Veterans Jobs Corps Act of 2012--Motion to Proceed

Floor Speech

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Mr. KYL. Mr. President, I would like to speak about two claims that were made at the recent Democratic Convention that I believe require a response. Obviously, the Republican Convention went first and they did not have an opportunity to respond to everything that was said, but I think there are two things, as I said, that were claimed that just are not true. The first is that Republican policies caused the economic recession, so that in the Democrats' view electing Governor Romney would simply return us to those same, allegedly, failed policies. Second, it was said by several spokesmen on the Democratic side that there were no new or big ideas coming out of the Republican Convention, so you might as well give President Obama another 4 years in office. I would like to respond to both of those claims.

First, President Obama and his supporters would like Americans to believe that the so-called Bush tax cuts, deficits, and deregulation caused the great recession. Those are the Republican policies that got us into the mess, they say. The facts show this is not true. As James Pethakoukis of the American Enterprise Institute asks, if the 2001 and 2003 tax cuts caused the great recession, then why does President Obama want to keep most of them? And why did he sign a 2-year extension of those tax cuts a year and a half ago? That is a good question.

Obama supporters also claim that huge deficits resulting from these 2001 and 2003 bills caused the recession. But here are the facts. According to the Congressional Budget Office--nonpartisan--the 2001 and 2003 tax relief has only been responsible for 16 percent of the swing from surplus to deficit that they had estimated. If you look at the upper income tax relief only, that relief makes up just 4 percent of the swing. So it is impossible to say the tax cuts on the rich caused the recession. The maximum that the Congressional Budget Office can identify is potentially 4 percent. It is also important to note that since the CBO does not take into account the progrowth effects of marginal tax rate reductions--which all economists agree with--these numbers are even likely smaller than 4 percent.

Over that same period of time, new spending--this is the real problem--and interest on that spending were 12 times as responsible as the upper income tax reductions. So the real culprit here is not reducing the tax rate on Americans and especially those who are in the wealthier brackets but, rather, the new spending in which the Federal Government engaged. That is the cause of the deficits, and that did have an impact eventually on our ability to recover from the great recession.

One other note on this. The rich people, even though their tax rates were cut, ended up paying a far bigger percentage of taxes after the Bush tax cuts. The upper bracket earners paid--according to CBO again, in 2008 and 2009, the years for which they have figures, the top 20 percent of taxpayers paid 90 percent of income taxes--94 percent of income taxes. Before the Bush tax cuts, before 2001, that same top 20 percent paid only 81 percent. So the tax cuts in the upper income tax brackets resulted in an increase in the total dollar amount of taxes paid by the upper income people from 81 percent to 94 percent. So you cannot even make the argument that it was less fair. If anything, the upper income folks obviously paid a lot more--94 percent of all the income taxes paid.

Now, if deficits are the problem the Democrats are talking about, then President Obama would clearly make the problem worse. Pethakoukis notes:

The most recent Obama budget, according to CBO, would add $6.4 trillion more to the federal budget deficit over the next decade, leaving debt as a share of the economy stuck at around 76 percent of GDP versus 37 percent pre-recession.

Think about it. The Obama budget leaves us with 76 percent debt as a share of GDP as opposed to 37 percent before the recession. So if debt and deficits are a problem, it is far worse under President Obama's budget than before. But, again, it turns out that is not really what caused the great recession, nor was it the third item that has been pointed to; that is, deregulation.

Deregulation under President Bush did not cause the problem. Pethakoukis writes:

Glass-Steagall ended during the Clinton administration, and studies have found no evidence that any rule changes by the Bush SEC contributed to the financial crisis.

Glass-Steagall is the law that used to regulate how banks made investments. That law was eventually repealed during the Clinton administration. The Bush SEC--that stands for Securities and Exchange Commission, and there are rules changes in every administration for the SEC--he is making the point that there is no evidence that any particular rule change in the SEC had anything to do with the financial crisis.

So it was not the tax cuts, it was not the deficit, and it was not deregulation. What did cause the recession? AEI's Peter Wallison has put it simply this way:

The financial crisis was a result of government housing policy. ..... Fannie Mae and Freddie Mac were the implementers of a substantial portion of the government housing policy.

Now, I would note that Republicans in Congress tried to reform Fannie and Freddie, but we were opposed by Democratic Members both in the House and in the Senate, including then-Senator Barack Obama.

Most experts, I believe, will agree that the biggest reason for the collapse that occurred after 2006 was the housing market--the sale of all of these mortgages that were not worth the paper on which they were written. When that paper was all added together, bundled together and sold in big chunks to investors, and they found out their investment was not worth what they had paid for it, you had a crash and you had several people on Wall Street who went bankrupt as a result of that crash. That is the reality.

The bottom line is that there is no Republican policy that caused the recession, so it is bogus for the President to keep saying Governor Romney would just return us to the ``same failed policies.''

The second claim is that there were no new big Republican ideas to come
out of the GOP convention. I submit that claim reveals just how radical the Obama team's economic policies are. It is true that Governor Romney's ideas for economic recovery are not new. But they are big. In fact, his faith in the American people and the free enterprise system is a very big idea--not new but tried and tested as the basis for creating the wealthiest Nation ever on Earth.

Capitalism and free markets have lifted the standard of living for more people around the world than any government program or any other system. Planned economies compare very poorly to the free enterprise system of America. Margaret Thatcher once famously observed:

The problem with socialism is that, eventually, you run out of other people's money.

Yes, a key theme of the Republican Convention was freedom, opportunity, and earned success. Americans did build our own success. To the extent that government provided any infrastructure along the way, it was paid for by taxes that Americans paid on what they earned because of their success. And, yes, this is in contrast to the theme of the Democratic Convention that our success comes from the collective, embodied mostly in government, so the bigger the government the better.

The bottom line is this: Returning to free market principles and progrowth policies will move us forward. Continued reliance on more spending, higher taxes, and bigger government will not solve our problems.

Mr. President, I suggest the absence of a quorum.

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