Congressional Budget for the United States Government for Fiscal Year 2005

CONGRESSIONAL BUDGET FOR THE UNITED STATES GOVERNMENT FOR FISCAL YEAR 2005

Mr. ALLARD. Mr. President, we have heard a lot of discussion about how important eliminating the deficit is. I could not agree more. We do need to eliminate the deficit. The reason we have a deficit today is because this Senate has refused to make tough choices about spending.

I make the point that when President Bush assumed office, he came into office when the economy was starting to move down. I don't think anybody can dispute that. When he took office, he was challenged as much as any President in recent history because not only was the economy turning down-and, I might add, with an unprecedented turndown of 2 to 3 years consecutively-but then on top of that we had the September 11 terrorist attack. We went to conflict in Afghanistan, as well as Iraq. It has been a tough time for this President.

Fortunately, this country has had strong leadership. Without that strong leadership, I would hate to imagine where we might be today.

We look at the combination of all these events as having an impact on revenues coming into the Federal Government. They had an impact on spending. I have been a supporter of a balanced budget amendment to the Constitution, as have many Members of the Senate, but there has always been a provision in times of conflict that there would be an exception to balance the budget. This is one of those exceptions in time caused by the attack on September 11 against the Twin Towers and the Pentagon. Then we lost a plane in the Midwest. Heroic, Americans on that plane tried to take over that particular plane. So I think it is understandable why the Senate and the House would decide we need to appropriate some dollars to take care of this time of conflict.

If we look back, the spending was probably the second most significant thing that contributed to our shortfall as far as eliminating the deficit. The most significant factor was the recession.

An analysis has been made by the Joint Economic Committee that has indicated that at least 40 percent-and there are other estimates of at least 49 percent-of the deficit can be attributed to this unprecedented recession.

Then, second in line is the amount of spending we have had, somewhere around 35 percent, if my memory serves me correctly. I might be off a few percentage points. And then somewhere around 25, 26, 27 percent-in that area-was attributed to the tax cuts we put in place.

The problem has been basically the turndown in the economy and the amount of spending. I think it is all too easy to go ahead and criticize the tax cuts and ignore the major reasons as to why we are having a shortfall in the deficit. I happen to think the tax package we passed when the President was first elected, and then we came back and passed an economic stimulus package, and then last year we passed another package of tax cuts, really did stimulate the economy.

We are going to have amendment after amendment on the floor saying we ought to increase spending and increase taxes. I think it is the wrong way to go. I think if we raise taxes, as our economy is showing signs of recovery, it sends the wrong message, and that later on this year we will find our economy still struggling and trying to work its way out of this economic downturn. But if we can sustain these tax cuts-in fact, even those that are expiring, if we go ahead and renew those, I think it will instill confidence in our economy and that we can expect it to continue to do well for the rest of the year.

I think the American workers need a break. Frankly, they send a lot of money to Washington. The producers of this country send a lot of money to Washington. From our colleagues on the other side, we hear all about how they want to go ahead and tax the wealthy, the upper 10 percent or the upper 1 percent, and then provide some program of sustained spending that is never going to quit. It is going to continue to grow.

If we look at our tax policy, we put taxes in on a temporary period of time-10 years most of them-and then they go away. In our spending programs, we put them in place, and they just seem to go on and on and on.

If we look at what happens to those tax figures as we go out in time in the budget, and we look at what happens to the spending figures as we go out in time from this year, the spending increases at a greater rate than the cost from the tax cuts. In other words, if we were to spend an equal amount of money for tax cuts and an equal amount of money for one of the spending programs, as it moves out over time, there is a discrepancy that develops, and spending increases at a greater rate than what happens with the tax cut.

I think it is something we need to do. I think it would be shameful if we abandoned the President's plan for economic
growth, particularly when the economy is starting to recover.

There are those who would argue they do not think the jobs are coming or growing as fast as they would like to see. I agree, we would all like to see the jobs grow faster, but the fact is we are getting job recovery.

If we look at the household survey, for example, for a number of months now-close to 9 months-we have seen some phenomenal growth. Why is the household survey important? Because it measures small business. It measures individuals who are out producing on their own, or a few people are out producing on their own. There is no salary. They are all in together. They decide to start a company or provide a service.

I am a veterinarian. A lot of them are veterinarians. They are a single-person practice. They are going out there and taking care of the needs of the community, and they are working and creating revenue for their family. They pay property taxes. They are supporting their community. But they never get counted, except in the household survey, because they may very well be operating out of their home.

We have a plethora of small businesses that work that way. We have seen this growth. I think a good percentage of that growth has been so phenomenal that they are trying to come up with an explanation for it.

Here is my conclusion. I think when we had the downturn in the high-tech sector of our economy, many of those individuals left their former employers with some kind of bonus when they separated, so they had this pocket full of cash. They did not have a job, so they thought: Here is a great opportunity for me to go into business for myself.

