We have this long tradition in the Senate of Senators giving farewell remarks. I want to alert colleagues that mine will be especially long, so they might want to go have lunch and then come back.
I don't consider this my final speech because I am still hopeful we will reach an agreement on the farm bill. The distinguished Chair is here. I hope we can reach agreement on averting the fiscal cliff because that is important to the country. I hope we will have additional chances to communicate with colleagues and the public before we are done.
These are my farewell remarks and observations of 26 years of service here, and it has been an incredible experience.
The first thing I want to do is say thank you to the people of North Dakota for having confidence in me when I was only 38 years old in sending me to represent them in the Senate. I was 38, but I looked about 25, and the people of North Dakota elected me in a stunning upset of a long-established incumbent. I treasure the confidence they have had in me.
I also want to thank my colleagues for the responsibilities they have given me. I also want to thank the leadership team of Senator Reid, Senator Durbin, Senator Schumer, and Senator Murray and the confidence they have had in me.
I have been so blessed to have people who have been with me on my staff in many cases for more than 20 years. My chiefs of staff, including Jim Margolis, who is one of the top media gurus in the country. He has done much of the advertising for the President in this last campaign. Also, my thanks to David Herring and Mary Wakefield, as well as Kent Hall, who died an untimely death while working for me. Thank you to Sara Garland, Bob Van Heuvelen, and Wally Rustad.
Thanks also to Tom Mahr, who was my legislative director for than 20 years. I also wish to thank my executive assistant, who has been with me more than 20 years; Geri Gaginis, who we all fondly call Mom in my office because she cracks the whip and makes sure the trains run on time; Mary Naylor, my long-time director on the Budget Committee and who has also been with me more than 20 years.
My Budget Committee deputies John Righter and Joel Friedman have done extraordinary work on behalf of the people of this country. Stu Nagurka is here with me today and is going to help me with charts and has been my long-time communications director.
There are so many more people I want to thank. Most of all, I want to thank my family. My wife Lucy, who has been my great partner through all of this. She was my campaign manager when I first ran for the Senate.
My daughter Jessie, who has in many ways, perhaps, sacrificed the most, because when a person is in this job they miss birthdays and other important events. She has been a great daughter. She was here last night for our farewell party and we had a lovely time. Our son Ivan and his wife Kendra, who are in Oregon where they have a small farm called Tipping Tree Farm. We wish they could be here today. Our grandson Carter, who is a proud member of the University of Oregon marching band, The Ducks, and who served as an intern for me -- not at government expense, by the way, it was at our expense; and our little dog Dakota who has become sort of a mascot of the U.S. Senate. Brian Williams, when he did a show on "A Day in the Life of the Senate," concluded that program by calling Dakota the "101st Senator." I think he will be missed perhaps more than I am as I leave the Senate.
In 1964, I came here. I sat up in the gallery -- in fact, it was the gallery right up there -- and I was 16 years old, and I watched a debate in the U.S. Senate. It was on civil rights. Hubert Humphrey was leading that debate. It so inspired me that I thought, you know, someday I would like to be down on that floor and I would like to debate the great issues of the day and I would like to represent the people of North Dakota. So I went home and wrote out on the back of an envelope that I would run for the U.S. Senate in 1986 or 1988, and I ran in 1986 and was successful. That is the power of a plan.
To the young pages who are here, if any of you seeks to be in the U.S. Senate someday, have a plan, because there are so many people who sort of drift through life without one. If you have a plan, you will be light years ahead.
In that race, as I indicated, my now-wife Lucy was my campaign manager. We won what was then believed to be the biggest political upset in the history of our State. I was proud of that victory and proud to have a chance to represent North Dakota here.
I think we all know our country needs a plan now, and we know plans have worked before. I was here in 1993 when we had just come off the largest deficit in the history of the United States. The country was in the doldrums. The economy was just plugging along, not doing very well, we had a weak recovery from a deep recession, and we passed a plan to get the country back on track. We did it the old-fashioned way. We made tough decisions, some that were unpopular, but it was the right thing to do and it worked. We balanced the budget. We had the longest period of uninterrupted economic growth in the Nation's history. Twenty-three million jobs were created, and we were actually paying down the debt of the United States at the end of the Clinton administration.
