BREAK IN TRANSCRIPT
Mr. FRANKEN. Madam President, two enormous challenges will await us when we return from recess. Our economy is still not yet fully recovered from a devastating recession, and the prospects for our middle class and for those aspiring to be in the middle class or to get back into the middle class remain uncertain. Meanwhile, our budget remains sorely out of balance, and our long-term debt crisis is putting our Nation's fiscal future at risk. These two challenges are, of course, linked. We cannot hope to solve our long-term debt problem unless we get our economy growing again, and we cannot hope to rebuild our prosperity unless we resolve our budget problems.
So we will have big decisions to make when we come back, but in the meantime the American people will be wrestling with the same issues: What should we do to grow our economy and reduce our debt? What are the right investments to make?
How should we pay for them? What sacrifices must be made in the name of fiscal responsibility? Who is going to make them? That is the debate our Nation will have over the next 6 weeks. Those are the questions we must be prepared to answer when we return. So before I go home to Minnesota to share my thoughts with my constituents, I wanted to take a few moments to share them with my colleagues.
My view of what we should do in response to these challenges is based upon what we have done in response to similar challenges in the past. We are not the first Congress or the first generation to struggle with these issues. At the end of 2011, our national debt had reached 100 percent of our gross domestic product. That is frightening. But after World War II, our debt was 121 percent of GDP.
To be fair, we had something to show for it. We had won World War II and the world was a very different place in 1945 than it is today. But the point is that we were tested. How did we respond? Well, we invested in the things we believed would grow the economy. We invested in education, things such as the GI bill, which helped my mother-in-law, widowed at age 29, go to college.
We invested in Pell grants which helped my wife Franni and her three sisters go to college. We invested in infrastructure. We built 40,000 miles of highways in the 1950s. We invested in innovation and we won the space race which, in turn, led to the creation of whole new industries such as personal computers and telecommunications.
Those investments paid off and our economy experienced three decades of incredible growth, growth that flowed to the top, to the middle, and to the bottom. Between 1947 and 1977, wages for the top fifth, the top fifth of workers, grew by 99 percent, and wages for those in the bottom fifth rose by 116 percent. I know that is hard to believe. The wages of the bottom fifth grew more than those of the top fifth. But that happened.
Even though we remained a Nation in which many kids like my wife Franni grew up in poverty, we had enough to invest in a strong safety net that helped those kids like Franni and her sisters and her brother work their way into the middle class. We bounced back from World War II to build an economy with a middle class that was strong, secure, and accessible to almost everyone.
Thanks in large part to the growth generated by that thriving middle class, we were able to lower our national debt to about 31 percent by 1981; so 121 percent at the end of World War II, to 1981, about 31 percent. Since then our economy has had some good times and some bad times. We have raised taxes and we have lowered taxes. We have had surpluses and we have had deficits.
As this chart shows, our debt relative to GDP has gone up and down. We have seen the results of a variety of approaches to the issues we face today. In the 1980 election, Ronald Reagan was elected on a platform that appealed to concerns that the government taxed too much and spent too much. His approach was later called ``starving the beast.'' Here is how he explained it. This is a quote. This is President Reagan.
There are always those who told us that taxes could not be cut until spending was reduced. Well, you know, we can lecture our children about extravagance until we run out of voice and breath or we can cure their extravagance by simply reducing their allowance.
Cutting taxes, cutting revenue to the government. When Reagan took office, he fulfilled his campaign promise and signed into law a huge tax cut, and on cue we began to amass enormous deficits almost immediately. In fact, President Reagan's Budget Director at the time, David Stockman, has explained that 1981 was when the era of large permanent deficits began.
The deficits were so bad in his first year, in 1981, that President Reagan had to increase taxes in 1982, and again in 1983. In fact, he ended up raising taxes 11 times; not because Ronald Reagan was a Socialist--at least I really do not think so--but, rather, because he could not ignore the arithmetic.
Still that first tax cut was so big that over the course of his Presidency, our national debt nearly tripled. It did not grow rapidly during the administration of George H. W. Bush. Then he handed it off to President Clinton. And what he handed off was at that point the largest deficit in the history of our country.
In President Clinton's 1993 deficit reduction package, he added two new tax rates, marginal tax rates, at the top end: 36 percent for income above $180,000, 39.6 percent for incomes above $250,000. The Republicans objected rather vehemently, arguing that asking the top 2 percent pay a little more would send the economy into a recession, which, of course, would be detrimental to the goal of reducing the deficit.
The bill passed without a single Republican vote in either House. But the Republicans' dire predictions turned out to be wrong, extremely wrong. Between 1993 and 2001, this country experienced an unprecedented expansion of our economy. We created 22.7 million net new jobs. We decreased the number of Americans in poverty to record lows. We increased the median household income and we created more millionaires than we ever had before.