A lot of these businesses are things that can sustain themselves if you have a good computer system and you can run it out of your home. Your costs are minimal. It is a great opportunity for an entrepreneur to take some idea he may have and start a business for himself, with a relatively inexpensive operation, and running it out of his home. That is the American dream.

This is the small business sector. This is where Americans have hope not only of owning their own home, but also of going into business for themselves. A lot of them have this desire.

I think when we saw the downturn and a separation of many employees from high-tech companies, they took the separation bonuses they were getting and took this opportunity to go into business for themselves. I think that is great. That is the strength of America.

Now let's look at the payroll survey. The payroll survey in the last couple months has been showing a growth. That is the last parameter, historically, that you see happen when the economy is recovering. I think that is great.

We saw job growth this month. Maybe it was not as great as some would like to see it. The previous month was a phenomenal figure; in fact, it led to some pretty optimistic projections on job growth this month that did not occur. But I think over time we are going to continue to see this growth in jobs. I think that is very important to the recovery efforts, and our tax cuts have contributed to that. We recognize this in the budget which the Republican Budget Committee has proposed and brought to the floor. I think it is one that recognizes our economy is starting to recover.

This economic growth is going to help us eliminate some of our deficit problems. I am optimistic about that. I think we made some tough decisions in this budget when we made some spending decisions.

Last year, I told the chairman of the Budget Committee that we simply had to have a plan on how we were going to eliminate the deficit. Obviously, we had to limit the spending parameters. So the Budget Committee went ahead, last year, with a plan as to how to pay down the deficit. What I was watching for this year was to make sure we stayed on plan to eliminate that deficit within 10 years. And we are well within the plan.

I was pleased, at the first of this year, when the President endorsed the idea that we needed to have a plan to pay down the deficit. The plan he put forward was a 5-year plan. It said, as a percentage of gross domestic product-which is probably, from an economist point of view, a very realistic way of looking at the impact of our deficit on the economy-that in 5 years we want to eliminate it by one-half.

I looked at those figures and, lo and behold, the nominal rate was also reduced in half. Now, this is the actual dollar figure. The Budget Committee did better than that. They eliminated the plan. They did better than that. They reached about where the President was in about 3 years or so. And both the figures-as a percent of gross domestic product and nominally speaking, where we look at actual dollars-has got us well on the way to eliminating the deficit.

I am proud to support this budget because we are taking a realistic approach.

Spending is a problem. We are going to have to take a serious look at spending. I remember when we passed the budget in 2000, the last year of the Clinton administration, we were trying to adjourn the Congress. In the last few days of that session, we passed over $500 billion in new spending. We had to compromise with then-President Clinton on a lot of his spending priorities. He was moving out of office. We were trying to get out of session so we could move on with the election. That $500 billion in new spending over a 10-year period is now coming home to roost.

We are beginning to see phenomenal growth in spending in programs. It strikes me how many people believe we need to do more spending. If we look out at producers in the country, the taxpayers, they are having to take cuts. Many of them are losing their jobs. Yet the agencies can't afford to take a cut. Even the President's budget, as austere as it is, takes care of defense needs. We are in conflict. It takes care of homeland security to protect the country, and we should put our efforts into that. It is a very small increase in the rest of the budget, about .5 percent.

The fact is, there is still an increase in spending. While the rest of the country is suffering reductions in their household
spending, the Government still claims it needs increases year after year, despite what happens to the economy.

There are going to have to be some serious decisions made about spending programs. Some of those decisions are going to be made this year. That is a step in the right direction. We need to look at what it is we can put in place as a policy for the Senate and the Congress to hold down spending. In 2002, a number of provisions we had adopted that would help us restrain spending in the Congress, help us restrain spending on the Senate side, expired. When they expired, we all of a sudden began to see spending increases. We needed to have budget parameters. Thankfully we began to put them in place in the last budget, and we are going to put them in place now with this budget.

I know the chairman committed during our Budget Committee deliberations he would work with the ranking member to see if they cannot put together legislation and send a bill to the President he could sign where we could put in place some of the President's recommendations on how we can restrain spending and some of the recommendations of Members in the Senate. They are giving a lot of serious thought to it. I know Senator Conrad, as well as Senator Nickles, is thinking about it. I commend them both for looking at some of these parameters.

We have in this particular budget some provisions to help restrain spending in the future. Hopefully we can keep those in the budget, and hopefully they will be applied in a way that will help hold down spending.

I want to talk a little bit now about who is paying the taxes. About 1 percent of the population, the top 1 percent, pays 34 percent of the individual income taxes. These are 2001 figures. Then if we look at the top 50 percent, they pay about 96 percent. That means the bottom 50 percent of individual income tax filers is paying the balance, is paying only 4 percent of the individual income tax. We keep hearing talk about how the producers of the country, the top 50 percent of the country, are getting off scot-free. They are the ones who are really making a difference. They are the ones who are making our economy move. I made some comments in this regard yesterday.

