Improving America's Security Act of 2007--Resumed
IMPROVING AMERICA'S SECURITY ACT OF 2007--Resumed -- (Senate - March 08, 2007)
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THE BUDGET
Mr. GRASSLEY. Mr. President, today, as I did a couple days last week, I continue with my discussion on the issues the Senate will face as the Democratic leadership draws up its budget resolution, and that is going to be 2 days next week in the Budget Committee and then I think the week after next, depending on what the Democratic leader decides to do, we generally will have a whole week of debate on the budget and adoption of the budget.
We face an important milestone because the Democratic leadership controls the Senate for the first time since the 2002 election. Over the past 4 years, there has been a lot of passionate debate over the fiscal policies the Republican leadership proposed and implemented over the last 4 years. In November, the voters sent a Democratic majority to Congress. The budget debate we are about to enter provides Democrats with their opportunity to chart a fiscal policy path for the Nation.
Before the budget arrives, I have taken to the floor to recap and evaluate some of the consistent themes we have heard from the Democratic leadership over the past 4 years. Since the Finance Committee has jurisdiction over nearly all of the revenue side of the budget, I focused on the issues on that side of the ledger, the revenue side.
Since the position of the Democratic leadership has been to let the bipartisan tax relief plans of 2001 and 2003 expire, I talked about the effects of that automatic tax increase--yes, automatic tax increase--that happens without even a vote of the Congress if we don't continue this tax policy that was adopted in 2001 and 2003 beyond the year of 2010.
It is a very important consideration. For the last 4 years, Republican budgets on Capitol Hill have made it clear that our priority was to ensure that virtually every American taxpayer would not see that automatic tax increase come in their earnings of 2011, and that still is our policy. That is a policy reflected in the budget the President of the United States has sent to the Congress. So the year 2011 is the year the bipartisan tax relief sunsets.
I emphasize that 2001 was the year of bipartisan tax relief. I had the good fortune of working that year, 2001, with Senator Max Baucus helping me get that bipartisan tax relief passed. He is now chairman of the committee, being that the Democrats are in the majority. I have the good fortune of maintaining a close working relationship with him.
The President's budget, as I already said, maintains the assurance that these tax policies of the last 7 years will continue in place beyond the year 2010. During the 4-year period 2003 to 2006, the Democratic leadership was harshly critical of this policy which was passed in 2001 and 2003; that is, the Democratic leadership opposed the fiscal policies of preventing a tax increase on virtually every American taxpayer automatically because Congress wouldn't even have to vote on it.
My first speech defined the tax increases built into that fiscal policy. My second speech highlighted some of the macroeconomic risks of that widespread automatic tax increase. Last week, I remarked to the Senate and discussed with the Senate potential omissions in the Democratic leadership's budget; that is, the discussion was about fiscal policy that was present in prior budgets. If the Democratic leadership's past criticisms of those budgets were carried out, the fiscal policy of continuing tax relief would end. This week, I am going to focus on the track record of the Democratic leadership and discuss potential problems from proposals that might be contained in that budget.
You could say, from our standpoint, I am examining errors of commission this week, whereas last week I examined errors of omission.
Today, I wish to refer to the use of revenue-raising offsets in the budget context. As any budgeteer can tell you, the budget resolution is not a law. It doesn't amend the Internal Revenue Code or Medicare law or appropriations. The budget resolution is like a blueprint for a building. The actual construction of tax and spending policies will occur later on this year.
The budget resolution is, however, critical to actual tax, actual spending, and actual deficit decisions the Congress will undertake. The matter of offsets is critical in this respect: If additional spending is proposed in the resolution without real offsets, then deficits are more likely. Likewise, if popular tax relief is proposed but not offset with real proposals, then deficits could appear and be larger--though, on this last point, the track record of the last 4 years shows tax relief grew the economy and record levels of Federal revenue came into the Treasury as a direct result.
My basic point is that if a proposed offset is not realistic and the proponents succeed, budget discipline could be undermined. In other words, phony offsets, if incorporated into the budget, can lead to deficits.