Not only did President Clinton's deficit reduction plan reduce the deficit, it eliminated the deficit. President Clinton was able to hand off to President George W. Bush a record surplus. In fact, in January of 2001, we were on track to completely pay off our national debt by the year 2011. However, as we know, President Bush chose a different course. Whether you agree with the two wars we entered into during his administration, the new entitlement program that we created, or the two tax cuts we passed, the fact of the matter is we did not pay for any of those things. They all went on our national credit card.
While the two tax cuts tilted toward those at the top--they did help some at the top do extremely well during the Bush administration--it is hard to say the things we put on that credit card created the kind of durable broad-based prosperity we saw in the 1990s or that we built in the 30 years after World War II, for that matter. It would be hard to say, because when President Obama took office from President Bush, the economy was hemorrhaging jobs at the rate of over 800,000 a month. And when the bill came for the Bush policies, we were staring at a projected $1.1 trillion deficit for 2009. That was the projected deficit that President Bush left for President Obama.
So far I have talked about President Reagan and his approach of cutting revenue in order to force the government to cut spending. We saw what happened. We could not or did not cut enough spending to keep our budget in balance. We had huge deficits even when Reagan tried to backtrack and raise more revenue. I have talked about President Clinton and his approach of raising taxes on the top 2 percent in order to bring the budget into balance. We saw what happened. The economy grew and we generated a record surplus. I have talked about President Bush and his approach of cutting taxes and incurring large expenses without worrying about the ramifications on the deficit. We saw what happened. Deficits ballooned and when the economy crashed, it crashed hard.
So what about President Obama? What has his approach been? Well, if you ask some people, including unfortunately many in this Chamber, they tell you that President Obama's approach was to go on a massive spending spree. Well, it is not true. Over his 4 budget years, Federal spending is on track to rise from $3.52 trillion to $3.58 trillion, an annual increase of 0.84 percent.
You can hash these figures out, but here is a chart that comes from Market Watch, a publication of Dow Jones which also owns the Wall Street Journal, that shows Obama's increase in spending from 2010 to 2013. These are Reagan's. These are numbers from the nonpartisan Congressional Budget Office, from the Office of Management and Budget. You can see the growth of Federal spending. This is lower than it was under any of the Presidents I talked about.
Indeed, the article that ran with this chart concludes that the growth of Federal spending under President Obama is the lowest it has been since the Eisenhower administration during the wind-down from the Korean war. But remember that besides a $1.1 trillion deficit, President Obama inherited an economy that in the month he took office lost over 800,000 jobs. That was January. The next month, February, 2009, he lost about 700,000 jobs. But that is also the month in which we passed the Recovery Act. By the way, when the Recovery Act was passed in February of 2009, the unemployment rate was already above 8 percent.
The Recovery Act, also known as the stimulus, is what people usually point to when pressed to explain why they think President Obama has increased spending. But the truth is that more than one-third of the Recovery Act was tax cuts. The stimulus cut taxes for 95 percent of American families. Another one-third was fiscal aid to the States, which were feeling the same budget crunch as the Federal Government but, in most cases, didn't have the option of running a deficit in tough years. Without the Recovery Act, imagine how many more teachers and firefighters and police officers would have had to have been laid off, and imagine what that would have meant to our economy, never mind what it would have meant to our communities. But the one-third that gets the most attention was the one-third that went toward creating jobs.
Did it work? There are a few ways to answer that question, but the answer is the same every time: Yes. First, we can look at our chart and see that once the Recovery Act began to be implemented we started losing less jobs and then we started creating jobs. We have had 30 straight months of private job creation--of growth.
Secondly, we can ask economists. The most reputable economists, including----
Mr. REID. Would my friend yield?
Mr. FRANKEN. Certainly.
Mr. REID. Madam President, we are going to have no more votes today--no more votes today. It is obvious to me what is going on. I have been to a few of these rodeos. It is obvious a big stall is taking place, so one of the Senators who doesn't want to be in the debate tonight will not be in the debate. He can't use the Senate as an excuse.
There will be no more votes today.
The PRESIDING OFFICER. The Senator from Minnesota.
Mr. FRANKEN. I thank the Chair. That is too bad.
I was going over what happened, reviewing what happened once the stimulus package had been passed in February, when unemployment was over 8 percent. And we can see as it started taking effect we lost less and less jobs and have since had 30 straight months of private sector job growth. I said we could ask economists. Most reputable economists, including those of the nonpartisan Congressional Budget Office, agree the Recovery Act created or saved anywhere from 2.5 million to 3.5 million jobs.
In the words of Mark Zandi, the economic adviser to Senator John McCain in his 2008 Presidential campaign, the Federal policy response to the financial crisis, including the stimulus, ``probably averted what could have been called the Great Depression 2.0.''
But we don't have to take the word of Mark Zandi. We don't have to take the word of all the other reputable economists. We don't even have to take the word of the Congressional Budget Office, although the CBO sort of exists for those of us in Congress. We can ask Jamie, Cecil, and Sheila.
This is Jamie, working on the Duluth Lift Bridge a couple years back. This is a picture of Cecil, who is working on a highway extension project. Let's give Cecil his due. He is working on a highway extension project in Brooklyn Park in the suburban Twin Cities.
