around here, and that is a big mistake as far as I am concerned. So I am very strongly for the balanced budget constitutional amendment. I believe with the mess we are in, good people on both sides of the aisle ought to be interested as well.
The last time I brought up the balanced budget amendment, we had 66 votes for it in the Senate. It passed the House overwhelmingly. If we had had one more vote back in 1997 we would have had a different situation today, because the balanced budget constitutional amendment would have passed, and I believe 38 States would have ratified it in a very quick fashion, certainly within a year or so.
Had that happened, we would not be in the mess we are in today. We are in a terrible mess. One of the reasons is Congress cannot get its fiscal house in order, and the reason it cannot is because of what I have been talking about. I think it is going to take restraints that the balanced budget amendment would bring to force Congress to have to live within its means or at least vote to break the budget.
Most people who spend do not want that provision, because they know when they vote to break the budget, their constituents are going to see that and they may not be here the next election. So as much as I would prefer to not have any artificial approach, I have come to the conclusion that Congress plain cannot handle its own problems. It does not have the fiscal restraint to do it.
A balanced budget amendment would be a constitutional amendment, locked into our beloved Constitution. It would, like all of the States in this country, except Vermont, require us to balance the budget or at least show a reason why not and to vote so that we have to vote on why not.
Germany has a balanced budget amendment. They meet those restraints. Switzerland has a balanced budget amendment. They meet those restraints. If they can do it, why can't we? I think we have got to get real around here and start doing some things that will help save the country, rather than push it right into bankruptcy.
We spend too much. Congress and the President pushed Build America Bonds. Why do you think they did that? The government is going to pay--it has been paying 35 percent on those bonds. Guess who pays that 35 percent. All of the States that have lived with fiscal restraint will be paying for the profligacy of States that do not live with fiscal restraint. That is not the way to go. It is not fair to the States that are careful with their money. We know which States they are. In almost every case, they are States that are dominated by my friends on the other side. The fact is, I am totally opposed to this proposal.
In this budget, the President wants to make these bonds permanent, while bringing down the 35 percent government match to 28 percent. But think about that. That is still 28 percent from American taxpayers, most of whom have lived with fiscal restraint in their respective States, to help States that have not and that probably will not behave responsibly. As long as they can get free money from the government, why not, in their eyes?
Some of these states are in such dire straits that even some of these Governors who have been big raging liberals in the past are starting to say, we have got to do something about it. I want to pay particular praise to them. I hope they will get spending under control, because their lack of fiscal restraint and our lack of fiscal restraint here is hurting our country.
I suggest the absence of a quorum.
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