We did it again when disaster struck my State in 1997. We had one of the worst disasters ever in North Dakota, a 500-year flood that followed the worst winter storm in 50 years. Many of my colleagues may recall the images from that disaster when firemen were fighting an enormous conflagration in downtown Grand Forks in the middle of a blizzard and there was also a massive flood. Grand Forks was devastated.
Again, we had a plan, a $500 million disaster recovery plan that became a $1 billion plan, and it worked, and we did it the old-fashioned way. We made tough decisions, some that were unpopular, but it was the right thing to do and it worked. The community held a recognition event for me last weekend. The leadership of the community was there, and many people from of the community reported on the remarkable recovery in Grand Forks. It is, I think, an example of what can be done when government responds and does so intelligently and effectively.
Now we face a new challenge. We have a fiscal cliff, or a fiscal curb, or whatever one terms it, but what we know is that if we fail to act, we could be pushed back into recession. Our country needs a plan -- a plan to get us back on track, to revitalize economic growth, to secure our long-term economic future, and to get the country moving again, and we can do it. We have done much tougher things in the past.
Sometimes I hear people being critical of this institution when they leave here. Let me say I am not in their ranks. I leave this institution with enormous respect. The U.S. Senate is the greatest deliberative body in the world, and I sincerely believe the vast majority of my colleagues are serious-minded and have the best interests of the country at heart. I believe the vast majority of my colleagues want to do what is right for the country. We have differences -- enormous differences -- about what is the right thing to do, but I have no doubt most of our colleagues are well intentioned.
In many circles it is fashionable now to bash government and play down its importance. I personally think we would do well to remember what it has accomplished. I can remember so clearly being called to an emergency meeting in this building in the fall of 2008. I was handed a note saying I was urgently requested to come here. It was about 6 o'clock in the evening. I was the last one to arrive. When I walked into the leader's office, there were the leaders of the House and the Senate, Republicans and Democrats, the Secretary of the Treasury from the Bush administration, and the Chairman of the Federal Reserve.
I instantly understood something very serious was afoot. They closed the door and told us they were going to take over AIG, the large insurance company, the next day. They weren't there to ask for our approval or seek our agreement; they were there to tell us they were taking this step and they told us they were taking this step because they believed if they did not, there would be a financial collapse in this country within days, and they gave great specificity as to what would happen if there was a failure to take the action they were about to take.
The public reaction was harshly negative. The notion of the Government of the United States bailing out a large private insurance company created controversy and criticism from almost every corner. Ultimately, the rescue of that company cost $180 billion -- a staggering sum. But do my colleagues know what. We have learned this week that the taxpayers will make money on the deal. Yes, it cost us $180 billion, but the taxpayers are going to make $22 billion on the transaction. If we hadn't done it, we would have risked going into a depression.
So when people say there is no role for government or it should be a limited, shrunken roll, I say, Really? Would we have wanted to stand by and risk this country going into another Great Depression? Let's recall what that was like. More than 20 percent of the people in this country were out of work.
I know my own grandfather, who refused to take bankruptcy, owned stock in the local bank. In those days people had unlimited liability if they owned stock in a bank. So when there was a run on the bank, as there was, he was called to bring money to the bank, which he did. He did it over and over, and it took him 9 years to recover. People were hungry. People were desperate. That is what a depression is about.
So when I reflect back to those decisions, I believe they were the right decisions to make. It is not just my view; that is the view of two of the most distinguished economists in this country, Mark Zandi, who was a key economic adviser to Senator John McCain in his Presidential race, and Alan Blinder, the former Deputy Chairman of the Federal Reserve. Here is what they say: Without that Federal response, we would have had 8 million fewer jobs and a 16-percent level of unemployment in this country, and we would have been in the second Great Depression. They call it "Depression 2.0."
So let's remember where we were when President Obama came to office. The Nation was facing the worst economic catastrophe since the Great Depression. In the fourth quarter of 2008, the economy shrank at a rate of almost 9 percent. After the Federal actions, positive economic growth returned in the third quarter of 2009 and we have now had 13 consecutive quarters of economic growth. We have come a long way.