Today, I am just going to follow the numbers. Just follow the numbers. I am not going to make any judgments or make any assumptions about the revenue-raising proposals. I am going to analyze these proposals strictly from a fiscal standpoint.
I analyze two categories of offsets from the standpoint of whether the budget arithmetic adds up, and I am going to examine last year's record of the Democratic leadership on offsets but look at it as if they were in control at the time. It is not a pretty picture.
I am going to take a look at proposed offsets from a series of amendments, real amendments that were debated here on the floor of the Senate during last year's budget resolution debate. During that debate, virtually all Democratic members had a common theme in their purported offsets for their amendments to this resolution. That purported theme was that they would close tax loopholes to pay for whatever popular spending program they wanted to propose. Closing corporate tax loopholes was the common refrain to pay for spending.
I will list the amendments and the popular spending proposals:
Senator Kennedy, Vocational Education and Pell Grants;
Senator Akaka, Veterans Medical Services;
Senator Murray, Community Block Grants;
Senator Stabenow, Emergency Responders;
Senator Menendez, Port Security;
Senator Byrd, Amtrak;
Senator Reed of Rhode Island, LIHEAP;
Senator Sarbanes, Corps of Engineers and other Federal services;
Senator Dorgan, Native American programs;
Senator Stabenow, Veterans' Health Care;
Senator Akaka, Title I Education Grants; and
Senator Lincoln, Agriculture.
These are all here, and more than what I gave are here.
Mr. President, at this point I ask unanimous consent that a list of these amendments by vote and by amendment number, so that they are there for people who aren't listening to what I am saying to consider, be printed in the Record.
There being no objection, the material was ordered to be printed in the Record, as follows:
Paid for by Closing Tax Loopholes
Vote #39 Kennedy Amendment, No.3028 Vocational Education and Pell Grants; Vote #41 Akaka Amendment, No. 3007 Veterans Medical Services; Vote #43 Murray Amendment, No. 3063 Community Block Grants; Vote #45 Stabenow Amendment, No. 3056 Emergency Responders; Vote #47 Menendez Amendment, No. 3054 Port Security; Vote #51 Byrd Amendment, No. 3086 Amtrak; Vote #57 Reed Amendment, No.3074 LI-HEAP; Vote #60 Sarbanes Amendment, No. 3103 Corps of Engineers and Other Federal Services; Vote #61 Dorgan Amendment, No. 3102 Native American Programs; Vote #63 Stabenow Amendment, No. 3141 Veterans Health Care; Vote #64 Akaka Amendment, No. 3071 Title I Education Grants; Vote #66 Lincoln Amendment, No. 3106 Agriculture.
Mr. GRASSLEY. Mr. President, as you can see, the proposed spending is popular and has a nice political edge. Democrats could record themselves as voting for the amendment, and they could criticize Republicans for voting against those amendments. From a political calculation perspective, these were profitable efforts on the part of the Democratic leadership. The fiscal consequences, however, were another story.
If Democrats had been in the majority, as they are now, the fiscal effect of these amendments would have been a very big problem, and here is why. One-time spending increases, even if for 1 year, are built into the CBO baseline, and they are built in forever. This is explicitly the case for increases in discretionary spending. It is also implicitly the case with entitlement spending. If anyone disputes that point, I would ask them to show me the last time we reversed new entitlement spending. It just never happens around here is the best thing to say.
Let's take a look at the Kennedy amendment on vocational education and Pell grants to which I have referred. The amendment was purported to be $6.3 billion, but that was for 1 fiscal year. That $6.3 billion, if adopted, would probably be extended in later years. It is in the baseline. So Senator Kennedy found his offset by closing $6.3 billion in what he referred to as corporate tax loopholes. I am not going to find fault with closing those tax loopholes. I have been involved in things like that for a long period of time, and successfully so. The fiscal and political effect, though, of Senator Kennedy's amendment was to identify specific popular spending and offset it with a nondefined tax increase. From a realistic standpoint, Senator Kennedy's amendment identified less than 10 percent of the gross spending burden it would have placed on future budgets to the extent the unspecified revenue offset was duplicative or not realistic. The real effect was that the $6.3 billion additional spending would have been added to the budget for that fiscal year.
