Congressioinal Budget for the United States Government for Fiscal Year 2007--Continued

CONGRESSIONAL BUDGET FOR THE UNITED STATES GOVERNMENT FOR FISCAL YEAR 2007--Continued

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Mr. GRASSLEY. Mr. President, what the Secretary said was that this was a decision by the Congress. We are involved in that decision, a decision today to give the Secretary authority to do it if it needs to be done, and do it not until it needs to be done, rather than sending a signal that you can procrastinate again for another 6 months.

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Mr. GRASSLEY. The Nelson amendment is the wrong idea at the wrong time. The amendment doesn't even provide the resources for enrolling people afterwards. We did in the amendment just adopted. How are we going to get people to enroll if the administration doesn't have the resources to do it? It is too early to make a decision, when we don't have final enrollment numbers yet. Right now enrollment is going very well. A quarter of a million people sign up every week. Many who are calling for delay in the enrollment deadline didn't support the legislation 2 or 3 years ago. They have admitted that. They have been encouraging citizens not to enroll. Extending the deadline until the end of the year is a cynical attempt to tell seniors not to enroll this year. The other side says May 15 is an arbitrary deadline. Americans live with deadlines every day.

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Mr. GRASSLEY. Mr. President, one of the things on this issue that is so misleading is the impression that this legislation does not allow Medicare to negotiate. The opposite is true.

This legislation requires negotiation. That is what the plans are doing all the time to drive down the price of drugs--what it does to drive down the price of the premium way below what we thought it would be. Again, everything is backward when they talk about this. In the real world, there are choices. Wherever you want to go for any consumer products, those stores negotiate prices to get good prices. It is just a way to get the job done. Statistics that have come in on this show that competition is driving down the price of drugs--the 25 leading drugs--by 35 percent on average this ought to show that this process is working.

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Mr. GRASSLEY. Mr. President, in a debate earlier today, the senior Senator from North Dakota responded to my challenge to point out a new corporate loophole closer that is not included in the tax relief reconciliation conference.

The ranking Democratic member of the Budget Committee discussed a proposal developed by the Finance Committee Democratic staff that would repeal ``deferral'' for controlled foreign corporations doing business in tax haven countries.

I share the senior Senator from North Dakota's concerns about the ability of large corporations to manipulate the Tax Code to shift large amounts of profits offshore. But this provision isn't the right way to address those concerns. It is both overbroad and inadequate.

It is overbroad because it would harm the competitiveness of U.S. multinationals by repealing deferral for holding company structures that allow them to efficiently allocate active foreign-generated resources among their foreign operations without incurring U.S. tax on entirely foreign transactions.

It is inadequate because it applies only to subsidiaries in black-listed countries. Companies that use tax havens for abusive purposes could easily avoid this rule by locating in a low-tax country that is not on the list, like Ireland, where we have read press reports that companies are shifting huge profits. Treasury would have authority to add countries to the list, but does anyone think Ireland, with whom we have a tax treaty, would be added to a black list?

The way to deal with those cases is through effective transfer pricing policy and enforcement, not by curtailing deferral.

This proposal was included in the Democratic alternative to the Finance Committee bipartisan tax relief plan. When we considered the House tax relief reconciliation bill, the Democratic alternative was defeated.

Even if the tax haven proposal were viable in the Senate, it would yield only a fraction of the revenue needed to offset the cumulative effect of the many Democratic amendments to increase spending.

The effect of using such proposals, which aren't viable in the Senate, even if successful, would be to drive down the tax relief number.

The result of a lower net tax relief number is that we would lack the necessary tax relief in the budget to accommodate tax relief proposals supported on both sides of the aisle.

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Mr. GRASSLEY. Mr. President, the issue of the increase in the debt limit has come before the Senate as an agreement between the two leaders, and as the committee of jurisdiction, as chairman of the Finance Committee, I speak in support of House Joint Resolution 47, a bill that increases the Federal debt limit. I support this increase because it is necessary to preserve the full faith and credit of the Government. Without an increase in the debt limit, our Government will face a choice that we should not make and we would not want to make: a choice between breaking the law by exceeding the statutory debt limit or breaking faith with the public by defaulting on our debt. I hope everyone would agree that neither choice is acceptable.

To understand why we are here today seeking to increase the debt limit, it is necessary to explain a few points about the Federal debt.

Under current law, there is a statutory limit on the amount of debt that can be issued by the Federal Government. This limit, which now stands at $8.184 trillion, applies to virtually all the debt issued by the Government. There is only one debt limit, but there are, in fact, two types of debt within that figure: debt held by the public--meaning you and I as private citizens buying Government bonds, owning Treasury bills--and then, of course, on the other hand, the debt held by various Government trust funds. An example would be the surplus that is invested in the Social Security surplus payroll that is not being paid out for benefits, being invested in Government debt with that debt owed to the trust fund with the interest accumulating to the trust fund.