This is a remarkable turnaround in a very short time, measured against previous financial crises. In fact, there has been an academic study just completed that suggests typically it takes 8 to 10 years to recover from a financial crisis. So the recovery here, while not everything we would have hoped, is a dramatic turnaround.
At the same time, our constituents know, and we know, the price has been high. We know we are currently borrowing 31 cents of every dollar we spend. That is somewhat of an improvement, because we were borrowing 40 cents of every dollar we spend. So this is an improvement, but we have a long way to go.
And the public understands we face both a spending and a revenue problem. Spending is near a 60-year high, as this chart shows. The red line is the spending line; the green line is the revenue line. But for those who say it is just a spending problem, I don't think the facts bear that out, because the revenue is near a 60-year low. I think most logical people would say we have to work both sides of this equation.
When we look at our debt, we see that our gross debt has now surpassed 100 percent of our gross domestic product. There was a landmark work done a couple of years ago by Rogoff and Reinhart. They looked at 200 years of economic history and they concluded that once our debt exceeds 90 percent of GDP, our future economic prospects are reduced, and reduced quite significantly: future economic growth reduced by 25 to 33 percent. So this is not just numbers on a page; this is a question of future economic opportunity.
This growing debt is why many of us called for action a long time ago. In fact, it was 6 years ago this month that Senator Gregg and I came up with the idea of a commission to tackle the debt. That idea ultimately led to the President appointing the Bowles-Simpson Commission. Its bipartisan report recommended $4 trillion in deficit reduction in a balanced way, and I think in a fair way. It protected low-income programs, it actually improved the progressivity of the tax system quite significantly, and it was balanced between revenue and spending. Other bipartisan groups have concluded the same thing; that we need spending restraint and we need revenue. So there is a critical role for government here. We have seen it in the past and we will find it in the future.
But I think we also have to acknowledge there are problems here. There are problems in this Chamber. As proud as I am of this institution, and I will forever be, I have detected over the 26 years I have been here, a change. It has happened kind of gradually, but it has clearly happened.
We now spend too much of our time seeking partisan advantage, and it happens on both sides, and it is all understandable. I understand it. I am not being critical of individuals. We spend too little time trying to solve problems. We spend too little time in our caucuses, in our meetings, focused on how to solve the problems facing the country. I deeply believe this observation is true.
I believe we can do better than this. The institutions of our government have a proud history. The genius of our Founding Fathers can be found in every part of our history. Whether it was conquering the last Great Depression or winning World War I and World War II or launching a man into space or conquering dreaded diseases, over and over our country has organized to better the plight of mankind. We need that same kind of focus and effort now to address our challenges.
I am confident we can do this, but it is not enough to be confident. It is not enough to be hopeful. It requires a plan, and I would like to take the next few minutes to lay out my belief of what that plan should include.
Much of what I will talk about reflects the work of the Bowles-Simpson Commission, the Group of 6 that I have been a part of, and the Group of 8.
It starts by looking at what both sides have laid down. Republicans have laid down the spending cut plan; the President has laid down a revenue plan. My own belief is we should take them both. We should take what the Republicans have proposed on spending, with some modest modifications which I will discuss, and we should take the President's plan on revenue.
The President laid down a plan that said we ought to raise $1.6 trillion over the next 10 years. Boy, that sounds like an awful lot of money -- does it not? -- $1.6 trillion. Not billion, not million, trillion. And people will be quick to say: Oh, my God, that is the biggest tax increase in the history of mankind. Terrible. We cannot do that.
Well, we need to put it in perspective. The first thing we should recognize is this will take us to a revenue level that is 19.9 percent of our GDP. The last five times we have balanced the budget in this country, going back to 1969, we have been at 19.7 percent, 19.9 percent, 19.8 percent, 20.6 percent, and 19.5 percent. Does 19.9 percent fit in? These are the only times we balanced the budget going back to 1969.
