Congressional Budget for the United States Government for Fiscal Year 2007

CONGRESSIONAL BUDGET FOR THE UNITED STATES GOVERNMENT FOR FISCAL YEAR 2007

BREAK IN TRANSCRIPT

Mr. GREGG. I understand I have 9 minutes. Good.

The discussion which just occurred between the Senator from North Dakota and the Senator from Washington is a discussion which reflects the difference between our views and how you should budget. Essentially what the Senator from North Dakota and the Senator from Washington said is we should break the cap, we should spend additional money, and we should raise taxes. Their approach to budgeting is to tax and spend. Our approach, on the other hand, has been to say if there is a priority which the Senate feels is a high priority, whether it is veterans' benefits or CDBG--and there will be other amendments like these--that the Senate should declare there is a priority and set up a process where other programs will have to be reduced in order to pay for that program within the cap. The Senator from North Dakota correctly referred to it as an across-the-board cut.

Section 920 is a technical event. It does not have money in it, and it never has. But when you identify a 920 expenditure, it creates a mechanism where another program activity would be cut across the board.

That is the philosophical difference between our parties.

This budget increases the size of Government from last year to next year by over $100 billion. That is the growth in this budget--over $100 billion. The growth in the discretionary account will be about $30 billion under this budget. Those are huge numbers of growth. That is expanding the Government in a very dramatic way and a very significant way, much more so than I would personally wish to do. I wish to see us control, for example, entitlement spending a little more aggressively around here, which is the majority of growth. But the fact is that is the growth.

What the Democratic proposals are saying--there have been innumerable ones--is we should grow Government even more, we should expand Government even more, and then we should raise taxes to pay for that. The traditional Democratic approach to Government is basically no end to the size of Government. There is no end to the amount of taxes they are willing to raise.

And this argument that they are going to use loopholes, I have to say, is a little shallow. There was this loophole around here called Customs fees which would be used to pay for new spending around here 45 different times. People said we are going to take it out of Customs fees, and then they offset it because they didn't get a budget point of order against it.

This building in the Caymans is the new Customs fee. The simple fact is if you eliminated all the loopholes which they are talking about--they may or may not be loopholes; I certainly think some of them sound legitimate--that would be $11 billion you would raise over 5 years, all of them. They have proposed $133 billion in new taxes. So they are $121 billion short.

Where is that going to come from? That is going to come from increasing maybe the death tax, increasing rates, and increasing taxes on working families, on small businesses, so they can expand Government. That is the difference of opinion which we have.

We don't believe that is the way you control the size of Government, to grow it and then raise more taxes to pay for it. We believe the way to control the size of Government is to set a hard spending level, which we have done, $873 billion, and hold that, and then within that spending level set priorities.

A lot of amendments come through here saying what the priorities should be. I think they are fairly reasonable; some aren't. The fact is they will all have to be shoehorned under that hard spending cap as long as we maintain that spending cap, as we have done so far in this budget process.

But every amendment offered so far from the other side of the aisle has been a spending amendment which has broken that spending cap--increase the size of Government; grow the Government; then raise taxes to pay for it, representing that it is a corporate loophole closing, which it can't be because they have already gone well beyond the estimates that are reflected in those loopholes which they allege exist.

There is a difference of opinion here. We happen to think we are doing it the right way by setting the priorities under the cap. They think they are doing it the right way by growing the size of Government beyond the spending cap and then paying for it with tax increases on working Americans. It is a difference of opinion.

I yield the remainder of our time on the Santorum amendment and we can move on to the Conrad amendment.

BREAK IN TRANSCRIPT

Mr. GREGG. Mr. President, I yield myself--the Senator from North Dakota and the Senator from Maryland took about a half an hour. I took about 5 minutes. So I am going to yield myself 25 minutes to discuss this issue in some depth because it is an important issue. I do believe the characterizations here are interesting but inconsistent with the facts.

