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Mr. WELCH. Yes, thank you. I appreciate your historical perspective on it.
There are really two things that I want to address. Number one: What are the policies that were part of getting us to that $11.5 trillion deficit? Number two: What do we need to do now in order to get to fiscal balance?
The two policies were, one, a war of choice where the Pentagon in its activities was not subject to the same scrutiny of actually having to pay as you go, so the cost of the war in Iraq was $1 trillion. The war in Afghanistan, as you mentioned, started out as a mission to dislodge Osama bin Laden. It was transformed into nation-building.
And no matter how necessary or debatable either of those events were, those wars were, you do have to pay for it. It's not as though because it's in the name of national security it can be exempt from fiscal responsibility. In fact, what's unusual is that this is the first time in the history of our country where we have been at war where we actually haven't asked for shared sacrifice by the taxpayers, but we've made the entire burden be borne by our military. So we've got to pay; and we didn't do it, as you pointed out.
The second is the theory that's being advanced by many that if you cut taxes, it will create wealth and create jobs. In some places and some times and in some circumstances that will work. In fact, many standard economists say that in a recession, it's the time to cut taxes, not raise them. But the more that is focused on the middle class who are struggling--especially in a down economic time--to pay their bills, if they get a tax cut, they have discretionary income or they have income liberated, that money is going to go right back into the economy. But every tax cut does not generate jobs, and many tax cuts end up adding significantly to the deficit.
The President Bush tax cut in 2001 and the President Bush tax cut in 2003 added $2.3 billion to the deficit. So you have a Pentagon that is not subject to pay-as-you-go and you have tax cuts that don't pay for themselves. Those are two major contributing factors to that $11.5 trillion deficit on the heels of a $5.6 trillion surplus. The debate we are having now in this House is enormously consequential to the future. Republicans won this last election, and a major argument they made is that we've got to get spending under control. They're right. I agree with that. We have to get to fiscal balance.
The challenge is if we're going to get there, do we need a plan that repeats those two policies of the Bush administration, namely, keeping the Pentagon off the table and increasing tax cuts, particularly to the high end, but keeping off the table Pentagon savings, keeping off the table eliminating tax loopholes and keeping off the table the question of revenues?
Democrats, in my view, have to be willing to come forward and say, look, the programs that we have been strong supporters of have to be re-examined, we have to reform them, we have to make them more efficient; and if they are not working, we have to acknowledge that and move on. We have to do our share. The President's proposal that would freeze domestic spending for 5 years is pretty dramatic, but many Democrats would be willing to support tough medicine as long as the plan had on the table other things that are major contributors to the fiscal situation we're in. That's, of course, revenues; that's, of course, the Pentagon; and that's, of course, tax loopholes in the tax system.
We can get from where we are to where we need to be. We saw that in recent years when it happened under President Clinton. Again, as you pointed out, in those years, Tax Codes matter; but in the Clinton years when we had higher tax rates, we created 20 million jobs. In the Bush years when we had lower tax rates, we created 600,000 jobs. And also incomes were increasing.
So this has to be reviewed by this body, in my view, as a practical problem for us to solve, not an ideological argument that every tax cut is going to be beneficial anymore than every spending program is going to be beneficial. You have to apply judgment to the situation at hand. The big challenge for us is restoring the fiscal balance.
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