Transaction Account Guarantee Program Extension Act - Continued

Floor Speech

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Mr. GRASSLEY. Mr. President, we have been hearing a lot about the so-called Bush tax cuts from my colleagues on the other side of the aisle. Given the rhetoric being used by some on the other side to describe this tax relief, I would like to take this time to correct the record.

But, first, during this talk about the fiscal cliff and about the tax cuts that sunset at the end of the year, all we have been hearing since the election is, What are we going to do about taxes? That is very significant as a result of the last election because I think it is a foregone conclusion there is going to be more revenue raised.

But if we raise the amount of revenue the President wants raised, and raise it from the 2 percent he wants to raise it from--the wealthy--that is only going to run the government for 8 days. So what will we do the other 357 days or, if we look at the deficit, it will only take care of 7 percent of the trillion-plus deficit we have every year. What about the other 93 percent?

So the point is that we can talk about taxes and taxes and taxes, but it is not going to solve the fiscal problems facing our Nation. We don't have a taxing problem, we have a spending problem. So we should have been spending the last 3 weeks talking about how we are going to take care of the other 93 percent of the problem. The President should have declared victory 3 weeks ago, and we wouldn't have had all this lost time between now and right after the election.

But I said I wanted to set the record straight. This tax relief of 2001 and 2003 reduced the tax burden for virtually every tax-paying American. It did this through across-the-board tax rate reductions, marriage penalty relief, and enhancing certain tax provisions for hard-working families, such as doubling the child tax credit.

Since the passage of this tax relief, there has been a concerted effort by my colleagues on the other side of the aisle to distort the truth about the present tax policy of the Federal Government. That tax policy has been in place for the last 12 years now. They have attempted to distort the truth behind its bipartisan support, its benefits to low- and middle-income Americans, and its fiscal and economic impact.

As one of the architects of the 2001 and 2003 tax legislation, I come to the floor to correct what I believe have become three common myths about this tax relief. The first myth is that this tax relief was a partisan Republican product. The second is that the tax relief was a giveaway to the wealthy. And the third is that the tax relief is a primary source of our current fiscal and economic problems.

First things first. We often hear the other side divisively refer to this tax relief as the Bush tax cuts. Given the rhetoric on the other side, one would think all this tax relief was forced through along party-line votes. The record proves otherwise. The conference report to the Economic Growth and Tax Reconciliation Act of 2001 passed the Senate by a vote of 58 to 33. In all, 12 Democrats voted for this legislation. Senator Jeffords, who later caucused with the Democrats, also voted for it.

As far as major pieces of legislation goes, it is difficult to find such major legislation passed with such broad support since there has been Democratic control of both the Senate and the White House. The President's 2009 stimulus bill, as an example, only had the support of three Republicans, as well as the Dodd-Frank bill. Of course, there is the health care bill, the President's signature legislation, which passed with no Republican votes.

Moreover, all the 2001 and 2003 tax relief was extended in 2010, just 2 years ago, with strong bipartisan support, and signed into law by this President. At that time--2 years ago--the Senate vote tally was 81 to 19. Now, understand, that has to be considered overwhelmingly bipartisan. So just 2 years ago we had overwhelming bipartisan support for the Bush tax cuts. Yet somehow this is a partisan measure we are dealing with. Given this record, instead of calling it the Bush tax cuts, as they are called, we really should be calling it the bipartisan tax relief.

I now would like to turn to the other side's criticism of the bipartisan tax relief or, as they say, tax cuts for the wealthy or another way they say it is it is a giveaway to the rich. This rhetoric demonstrates the difference in philosophy between this Senator and my Democratic colleagues.

First of all, a reduction in tax rates is not a giveaway to anyone. The income a taxpayer earns belongs to that taxpayer. It is not a pittance the taxpayer may keep based upon the good graces of our government. The burden should not be on the taxpayer to justify keeping their income. Instead, it should be on us in Washington to justify taking more away from them.

Secondly, there is a tendency on the other side to view everything as a zero sum game. In their minds, if someone has more, it means someone else will have less. So I would like to quote Ronald Reagan as the best example of this attitude when he said too many people in Washington ``can't see a fat man standing beside a thin one without coming to the conclusion that the fat man got that way by taking advantage of the thin one.''