The Senator from North Dakota says we are running up the debt. I suppose you can argue that is true, yes, because we are operating the Government. But the second question would be, Who is running up the size of the Government? That would be probably a more appropriate question. If you look at the Democratic proposals, as they have hit the floor of the Senate, they are running up the size of the Government. That is their goal.

They proposed amendments in committee that increase the size of the Federal Government by $127 billion. That is a huge expansion of the Federal Government. I give them credit, they pay for it with taxes on the American people, raising them $133 billion. And they are not tax-loophole closers.

The Senator from North Dakota has claimed: Well, if you just collected taxes that are owed, you might get up to $100 billion. That may or may not be true, and we are going to try to do something to accomplish that. But as he well knows, CBO will not score that. They score that as zero. So in order to get that $133 billion, they are going to have to raise taxes on working Americans because loophole closers simply do not generate anything like that. The maximum amount you can score for loophole closers is about $11 billion. So they are going to have to raise taxes at least $121 billion on working Americans.

And then the Senator from Maryland says there is $41 billion out there that you can just take from high-income Americans. If you grab that, well, that is clearly a rate increase and a tax increase. But it is an inaccurate statement. Actually, the high-income Americans today are paying more--paying more--than they have paid at any time in history as a relative burden of taxes. Their number has gone up significantly. In fact, the time when they got the best deal, ironically, was during the Clinton administration.

During the Clinton administration, high-income Americans actually paid less as a percentage of the gross tax burden, total tax burden in America, than at any other time. It is only in the last few years that their percentage of the burden has gone up.

Why is that? Well, it is something called economic activity. When people go out and they work hard and they are being productive, they end up paying more taxes. When tax rates are high, people seek tax shelters, and they hide income, and they invest it in things that give them avoidance of taxes. Some of the things the Senator from North Dakota would like to eliminate I would like to eliminate, too, that are inappropriate. But they also do things that are appropriate to avoid taxes so they do not have to pay that high tax rate.

When you have a capital gains rate of 30 percent, people do not sell their assets. They hold on to them because they do not want to pay all that money to the Federal Government, especially high-income people. So what we have seen is when we cut rates, high-income people started doing things that generated revenue for the Federal Government, and it also generated a tax burden on them that was higher. They were willing to take that because they were making more money. And it is shown definitively by the revenues we have received as a Federal Government as a result of the cut in the capital gains rate.

Now, the other side of the aisle considers the cut in the capital gains rate to be poison. They think it just benefits the rich and it should not have occurred. They want to repeal it. They tried to put in place pay-go to force the repeal of it, and they have all sorts of ideas for how you eliminate it because this is the rate they see as the problem in America, the capital gains rate being 15 percent instead of what it was. It used to be 30 percent.

What was the effect of cutting capital gains rates? It actually generated huge revenue to the Federal Government. Why? Because people went out and started to undertake economic activity. They went out and sold stock. They went out and sold small businesses. They went out and sold real estate. That generated economic activity, which generated taxes to the Federal Government, taxes which we did not expect to get of $81 billion. Then they took the money they generated as a result of selling those assets and reinvested it in more productive activity and created more jobs, took more risks. As a result, the economy is growing.

We have had month after month after month of growth in this economy. We created 5 million jobs. We have had, I think, 30 months of growth in this economy. And the 5 million new jobs we have created actually exceeds the combined jobs created in Japan and Europe during that same period of time. That is good economic policy.

Just last month, we created 234,000 jobs. Why? Because we created an atmosphere where people are willing to go out and take a risk, where they are willing to go out, invest their money, take a risk, and create a job as part of taking that risk, and create revenue for the Federal Government because they create income. As a result, the revenues have gone up in this country.

So another chart is pretty dramatic. These are the revenue growths--the yellow lines--in the last few years and what we project out into the future--a 14-percent jump in revenue last year. Now, the other side will say: But that is from a historic low. Yes, it is a historic low, which was driven in large part by the Internet bubble of the late 1990s, the largest bubble in the history of this country or in the world. It was a bigger bubble than the tulip bubble or the South Seas bubble. When the Internet bubble collapsed, we went into recession, and that dropped revenues dramatically. Then we were attacked on 9/11, and that dropped revenues even more.