All 12 of these listed amendments used the same undefined offset.
Several Members referred to revenue raisers in a Democratic substitute amendment to the 2005 Tax Relief Reconciliation bill, and they kept trying to spend the same money over and over again. Let's take a look at the list of revenue raisers in the substitute amendment.
Mr. President, I ask unanimous consent that a Joint Committee on Taxation estimate of the revenue offsets to the 2005 substitute be printed in the Record.
There being no objection, the material was ordered to be printed in the RECORD, as follows:
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Mr. GRASSLEY. That substitute amendment is an overinclusive inventory of offsets. I say ``overinclusive' because it included the universe of revenue raisers that the Democratic caucus supported. Republicans supported many, but not all, of these offsets.
Joint Tax scored these revenue raisers during last year's budget debate. According to the Joint Tax experts, that universe of Senate offsets raised $53.6 billion over 5 years. That is this chart right here: $53.6 billion. At that time, I noted that the budget resolution assumed several billion in revenue raisers to cover part of the reconciliation bill. Indeed, in the reconciliation conference, we used eight of these revenue raisers. They accounted for about $9 billion--and I should say only $9 billion over 5 years. I had hoped to use additional raisers accounting for about $7.5 billion over 5 years, but the House rejected that, and we then found some offsets someplace else. So we will take a look at them.
If you account for the revenue offsets left over, you can subtract out another 10 revenue-raising proposals that are in the Senate's small business minimum wage bill. Those revenue raisers--and those are things which had just been before the Senate--those revenue raisers included $8.7 billion over 5 years. That is this figure here.
Of the raisers in the 2005 substitute amendment, about $18 billion of those were enacted or are in play in discussions between the House and the Senate. So if we review the Senate Democratic inventory of identified as well as scored revenue raisers and net out current law and Senate-passed tax legislation, we find 18 revenue proposals available. These are proposals the Democratic caucus has advocated that are left over. They raise approximately $36 billion over 5 years.
Everyone should know there are revenue raisers in that total I just recited that the administration doesn't support. You don't have to let that detract you from it, but those would be issues which would be subject to, I suppose, a Presidential veto.
Let's forget that for the moment. There are many in this total that the House and Senate Republicans don't support. As we have found in the small business tax relief discussions, House Democrats aren't keen on some of these proposals either. Nevertheless, to bend over backward and to be fair to the Senate Democratic leadership, I am going to tally the proposals they have supported as a caucus.
Let me repeat the total corporate loophole closers and other offsets Democrats have defined. It is $36 billion over 5 years. Put another way, I would like to say it is only $36 billion over 5 years, but I want you to see what they want to use that $36 billion for--presumably to cover a lot of other expenditures they can't do because the numbers don't allow it. That total of $36 billion, then, provides a ceiling of offsets to compare to the spending amendments.
Let's go back and match the spending amendments with the universe of Democratic revenue raisers. The revenue raised is a far cry from the cumulative demand of the amendments that were filed. The amendments that have been filed that propose to use those tax loophole closers as offsets total $105 billion in new spending. So the Senate Democrats propose $36 billion in revenue raisers that were supposed to offset $105 billion in new spending, but it doesn't add up. That means the spending exceeded revenue raisers by $69 billion.
Mr. President, I ask unanimous consent that a list of the Democratic amendments to the fiscal year 2007 budget resolution be printed in the Record.
There being no objection, the material was ordered to be printed in the RECORD, as follows:
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Mr. GRASSLEY. Mr. President, this list was prepared by analysts and was based upon filed amendments printed in the Congressional Record. I think it is interesting that only one filed amendment on this list would decrease taxes over 5 years, and only one amendment would result in decreased spending over 5 years. The amendment decreasing spending was filed by New York's junior Senator and would reduce spending by $1 million. That is one-thousandth of a billion dollars.