I believe this is what is driving the animus against the so-called wealthy on the other side. They are under the impression the wealthy got rich at the expense of someone less fortunate.

The problem with this view is that in a free economy goods and services are transferred through voluntary exchanges. Both parties are better off as a result of this exchange; otherwise, it wouldn't occur. Moreover, wealth is not static. It can be both created as well as destroyed.

At worst, the government is a destroyer of wealth. At best, the government is a redistributor of wealth. It is through the force of government the zero sum exchanges occur.

It is the private sector that creates wealth through innovation and providing the goods and services we need and want.

The leadership of the other side has become fixated on redistributing the existing economic pie. I believe the better policy is to increase the size of the pie. When this occurs, no one is made better off at the expense of anyone else.

The constant rhetoric of pitting American against American based upon economic status is not constructive. It also has not been constructive to accuse those of us who support the present tax policy for all Americans as agents of the rich. And I will soon get into discussing why that isn't true, as a result of the 2001 and 2003 tax bills.

I do not support tax cuts for the wealthy for the purpose of wealth redistribution. I support progrowth policies to increase the size of the economic pie. Free market, progrowth policies are the only proven way to improve the well-being of everybody.

My objection to the other side's characterization of the bipartisan tax relief is not only a philosophical one, but it is a factual one. The truth is that the bipartisan tax relief that was voted on in 2001 made the Tax Code more progressive, not less. With all the rhetoric around here over the last 5 or 6 years, nobody believes that, so I have a chart to show that.

Since its implementation, the share of the tax burden paid by the top 20 percent has increased. Conversely, the bottom 80 percent has seen its share of tax burden decrease. Additionally, the percentage reduction in average tax rates between 2000 and 2007 was the largest for the lowest income groups.

As you can see from this chart, there is a general trend downward from the bottom 20 percent to the top 20 percent. The bottom 20 percent saw their average tax rate drop by the 25 percent that is shown there. The top 20 percent, on the other hand, only saw an 11-percent reduction, with the proportionate in between.

The truth about the bipartisan tax relief apparently has been recognized by my colleagues on the other side. They do not like to admit this, but this must be so since they now claim to support extending 75 percent of the bipartisan tax relief bill. In other words, 75 percent of what they are condemning of the 2001 tax bill the other side wants to make permanent law, which obviously I support too. You would think that if it really was a tax cut for the wealthy, however, the other side would be advocating letting all this tax relief expire. Certainly you would not think they would be advocating for more than half of it to be extended. To get around their seemingly contradictory position, they have stopped referring to the majority of the bipartisan relief as the Bush tax cuts. That term is now reserved only for the 25 percent they wish to see expire. They now refer to the 75 percent not as Bush tax cuts but as middle-class tax relief. So I have news for my colleagues. The middle-class tax relief you now claim to support is the same relief you previously demonized as tax cuts for the wealthy.

Finally, it has become en vogue for the other side to blame the bipartisan tax relief for everything from the Federal deficit to the state of the current economy. Neither is based in fact nor sound economic reason.

It is undisputed that in 2001 the Congressional Budget Office was projecting a 10-year budget surplus of $5.6 trillion. However, as a June 2012 CBO report shows, the bipartisan tax relief role in turning this projected surplus into deficits is dwarfed by other factors. This is the 2001-2003 tax cuts. See that smaller piece of the pie?

Then let's look at what else is the justification, according to the Congressional Budget Office--not this Senator--about where the deficit came from.

First off, the June CBO report tells us that their budget surplus projections were simply incorrect. That happens a lot with CBO. I like to refer to CBO around here as God because what they say goes, and you have to abide by it if you don't have 60 votes. But they aren't always right. Unlike God, CBO is not omnipotent. They do not have perfect foresight, and every once in a while even they make mistakes.

CBO's surplus projections were based on rosy economic assumptions as well as faulty technical assumptions that did not pan out. CBO failed to predict the bursting of the tech bubble that was so beneficial in propping up the economy of the Clinton years. CBO also could not predict the September 11, 2001, tragedy that hit New York and the Pentagon, killing 3,000 Americans, which wreaked havoc on our economy.