I also looked at the amount of money. If you take all the income tax filers together, the whole group of them, and you take those paying $100,000 or more in taxes, they pay 75 percent of our total income taxes. So they are paying their fair share.

Today a study was brought to my attention that had been done by the Urban-Brookings Tax Policy Center. Usually I don't pay too much attention because they don't actually end up focusing on tax cuts and the tax issue. But they have come up with some very interesting data, more current than what I was quoting as far as the tax foundation was concerned. The bottom 50 percent of taxpayers is paying minus 3 percent of income taxes. In other words, our earned tax credits are kicking in, and they are showing the bottom 50 percent of the taxpayers is paying a minus 3 percent of income. The earned income tax credit is a cash payment we give to those with lower income. Fourteen percent of the payroll taxes come from that 50 percent.

Yesterday somebody said: You didn't talk about the payroll taxes. This bottom 50 percent makes up about 14 percent of the payroll taxes. That is only 5 percent of all income and payroll taxes. So when we combine those together, we come up with 5 percent. That includes your filers, plus the withholding from their taxes.

What happens to the top 10 percent of the taxpayers? The top 10 percent pay 71 percent of our income. That is based on the Urban-Brookings Tax Policy Center. Thirty-two percent of those are payroll taxes. That is a total of 53 percent of all income and payroll taxes together. So 10 percent of all taxpayers, including income tax plus payroll taxes, are paying 53 percent. The bottom 50 percent is paying 5 percent when you combine them.

The producers of this country, the wealthy, if you want to put them in that category, are the ones who are really making a difference.

It is time we put aside class warfare and talk about meaningful change in the economy that will make a difference.

I yield the floor.

BREAK IN TRANSCRIPT

Mr. ALLARD. Mr. President, I emphasize that we are moving forward. We just finished a recession. The attack on America and the war on terror have created some unacceptable budget deficits and we are trying to deal with these in the budget.

Since 2001, spending increases and the economy, not tax cuts, have been the biggest contributors to the deficits. The President's economic policies are working. The gross domestic product growth is up, unemployment is down, and the combined value of the New York Stock Exchange and the NASDAQ have increased 40 percent. We are moving forward. We can reduce deficits by slowing spending and preventing economically damaging tax increases.

I will go over just a few things that our budget will do. In 3 years, by 2007, it is going to cut the deficit in half and continue bringing deficits down. It is going to slow the growth of discretionary spending. We are eliminating wasteful mandatory spending. We are attempting to prevent tax increases on families. We are trying to maintain some spending discipline. We are trying to show that as Republicans, we can lead, and that Senator Nickles from Oklahoma is willing to take and make the tough decisions necessary to eliminate our deficits under this budget.

Our Nation's priorities, as reflected in the budget, are that we fully fund the President's request on homeland security; education, there is a $1 billion increase for both IDEA and title I grants; veterans health care, there is a $1.4 billion increase for veterans health care; international affairs, $3.6 billion increase under the President's proposal, including funding for the global AIDS initiative. The budget also rejects several of the President's proposed cuts for congressional priorities like the Corps of Engineers and the EPA Clean Water Act.

I think this is a very responsible budget. I think it is a very thoughtful budget, and obviously it is a budget that reflects what the American people are trying to tell the Congress. The noise I hear back home and the noise I hear from the American people is, look, these deficits are a problem, but the tax cuts are not what is contributing to the deficit. The tax cuts are actually stimulating our economy.

Even the people who are in our States are beginning to realize that the economy is recovering. They would like to see it recover more, and I do not blame them. I do, too. The fact is the tax cuts are making a difference.

I would like to go back to the discussion I was holding earlier this afternoon on who pays the taxes. I will speak about this chart I have before me. This chart reflects a study made by the Urban-Brookings Tax Policy Center. Under this area of "with tax cuts," the issue is, what is going to happen as far as the income tax rates are concerned?

Well, the bottom 50 percent of the tax cuts is a minus 3 percent. What does that mean? That means that there is actually a cash payout to taxpayers. How does that happen? We have an income tax credit where we actually make a cash payment to individuals who are low income who are working.

The top 10 percent of the taxpayers are 71 percent. The payroll taxes-and yesterday when we were talking about what was happening with tax cuts, I was talking about the income taxes and then they brought up, well, what about the payroll taxes? That is how much one's check comes up short. There is the gross amount and then they take out all the payroll taxes and the bottom line is what a person takes home.