Then we have Sheila. This is Sheila in front of her Bobcat working the night shift on an I-94 improvement project.
These are people who were put back to work by the stimulus. Despite claims by some that the only jobs created by the stimulus went to government bureaucrats, we will notice Jamie, Cecil, and Sheila are not, in fact, government bureaucrats. Thankfully, we do not let government bureaucrats operate heavy machinery.
What can we say about the approach of President Obama so far?
He slowed the growth of Federal spending to its lowest level since Eisenhower. He has cut taxes--not just in the stimulus package but many times during his first term--to the tune of more than $850 billion. When the economy was at its low point, he made investments and put people back to work in the short-term and prevented things from getting even worse.
There was another road we could have taken. That approach would have involved not just cutting spending but gutting the government, and it definitely wouldn't have involved making investments to put people back to work.
We will never know whether that approach--known as austerity--would have gotten us results such as the ones reflected on the previous chart, but we do know what happened in countries where they tried this alternate approach. This is a chart of European countries that went the austerity route. This is GDP from 2008 to 2012. This would be where President Obama became President and this is Europe and we all were seeing a global meltdown. These are countries that did austerity in Europe, and this is the United States. The evidence tells us our way worked. President Obama's way worked and theirs did not.
Of course, while we are better off than we were 4 years ago and better off than we would be if we had tried austerity instead of the approach taken by President Obama, which, if we look at the growth in spending, was pretty close to austerity, we are obviously still not where we want to be, either in terms of our economy or in terms of our deficit.
What is the right way going forward? First, let us talk about deficit reduction. It is clear to me that any solution that does not include both increased revenue and decreased spending simply isn't going to work. The hole is too big for us to tax our way out or to cut our way out. We have to do both. The hole is, in fact, so big we can't even get out of it just by taxing and cutting. We have to grow our way out too.
That is why I think we need to invest in education, and infrastructure, and innovation. That means early childhood education, which has a return of investment in every study--quality early childhood education--of $16 for every $1 spent, and in workforce training, in roads and bridges and rural broadband, in clean energy and health care technology.
I don't think only government can create jobs. I know that. But I know that only government can make those critical investments that will help the private sector create jobs, and I know it works when we do. It worked after World War II, it worked under President Clinton, and it worked in the Recovery Act. Those investments, however, cost money, and we will not be able to afford them unless we reduce our deficits.
I think people who talk about cutting spending should say what spending they want to cut. I want to cut spending, so let me tell you what spending I want to cut.
I want to cut the billions in subsidies we give to oil companies that simply don't need them. I want to let Medicare negotiate for pharmaceuticals under Part D, just as the VA does, because prohibiting Medicare from doing so amounts to a subsidy for pharmaceutical companies, one that, again, they do not need. I want to make cuts in our military budget, because as the comprehensive defense review found--begun under Secretary Gates and completed under Secretary Panetta--we can make hundreds of billions of dollars in cuts to the defense budget without compromising our fundamental security and military interests.
Of course, we can't only cut the things we think are easy calls to cut. We are going to have to cut some things we don't want to cut. Speaking personally, I have already had to vote for some of those hard cuts, and it was not fun. But there simply aren't enough cuts to make. It is clear to me, if we are going to protect our most vulnerable Americans--our children, the sick, the disabled, our seniors--and make the investments that will grow our middle class and our economy, we are going to have to raise revenue.
Just like President Reagan--but unlike some of today's Republicans--I know we don't raise revenue by cutting taxes. That is why I support restoring the Bush tax cuts for the first $250,000 of income but after that allowing the top marginal rate to go back to where it was under President Clinton. I know that, as they did in 1993, people will argue that doing so will hurt the economy. But I am equally confident that, as they were in 1993, they will be wrong.
I know we all come to the debate about our Nation's challenges with different philosophies and different convictions and I respect that many of my colleagues feel they would be betraying their own political core by asking the wealthy to pay a little more or investing taxpayer dollars in job creation. I didn't feel great about all the cuts I had to vote for over the last couple years either. But I don't think we are going to get anywhere if we are so invested in following our own ideologies that we refuse to acknowledge the lessons of where we have been or the truth about where we are and where we are headed.
We are not going to get anywhere if we can't agree that, yes, the government does have a role to play in helping the private sector create jobs; and, no, we will not cut the deficit by cutting taxes; and, yes, we are going to have to both raise revenue and reduce spending if we want to get a balanced budget; and, no, asking the wealthy to pay a little more will not drive us back into a recession.
We have debated these issues a lot this year and we haven't resolved the argument. Now we are going home, and it is the American people's time. It is the American people who get to have their say. I hope that over the next 6 weeks we lead them in a debate worthy of the challenges we face--a debate rooted in the facts and mindful of our history.
I hope when we come back we are ready to have that kind of worthy debate ourselves and then make the tough calls, as our constituents will in November.
I wish my colleagues well over the recess, and I look forward to getting back to our important work when we return.
I yield the floor.
BREAK IN TRANSCRIPT