Put another way, if you subtract the $36 billion from the $105 billion in new spending proposed, it means the other side's amendments were short $69 billion--short $69 billion. Right here. This figure. This money proposed for offsets, add up all of the amendments put before the Senate, and you come out short. Revenue neutrality? No. Budget neutrality? No.
Now, that $69 billion needs to come from someplace. If the other side had prevailed, it would have wiped out the tax relief of last year's budget, including what we do to keep more Americans from paying that horrible tax, the alternative minimum tax. You can't have it both ways. Either the other side, if they had prevailed, would have added $69 billion in deficit spending or they would have gutted the tax relief they claim to support.
Budgets are about choices.
In this case the choices are clear. If the Democratic leadership would have controlled the Senate last year, we would have no tax relief in that budget or we would have added $69 billion in deficit spending. Neither choice would be the right choice from the standpoint of the American people.
Defining offsets is very important. It is very important because we need real numbers if we are going to have intellectually honest budgeting. My analysis of corporate loophole closers and other revenue-raising proposals shows the Democratic caucus has supported at most $36 billion in specific revenue-raising proposals. By the way, that is about the revenue loss for last year's AMT patch. So the alternative minimum tax would have hit another 7 or 8 million Americans.
Using unspecified revenue-raising proposals is not realistic. If Democrats intend to live by pay-go, short for ``pay as you go,' the Finance Committee will need those revenue-raising proposals to handle a portion--and just a portion--of the demand of the tax system.
There are two other categories of revenue-raising proposals identified by the Democratic leadership. One is repealing tax relief for higher income taxpayers. The other is reducing or closing the tax gap. I will talk about the tax gap in a later speech.
When folks in the Democratic leadership talk about raising taxes on higher income taxpayers, it sounds as if all fiscal problems can be solved as long as you want to look down the road. Liberal think tanks and sympathetic voices in the east coast media tend to echo that sentiment. As a matter of intellectual honesty in budget debates, we ought to have an idea of how much revenue is there. Since the most popular proposal is to repeal the bipartisan tax relief for higher income taxpayers, I have asked the Joint Tax Committee to provide updated estimates of those proposals--such as the corporate loophole closer. I do not expect the revenue would cover the spending demands. I was pleased to see the Budget Committee chairman make a public comment last week that seemed to address these proposals. According to the March 1, 2007 edition of Congress Daily AM, the chairman indicated he intended to put forward a budget with ``no tax rate increases.' I will have to see the budget resolution and hear the chairman's explanation, but I read that comment to mean the Democratic leadership will not, at a minimum, propose to roll back current law tax rates.
This would be especially interesting in light of the so-called millionaire's tax amendment put forward in the past by members of the chairman's party. The millionaire's tax amendment filed for the fiscal year 2007 budget would have increased taxes by about $105 billion. Of course, those same amendments spent that money, so deficit reduction would not have been received.
Today I have examined the question of revenue-raising offsets. The inventory of available, defined, specific revenue-raising offsets is relatively small. Last year, Democratic amendments overspent the available revenue offsets by $69 billion. The Democratic leadership has indicated a desire to apply pay-go, pay as you go, to the current law tax relief. If pay-go is to be observed with respect to the alternative minimum tax and other popular expiring tax relief provisions, the Democratic leadership will need those revenue raisers and even more to offset the revenue lost from these time-sensitive provisions.
When we start to examine and debate the budget resolution, we will need to use intellectually honest numbers. Using the undefined corporate loophole closer is fiscally dangerous. It enables even more spending at a time when Government is at record levels as far as real dollars. Runaway spending is at the root of our current or future fiscal problems. Using phony revenue-raising offsets sets up two negative fiscal outcomes, an undefined tax increase and/or deficit spending.
All Members, whether Republican or Democrat, ought to agree to be transparent with all these numbers and all these figures in the amendments that are posed in the upcoming budget debate.
I yield the floor.
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