So add up all these things. All told, these and other economic and technical changes account for $3.2 trillion or, as I show in this chart, these faulty assumptions accounted for 27 percent of the change of the 2001 projections from surplus to deficit.

By far, the biggest reason for the change from surplus to deficit was an increase in spending. Some of this spending was justified. This includes bipartisan support for increased spending to protect our Nation against future terrorist attacks. But, of course, as has become the custom around here, we spent and spent and spent some more. This spending not only continued but escalated with the election of President Obama. His first act was to increase the deficit by $800 billion-plus through a failed stimulus package. In all, this increase in spending accounts for nearly 50 percent in the change from surplus to deficit. That is this part of the pie chart.

So how about the tax cuts we hear so much bellyaching about from the other side? If you look closely at my chart, you will see I have divided the tax relief into two slices. These two slices add up to about 25 percent. Eleven percent of this, which I labeled ``all other taxes,'' primarily consists of the tax relief provided in President Bush's 2008 stimulus package, President Obama's 2009 stimulus, and the payroll tax holiday. Of course, these provisions had large Democratic support, as we all know. That leaves us with the 2001 and 2003 tax relief accounting for merely 12.9 percent of the change in the projected surplus.

But understand what other people are saying--including, I think, even the President--about the reason we have this big budget deficit is because of the Bush tax cuts. Well, that is baloney. That is a far cry from being the driver of our deficits or even a substantial contributor. The truth is, even using CBO's static scoring assumptions, the tax relief did not push us into deficits. In fact, if the only change since CBO's 2001 projection had been the 2001 and 2003 tax relief, we would still be experiencing sizeable surpluses each year.

Along with blaming the bipartisan tax relief for

deficits, my colleagues on the other side have alluded to this tax relief as being a cause of our recent recession. The President even made this claim in an ad during the Presidential election.

The exact logic of this claim escapes me. Apparently, it also escaped Washington Post fact checker Glenn Kessler. He described the reasoning supporting such a claim as a ``Rube Goldberg phenomenon.'' The Post was unable to find any respected academic study supporting this convoluted logic. There is good reason the Post could not find such a study. The focus of most economic research in this area is on the degree to which tax increases lower economic growth and tax decreases increase economic growth. There is considerable debate within this research, but it is difficult to find any suggesting that tax increases are good and decreases are bad for the economy.

Now that I have explained and hopefully corrected these myths, I hope we can have a more constructive discussion on averting the fiscal cliff. Republicans have already stated they are willing to accept some new revenues. Speaker Boehner has put $800 billion in new revenues on the table. However, we still haven't heard any substantive ideas from the President or other leading Democrats about cuts to spending or entitlements. We haven't even heard the President say good things about the Simpson-Bowles recommendations--a commission he appointed, a commission that had Republicans and Democrats on it, a commission that reported conservative Republicans and liberal Democrats saying: We ought to do what we can to see the Simpson-Bowles approach through. It would be nice to see the President endorse a recommendation of a committee he appointed that had a suggestion for taking care of this fiscal cliff problem. If he had done that 2 years ago, we wouldn't be debating fiscal cliff today.

So there are serious concerns on my side of the aisle that any agreement we reach will result in immediate tax hikes but promised spending cuts will never occur. We need more than just empty promises from the other side.

The President and my colleagues on the other side of the aisle need to get serious about looking at the spending side. It is time for the President to make good on his campaign promise of supporting a balanced approach to deficit reduction.

I repeat what I said at the beginning. All we have heard for 3 or 4 weeks now since the election is all about taxes. Too often, that is what Republicans are talking about, although they have to be considered now as a result of the election. But if we give the President everything he wants in the sense of taxing the wealthy with the figures he wants, it still runs the government only for 8 days. What about the other 357 days? It only takes care of 7 percent of the deficit problems we face year after year, and it is going to be year after year into the future if we don't get something done about it. So what about the other 93 percent? The taxes aren't going to take care of that. You can't tax us out of this deficit problem because we have a spending problem.

So if we had put as much time into the spending side of the ledger as we put into the taxing side of the ledger over the last 3 or 4 weeks, we would be well on the road and be certain to get out of here by Christmas Eve, which I have my doubts that we can.

I yield the floor.

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