So the President, with considerable foresight, I would say, decided to cut taxes before we got deep into the recession. As a result, there was economic activity generated, and that has produced a significant upturn in revenues--one of the most significant upturns in revenue in history.

Now, here is the bottom line of this whole argument: We are reaching a point where we are back to a historic level of what taxes have been in this country. Historically, taxes in this country have represented about 18.4 percent of gross national product. And yes, they dipped well below that because of the Internet bubble and because of the attack on 9/11 and the economic slowdown that occurred. But now they are headed back up because of the economic policies this President has put in place, including creating more incentive for people to go out and be more productive.

So within a year, or maybe a year and a half, we are going to be back to a tax burden in this country which is generating essentially what has been the historic norm, which is about 18.4 percent--18.4 percent--of gross national product, with a Tax Code that does it by saying to people: Go out and take a risk. Create a job. As a result of doing that, give us some more revenue--because there will be more people paying taxes.

But if you look at the Democratic proposals which have come forward under this budget, what they are suggesting is that this tax burden, this historic tax burden of 18.4 percent, is not high enough. The American people are fundamentally undertaxed, they are saying. They have to be taxed more. And Government has to grow more. Government has to grow a lot more. We have to grow Government by $127 billion more, and then we have to hit people with another $133 billion in taxes. We will get that tax burden up around 19 or 20 percent of gross national product, maybe get it up to 21 percent, 22 percent. Who knows how high it is going to go. It is going to go as high as they want to spend money. That is the difference between our parties. They believe in expanding the Government and expanding taxes to pay for it.

When our members have come to this floor and suggested there is a priority for CDBGs or there is a priority for veterans, what they have said is they want that money to be spent there, but they are willing to do it under a cap. They are going to control spending on the discretionary side of the ledger.

When the members from the other side have come to the floor and said there is a priority for veterans or there is a priority for CDBG, they have said: We don't want to have to be limited to any spending regime around here. We want to blow that cap. We want to add another $127 billion to the cost of Government, grow the Federal Government, and we will raise taxes to pay for it.

At least they have integrity on that point. I agree with that. They are saying: Grow Government, grow taxes, take that tax burden over the norm of 18.4 percent. Take it up to 20 percent. Take it up to 19 percent of gross national product. And then take the size of Government and drive it up, too, over 20 percent, 21 percent, 22 percent.

What our people are saying--

Mr. DORGAN. Will the Senator yield for a question?

Mr. GREGG. No, I am not going to yield. Your side did not yield to me when you were talking.

What our people are saying is we have priorities, too. We recognize that some things need more money than other things. We are willing to do it within a controlled atmosphere of a spending cap that is $873 billion. Within that cap, we are going to offer amendments to spend money on this item or that item, and in exchange for that we are going to cut across the board under 920. That is what it does. That is the difference. We are willing to set priorities and limit spending. They are willing to set priorities, increase spending, and raise taxes to pay for it.

This argument that these taxes are going to come out of some nonpenal event to the American people, that it is not going to affect the American people's income, that it is going to come from some corporate loophole or that it is going the come from some Cayman Islands place, is just--well, it is like the Customs fees. Forty-five times we used Customs fees around here to claim we could raise spending. Finally, we actually did use the Customs fees, so we don't here about them anymore around here. Hopefully, someday we will wipe out the Cayman Islands building so we won't hear about that anymore, either. But in the process, you cannot generate enough revenue from doing that to address the $133 billion of taxes that are being raised here. The maximum you can generate out of those items is $11 billion.

So this has been an interesting aside, well discussed, well presented. But I would like to suggest to the Senator from North Dakota that we get on to the amendment process.

Mr. CONRAD. Does the Senator yield?

Mr. GREGG. I am not yielding the floor. I am asking the Senator from North Dakota if he would like to get on with the amendment process. I have not yielded the floor.

Mr. CONRAD. Momentarily----

Mr. GREGG. I yield for a question.