To put it in even more perspective, how much revenue are we going to raise over the next 10 years without any change? Well, here is the number: $37.4 trillion. Nobody ever puts these things in perspective. These big numbers are in relationship to what; $1.6 trillion is what in relationship to $37.4 trillion? As a percentage that is an increase of 4.3 percent. My goodness, we cannot increase the revenue by 4.3 percent in this country over the next 10 years? Of course we can. Of course we can, especially if it means we get our house in order and put the country on a more firm fiscal footing.
It does not just matter how much money we raise; it also matters how we raise it. We have a Tax Code now which I cannot defend. I cannot defend it. I took a study that was done by a man named Martin Sullivan last year. He did a very interesting thing. He looked at one building on Park Avenue in New York, and he was able to do it because they happened to have the statistics that isolated that one building.
Do you know what he found? The average income in that building was $1,167,000 for the year -- $1,167,000. The average tax rate of the people in that building was 14.7 percent. The janitor in that building had an income of $33,000. He paid a tax rate of 24.9 percent. Is this fair? Is it fair that people making $1.1 million paid a tax rate of 14.7 percent, and the janitor who served them earning $33,000 a year paid a tax rate of 24.9 percent? Well, I personally do not think so.
I know all of the arguments. I have served on the Finance Committee. I have heard it all. The biggest reason for this differential, by the way, is not the earned-income tax rate, which has had almost all of the attention in this national discussion. Almost all of the attention has been on the earned-income tax rate and raising it from 35 percent to 39.6 percent.
Almost no attention has been paid to the unearned-income tax rate on capital gains and dividends. The unearned rate is currently at 15 percent. That is what allows very wealthy people to pay a tax rate that is a fraction of those who work full time and are paying rates of 25 percent.
So I hope as we move to conclusion we will pay a little more attention to the unearned rates. The truth is, we would not have to have as much of an increase as is being proposed on the earned-income side and have more of an increase on the unearned-income side, and we would make the Tax Code fairer and we could raise the same amount of revenue. That is the revenue side.
But the spending side, Republicans have down. They have put out a proposal that asks for savings out of entitlements and other discretionary spending. And if we look at their proposal and break it down -- again, let's look at health care. We are going to spend $11 trillion over the next 10 years on health care. Republicans are proposing saving $600 million. If we had a compromise between Republicans and Democrats let's say at $500 million, that would be a savings of, again the magic, 4 percent.
We are going to increase revenue 4 percent. If we had savings in health care of 4 1/2 percent, we would save $500 billion. Now, I have had conversations with colleagues who tell me we cannot possibly save $500 billion out of health care, just like people say, well, we cannot possibly increase revenue $1.6 trillion.
Really, we cannot save $500 billion out of a pot of money where we are going to spend $11 trillion? I do not think that is true. I think we can save $500 billion. And I will tell you, there is someone sitting on this floor who has a pretty good idea of how to do it. Senator Sheldon Whitehouse has said to us over and over and over: We are spending more than any other country in the world as a share of our national income on health care. We are spending 18 percent of our GDP on health care. No other country spends more than 11 1/2 percent.
The best minds in this country have told us we are wasting hundreds of billions of dollars in health care that do not improve health care outcomes at all. If we would save money in overall health care, 40 percent of that savings would flow through to the Federal Government. Senator Whitehouse is right about this. We ought to focus like a laser on where the waste is.
We do not need to increase the eligibility age for Medicare. We absolutely do not have to do it to save $500 billion. But what it would do, if we save $500 billion, is it would keep the growth in health care spending about equal to the growth in the overall economy. That would stabilize the growth of health care spending. That would be a huge contribution to the economic competitive position of the United States.
Republicans have also said: Hey, let's save $300 billion on domestic discretionary savings. Now, I will be the first to say we have already had lots of savings on the discretionary accounts. We have saved over $1 trillion in the discretionary accounts. But they say, ok, let's save another $300 billion. I think we should say we will do it if they go with us on the revenue. We will do it because that represents a savings of 2.6 percent of the $11.6 trillion we are going to spend in the discretionary accounts over the next 10 years.
Now, I think we have gotten into a situation where we use numbers that are absolutely big numbers, but we do not put them in perspective. We cannot save 2.6 percent out of discretionary accounts. Well, I believe we can. I absolutely believe we can. I believe we can save more out of defense.