The amount of Federal debt held by the public is determined by the Government's annual cash flow. When total spending exceeds total taxes, the Government has a budget deficit. To finance this deficit, the Government borrows from the public by selling debt, such as Treasury bills, Treasury notes, and Treasury bonds. We will hear a lot of criticism that President Bush's tax cuts are responsible for our rising public debt, but the facts show otherwise.

When President Bush took office in 2001, the Federal debt limit was $5.95 trillion, almost $6 trillion. The debt limit was increased to $6.4 trillion in 2002, $7.3 trillion in 2003, and now the present $8.1 trillion in 2005.

Assuming we increase the debt limit today, it will be $8.965 trillion. Thus, the Federal debt limit will have increased by $3.015 trillion since President Bush took office in 2001.

However, the tax cuts that have been enacted since 2001 total roughly $900 billion through the end of the most recent fiscal year. That includes interest costs as well. Thus, the President's tax cuts account for about 30 percent of the increase in the Federal debt. The rest of this increase in the public debt is due to the recession, the war in Iraq, and the increased spending on homeland security, also related to the war on terror.

In addition to the debt held by the public, the Federal debt limit also applies, as I said before, to the debt held by various Government trust funds, such as Social Security and Medicare. Whenever a trust fund program collects more than it spends, the surplus is invested in special issue Treasury securities. These special securities count toward the debt limit. However, it is important to understand that the amount of debt held by the trust funds does not reflect the Government's unfunded obligations.

For example, the Treasury Department reports that the total amount of Federal debt held by all the trust fund programs is about $3.5 trillion. However, the Social Security and Medicare trustees report that the unfunded obligation of Social Security and Medicare is more than $81 trillion.

Given these facts, it should be obvious to everyone that the Federal debt provides a misleading and inaccurate picture of the Government's future liabilities. Efforts to use the statutory debt limit to control Government debt and deficits cannot succeed because it ignores the long-term budget problems.

Indeed, even former Federal Reserve Chairman Greenspan has suggested the debt limit has outlived its usefulness and should be replaced with a more accurate and useful alternative. I would welcome the opportunity to work with my colleagues to develop such an alternative. It may never happen, but it ought to happen. This is not quite a very intellectual way to decide what the Government is doing in a fiscal way because, quite obviously, every day Congress is appropriating money and every day we are spending money and every day if that exceeds the taxes that are coming in and we get to the debt limit, the debt is going to increase or is going to shut down the Government.

As a Republican, that was part of our strategy during the Clinton administration. But let me tell you, it didn't work. It didn't work because it wasn't good policy, and it ended up not being very good politics. I hope we do not have an extended debate and a lot of breast beating about the issue of increasing the national debt because, quite frankly, if we spend and we spend up to that limit, we are not going to shut down the Government, if we learned the lesson, as I hope I learned the lesson, and we move on. It ought to be very pro forma.

There will be a lot of debate about it, a lot of political points trying to be made, but the point is we have to keep the business of Government going. I would relish the opportunities to have those days when we paid down $550 billion on the national debt during the fiscal years of, I think, 1997, 1998, 1999, and 2000, I believe it was. It was about $558 billion I believe that we paid down on the national debt. I am glad we did. But now we have the war on terror, we had 3,000 Americans killed in New York City because of terrorist attacks, and we are fighting a war to make sure terrorism doesn't happen again, at least on the soil in the United States of America.

The No. 1 obligation of our Government under the Constitution is for the national defense. Protecting our people from further terrorist attacks is very basic to it. We voted, in a bipartisan way, to send men and women to the battlefield in Afghanistan and Iraq, and if we do that, we have an obligation to appropriate the money to give them the tools to do the job when they put their life on the line for our freedom and our liberty and to make sure that 3,000 Americans don't get killed again.

These all create situations wherein we have annual debt or annual deficits, and you increase the national debt on a cumulative basis when you do that. So there will probably be almost 50 votes, maybe, against this resolution when we vote on it tomorrow. I would ask the people who vote against it, do you want to shut down Government? Or if you don't want to shut down Government, you don't want to increase the national debt, why did you vote for the money we spent that brings us to the point of a necessity of increasing the national debt? We should pass this resolution for the sound operation of our Government. Shutting down Government, we found out, ended up costing the taxpayers more than if Government had operated.

There are a lot of conservatives listening who see a conservative like Chuck Grassley saying that, and they say: Grassley, what planet did you come from? If we shut down Government, you ought to save money. But we didn't end up saving money. So you learn from history, or you are destined to repeat it. That is why this ought to pass unanimously. It won't, but it ought to.

I yield the floor.

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