Mr. CONRAD. I am not going to ask a question. I will respond to your question and just say, I think this is a healthy thing. Debate has broken out here, which is a rare occurrence. You have done an excellent job of presenting your view. I have tried to represent our view. I would like to respond briefly to some of the points you have made. Perhaps you would then like to respond briefly to some of mine.

Mr. GREGG. I would suggest, then, that we spend another 6 minutes on this. You take 3; I take 3. Then we move on to your amendment.

Mr. CONRAD. I wouldn't be prepared in 3 minutes to respond to your very excellent presentation over the last 15. It will take me a little bit of time to respond to these things. I do think it is a healthy debate. It will actually, perhaps, save us time because maybe we can then reduce our wrap-up time at the end of the debate.

Mr. GREGG. I will yield the floor, recognizing that I will probably reclaim it for the amount of time that the Senator from North Dakota uses.

BREAK IN TRANSCRIPT

Mr. GREGG. Mr. President, the Senator from North Dakota makes my case. The seriousness of purpose would require that they present a budget, and if they did, they would be presenting a budget that had dramatic tax increases in it and dramatic expansion of the Federal Government, as has been shown by the amendments they have brought to the floor--over $127 billion of expansion of the Federal Government, over $133 billion in tax increases.

That is just the start. The senior Senator from North Dakota basically questioned this recovery. I suppose you can always walk around with a dark cloud over your head and claim there is no sunlight when the sun is shining on you. The fact is, this recovery has been pretty good, especially in the context of the fact that we are fighting a war and we have had basically the entire Gulf States wiped out as a result of catastrophic natural events, Hurricane Katrina and Hurricane Rita. If we look at some of the issues that affect people the most in this recovery, let's look at the price of homes. They have gone up; there have been historic increases. When that happens, everyone's net worth in America jumps. All homeowners' net worth jumps when the price of homes goes up. So everybody who is a homeowner has a little more of a cushion to their life.

Dividend income has jumped dramatically as a result of the cut in dividends. Why? Because corporations, instead of borrowing and instead of using mechanisms where they reinvest maybe overseas--which seems to upset our colleagues on the other side--have decided to pay out dividends. So people who own stock in this country--the vast majority of Americans, by the way, either directly or through pension funds--are benefiting from the fact that dividend income has jumped radically under this administration.

Unemployment, during a period of fairly significant recession at the beginning of this administration, and a period of war that has been going on throughout this administration, and a period where the gulf coast has been overwhelmingly hit by an economic downturn as a result of the impact of the catastrophic events of Katrina and Rita, unemployment continues to drop.

In fact, I remember a couple years ago, under this administration, when the other side of the aisle was claiming we weren't creating enough jobs. We don't hear that routine anymore. Jobs are being created at a significantly faster rate than historic norms, and we are seeing a lot of people being employed--5 million jobs added, which is more than the combined increase of Japan and Europe--which, by the way, has a population of about half again as large as ours--over the same period of time.

Productivity growth. This is an important one because it is a function of the tax laws that we put in place. Productivity growth is higher than almost all prior business cycles. We have maintained extremely high productivity growth as a result of the fact that we have created a tax climate where people are having incentive to invest and create jobs, which we have talked about earlier. That is a hugely important factor, something that if you listen to former Chairman Greenspan, who I think is a fair arbiter of economics in this country, he will tell you productivity growth is probably the most important thing. If you can keep that ahead of inflation, you are going to have a robust economy, and we have certainly done that as a result of the policies of this administration.

We have had 17 consecutive quarters of economic growth, economic expansion. That is a very robust recovery under any definition of recovery--17 consecutive months. It may not be as strong as other recoveries, but it is certainly a very strong recovery and something we as a nation should be taking a fair amount of pride in.