This means the bottom 50 percent of taxpayers pay about 14 percent of the payroll taxes and the top 10 percent of the taxpayers 32 percent. That figure was a little bit of a surprise to me. I thought perhaps that would be closer, but again it is pretty obvious that the higher income taxpayers are paying a considerable amount more than those in the bottom 50 percent. That is the top 10 percent. Then if we combine both of those, if we combine the income taxes that are paid and then combine the payroll taxes, it averages out that the bottom 50 percent of the taxpayers pay about 5 percent of the taxes. The top 10 percent pay 53 percent of the taxes.

What happens without the tax cuts? An interesting phenomenon has happened. Every time we have cut taxes in the Senate, the percentage the high-income taxpayers pay keeps going on. When we cut taxes, they pay a greater percentage of the revenues derived from income tax. This is reflected in the column "without the tax cut."

Here is what we see happening. We see that the bottom 50 percent pay about a minus 1 percent. In other words, they are not getting as much money sent back as we saw with the tax cuts. We see less taxes being paid by the top 10 percent. So here we are with the tax cuts, and their share of the taxes goes from 67 percent up to 71 percent.

We even see that phenomenon happening when we combine both income and payroll taxes. This is significant. When we make our adjustments in our tax cuts, those who are in the higher income pay a higher percentage of taxes as we move forward with our tax cuts. I think that is important.

The upper income pays a greater share of the tax burden with tax cuts than without. This is broken out a little differently, but if we look at the top 1 percent, the red here reflects with the tax cuts and, over here, what happens without tax cuts.
We see the top 1 percent ends up paying a greater percentage of the tax cuts. We go here to the 10 percent, we see there is still an increase. Without a tax cut it is a lower percentage than with the tax cut. We are getting a shift automatically to the higher income taxpayer.

On the 50 percent it is close to even, although there is a little, very narrow difference there. Then the bottom half actually is paying fewer taxes as a percentage with the tax cuts as opposed to without.

What happens with this budget when we are talking about the child tax credit, the marriage penalty, and changing the tax bracket? We need to do this if we want to preserve income for the family. Here is how this breaks out as we have it in the bill. If we let all these taxes expire, here is what happens. If we don't take any action on taxes this year, here is what happens. Assume the family tax bill in 2004 for a middle-class family of 4 is $6,000. Then here is what would happen with that family of four. They are going to pay $600 more, because we begin to see a drop in the per-child tax credit. It expires. Then we begin to see the marriage penalty relief expire. We see a drop there-$911. We see the 10-percent bracket expansion expires. That adds $100. So the total tax increase that will hit that family of 4 is $1,611. That means the family tax bill from 2004 to 2005 is going to increase $7,611. That means there is going to be $1,611 less expendable income from that family.

My view is if we can keep that money in the family they are going to create jobs because they are out buying products, they are buying and stimulating the economy, as opposed to the Federal Government, where that does not happen. That phenomenon is not there. That is a 26-percent tax increase that happens if we do not go ahead and implement these tax relief provisions that are in the budget bill. These are very important. They are important to families in America and they are important if we are going to continue to see our economy grow, because it gives the family greater discretionary income so they can meet their needs.

If we can keep the money in the taxpayers' pockets in their own local communities, then that money is available to help those communities. Taxpayers look at the whole tax burden. If it is too high at the Federal level, they don't particularly feel they want to give up their hard-earned taxes for things that are happening in their community. But if they can get tax relief at the Federal level, then they realize some relief from the Federal tax burden and they are more willing to support what needs to be done in their community. Maybe they need to increase the sales tax for open spaces or have a sewer plant replaced or maybe a water treatment plant for the drinking water needs to be improved upon, or maybe the roads and highways need to be taken care of. These are local projects. It means there is more money available at the local level so the local communities can do that.

To me, this makes a lot of sense. We need to move the power from Washington back to our cities and States. That is what this is all about. It is not about whether we are going to tax the wealthy. The wealthy are carrying their fair share. It is about getting the money back down to the States, back down to the individuals, where it will make a difference in people's lives.

This is a well-thought-out budget. I think it moves this country forward. It is a budget that I think will make a difference in American lives. It is something I hope we can pass out of the Senate, get to the conference committee, and we can get it back with minimal change. Obviously there will be a few things that will happen. We will have a number of amendments here on the floor, but this is basically a pretty good plan. We need to get a budget this year. That is the first step. Then once you get the budget passed you can get your appropriations bills.

Without a budget, it is catastrophic. We saw that happen 3 years ago. We didn't get a budget passed from this Senate. We saw spending get out of control. We saw all sorts of budget discipline lost in the budget process and this all contributed to the deficits we are facing today.

I urge my colleagues in the Senate to work with the chairman of the Budget Committee because he has indicated a willingness to work with the Members of the Senate to take care of their concerns. Let's get a budget passed and move forward, a budget that will hold the Senate accountable so we will be well on our way to eliminating the deficits we now face.

I yield the remainder of my time.