I have supported every penny -- I did not vote for going to war in Iraq. I thought that was a huge mistake. But I have supported every dollar of spending for our troops in the field. I can tell you as the Budget Committee chairman, we can save more money in defense. There are lots of Republicans who know we can do it too.
Other mandatory. That is another category the Republicans said to save $300 billion there. I think they are $100 billion too high because we are already saving over $100 billion out of other mandatory programs to offset the cost of extending certain policies just last year. So let's save $200 billion. That would represent, again, 4 percent of what we are projected to spend over the next 10 years in other mandatory spending; $5.1 trillion is what we are programmed to spend. Two hundred billion dollars of savings there would represent 4 percent.
Again, I have had colleagues tell me we cannot possibly save $200 billion. I have had staff people tell me we cannot save $200 billion. So I say, how much are we going to spend? How much are we going to spend? That $200 billion represents 4 percent of what we are going to spend. We cannot save 4 percent? Yes, we can. Yes, we can.
I was elected on the slogan, in 1986, of "Yes We Can." And somebody else used that slogan a few years later. President Obama used that slogan, "Yes We Can." He called me up. He said: "Do I owe you royalties?" I said: No, I am glad you are using it."
But, yes we can. We need more of a yes-we-can attitude around here.
So when I rack it all up and I look at what we have already done, we have saved $1 trillion in the Budget Control Act of last year. Here is other mandatory savings I just talked about: more than $100 billion that we have already done to offset the cost of extending certain policies, $900 billion of other discretionary savings already done. So we put that in the bank. We use that as the base.
We put it all together and here is what we have: We save another $200 billion on defense; we have revenue of $1.6 trillion, which is the President's proposal; we have $100 billion of nondefense. That gets us the $300 billion the Republicans have asked for.
On health care we do $500 billion. That is close to what they have asked for, $100 billion less. Other mandatory, $200 billion; that is close to what they asked for. The $100 billion difference reflects what we have already done.
Interest savings. Because we are spending less and we have more revenue, we save interest, $400 billion. That gives us a total of spending cuts of $1.4 trillion. We add in what has already been done $1.050 trillion, and we have a total of $2.450 trillion. We add that to the $1.6 trillion of revenue, we have $4.050 trillion of savings.
Then I personally would extend the payroll tax holiday because CBO tells us, on the tax side, that holiday is the biggest bang for the buck in giving a lift to the economy. It will cost us $200 billion, for a net deficit reduction of $3.850 trillion. For those wondering what happens to AMT and what happens to the doc fix, we have those in the baseline so they are covered in this proposal. We can correct the alternative minimum tax. We can eliminate the doc fix and be done with them.
This magnitude of package is precisely what was called for in the fiscal commission. In The Moment of Truth report, this is what they called for. I think they were right to call for it. I was proud to be part of that effort. I believe this is precisely what we need to do now.
So that is the plan. Now we need action. We should do it the old-fashioned way. We should make tough decisions, even some that will be unpopular.
It will be the right thing to do, and it will work. It will stabilize our debt and begin to bring it down. It will provide certainty to our economy. I believe it will unleash the $1.7 trillion that is in the balance sheets of our corporations, and it will unlock the investment potential that lies all across this country.
Let me end as I began by simply saying thank you. Thank you to the people of North Dakota, thank you to my colleagues, thank you to my staff, and most of all, thanks to my family -- to my wife Lucy, to my daughter Jessie, to our son Ivan and his wife Kendra, and to our grandson Carter. To all my family members, my cousins, who have been with me in every campaign, I will never forget your support and your help. I will always consider serving here the honor of my life.
I also thank my colleague Senator Hoeven, who, in the 2 years he and I have overlapped, has been a good colleague. I have enjoyed working with him very much.
I just close by noting, because as many of you know, I am sort of a numbers guy, that I started these remarks in the 12th hour of the 12th day of the 12th month of 2012. I am sure numerologists will make much of those relationships.
I began this speech in the 12th hour of the 12th day of the 12th month of 2012, and I leave here forever grateful for the opportunity to serve.