That brings us back to the issue of tax policy because if you listen to the other side of the aisle, you would think that revenues were still down as a result of Katrina, as a result of the attack of 9/11, and as a result of the burst of the Internet bubble, and they claim it is as a result of tax cuts. Revenues are not down; they are proceeding to go up. They continue to grow. At least their chart shows they are back to a historic level. That level that they are at is essentially the level they should be at, which is the historic level that we pay taxes as a percentage of gross domestic product. The Federal Government should not be taking more than 18.4 percent of GDP out of the economy for tax purposes. We are growing at a dramatic rate. These bars go up significantly, and they are going to continue to go up significantly because of the fact that we have in place tax policy that encourages economic activity, risk taking, and job creating, which is so critical to the generation of revenue to the Federal Government. So we get back to what is the essence of the debate because I think it needs to be restated.

The essence is this chart--they have their chart, and it is basically the same chart, but we look at them differently. We agree that the chart is the same. The point is this: Revenues are coming back to their historic levels, 18.4 percent of gross national product. Spending, however, is not coming down as much as it should, and it is not coming down not because we have not made a commitment to try to control spending--we have done that. Last year, we passed the first deficit reduction attempt on entitlements in 8 years. We got two votes from the other side of the aisle. There was no attempt to control entitlements from the other side of the aisle last year. There was opposition to spending control there. Then we put into place a cap on spending, and again we didn't get any votes from the other side of the aisle.

What their proposal is, is shown in their amendment, which essentially says we are going to grow the size of Government, grow it above that line where it is now, which is 20 percent; and we are going to raise taxes and grow the revenues well above the 18.4 percent, which is the historic norm. So they are basically saying they are willing to take much more out of this economy to grow the Government, make the Government bigger than what has historically been the case, and they are also willing to take much more in taxes.

We don't think we should go that way. We think we should put into place spending restraint. We would love it if the other side of the aisle would support this. But there is no attempt to support the caps from any amendment offered on the other side of the aisle. Every amendment that has come forward from them has raised the caps, raised the size of Government.

There was no support for entitlement control on the other side of the aisle--none. Well, there were two votes, I am sorry. I respect those votes and I thank them. But the vast majority of the other side of the aisle didn't want to do any entitlement restraint. To the extent we have seen spending go up, it has only gone up in two categories--entitlements and national defense. National defense is something you have to do when you are at war. So when the Senator from the other side of the aisle points to the spending chart going up, he knows and I know that the extent that is discretionary spending, it is 95 percent national defense because that is what we have to do when we are at war.

So if you are going to control the rate of growth of Government, you have to control the discretionary side and the entitlement side. There is no attempt to do that on the other side. There is an attempt to expand it. Yes, the debt goes up. Their argument is that we are expanding debt. Well, that is true because we are fighting a war that we have to pay for and because we cannot get any support in a bipartisan way to address what is driving the debt most, which is entitlement spending.

The President comes forward with a proposal on Social Security and says everything is on the table. The other side says we won't accept anything. He comes forward with a Medicare proposal. Immediately, the leader on the other side of the aisle said the proposal was inexcusable, even though it was put forward by MEDPAC, an independent organization of health professionals, which suggested you can restrain the rate of growth nominally with a couple of changes.

The same is true of Medicaid. What a battle we had last year to save $5 billion in Medicaid spending, with over a $1.2 trillion base, so we took the rate of growth from 40 percent to 40 percent. We didn't even change it. There was opposition every step of the way from the other side.

So it is very hard to give a lot of credibility to the idea that there is a desire to control spending on the other side of the aisle. What this is on the other side of the aisle is shown by this chart, which is to increase spending, increase the size of Government, increase taxes and, as a result, we refer to that as tax and spend, a term which I believe is reasonably accurate in this context.

At this point, I will yield the floor.

BREAK IN TRANSCRIPT

Mr. GREGG. Mr. President, this is a classic liberal amendment that increases the size of Government, increases taxes on the American people. A much more appropriate way to do this, if we believe CDBG is important, is vote for the Santorum amendment which makes that a priority but does so within the caps. So it has to compete with other programs that we as a Congress can declare as a priority by using the Santorum amendment.

To follow the Murray proposal is to increase spending by $1.3 billion and increase taxes by $1.3 billion; grow the Government, grow the taxpayer. For the American people, that is not the right way to do this.

I yield back my remaining time.

http://thomas.loc.gov/