Concurrent Resolution on the Budget for Fiscal Year 2008--Conference Report

CONCURRENT RESOLUTION ON THE BUDGET FOR FISCAL YEAR 2008--CONFERENCE REPORT -- (Senate - May 17, 2007)

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Mr. GRASSLEY. Mr. President, over the last 26 years, the budget resolution provided the necessary resources to allow the committee that I used to chair and now am ranking member on, the Finance Committee, jurisdiction over taxes. It provided us the necessary resources, usually in a bipartisan manner, to realistically address the demands of tax, trade, health and welfare policies--all things within the jurisdiction of our committee. So reading this budget compromise, I am very disappointed to say that this year is very much different than over the last few years.

Now, I know the people spoke in November, and for the first time in 12 years the Democrats are in the majority and in control of the congressional budget process. As ranking Republican on the Finance Committee, I was not consulted at any point by our distinguished chairman of the Budget Committee on this year's budget resolution. Unfortunately, after reviewing the resolution conference agreement, the agreement that is before us now, it is clear it does not realistically address the needs of the very important work of the Finance Committee.

Despite claims to the contrary, this budget does not provide for even 1 year, not even 1 year of alternative minimum tax relief, the tax that is going to hit 23 million Americans this very year, right now, who were not paying that AMT last year. Now, that is even for 1 year, let alone 2 years or even a 1-year extension of the provisions that will expire this year. So this budget puts the burden on the Finance Committee, the tax-writing committee, to come up with the offsets to pay for the alternative minimum tax relief and for other extenders that it is necessary for us to pass.

On these immediate needs, on the AMT and other extenders, the Democratic Budget Committee's press release says:

AMT relief. The conference agreement prevents the spread of the alternative minimum tax so that it does not impose a higher tax on middle income families. It ensures that the number of taxpayers subject to the AMT will not be allowed to increase in 2007, protecting some 20 million middle class taxpayers from being subject to that tax.

Now, if that were really happening, I would applaud it. I have looked over the resolution, I have looked over the statement of managers, and I cannot find the basis for what is in the press release. If you look at the numbers, unlike the past 6 years of Republican budgets, you will not find tax relief room to accommodate the alternative minimum tax. You will not find any tax relief room for anything, including very important extenders which are popular around here which everyone wants to extend from year to year.

The chairman, I am sure, will respond that the Finance Committee tax tab will find revenue-raising offsets. More on that in a few minutes. Without question, however, this resolution does not provide the tax-writing committees of both Houses with the resources to prevent the spread of the alternative minimum tax for this year or next year to those more than 23 million middle-income taxpayers who were never supposed to be paying the alternative minimum tax. It is simply not in the black-and-white print of this resolution, regardless of what the press releases say.

Let's turn to the offset point. As a farmer, I would like to think we country folks can teach people in the city a lesson or two. The first chart involves the method a lot of us farmers use to get water. It is a well. Here is the top of the well. I am pointing to the top of the well. You can see it is a long well, and there is some water way down at the bottom of the well, but you will see the well is almost dry.

Now, as I indicated a few months ago, the budget resolution does not contain tax relief room sufficient to cover the revenue loss of the alternative minimum tax and other time-sensitive tax extenders. What we are told by those who drew up this budget is that the tax-writing committees will find the money.

The offset well shows about $44 billion in known, identified, and scored revenue-raisers which the Senate Democratic caucus has supported in the past. I used this chart about 2 months ago. Now I have updated it to account for $2 billion in new revenue-raisers developed by the Finance Committee tax tab. That figure of $1 billion a month is in line with historical averaging. How reliable is that average, and can we count on it?

As a farmer, I know something about the predictability of well water. You hope you will get rain and it will give you a decent level of well water. As a former chairman and now ranking member of the committee, I know something about revenue-raisers. I have been here, done that, been through all of that. When I was chairman, I aggressively led efforts to identify and enact sensible revenue-raisers aimed at closing the tax gap and shutting down tax shelters. As ranking member, I continue to look for ways to shut off unintended tax benefits. So I consider myself to be credible on what is realistic when it comes to revenue-raisers.

From 2001 through 2006, Congress extended over 100 offsets with combined revenue scores of $1.7 billion over 1 year, $51 billion over 5 years, and $157 billion over 10 years. That figure is reflected in this chart. It is reflected in that $51 billion figure you have up there at the top. So if you look at the recent history, we can realistically figure the tax tab will find about $1 billion a month.

Right now, all we can find that is specified, drafted and scored by the scorers of the Joint Tax Committee is a big amount of money, but compared to what is needed, a mere $44 billion. The revenue-raising well shows about
$44 billion in available, defined, and scored offsets at the waterline there.

The defenders of this resolution now will say a virtual cornucopia of revenue-raisers is there in this well from the tax gap and shutting down offshore tax scams. I take a backseat to no one on reducing the tax gap and shutting down offshore tax shelters. I have the scars to show for those efforts over the past few years. But the defined and scored tax gap proposals are already included. That is that figure of $6 billion up there on the chart. Likewise, a proposal targeting tax-haven countries and other offshore activities is included at $2 billion.

The well has, then, about $44 billion of offset water. This budget anticipates a Congress which will be thirsty for this limited group of offsets. On the thirst or demand side, you will see the bucket will be very busy.

On the demand side, I have talked about the alternative minimum tax fix. There is $115 billion for that fix for this year and next year. That is what it is going to take to get that job done, the $115 billion there. That is the biggest sum of money which is going to be demanded.

There is $20 billion for other extenders that run out at the end of the year. Then there is $15 billion for Children's Health Insurance Program expansion, and there is another $30 billion for the rest of the so-called reserve funds. Here is a chart that lists the other 20-some-odd reserve funds. You can see there is a massive demand for revenue out there. Each of these reserve funds are an arena for popular new spending and maybe new taxes. I will not take the time to read them all, but veterans, affordable housing, Indian claims settlement, childcare--all have a basis in this budget. Every one of those would be popular expenditures. Since we know from almost a decade of fiscal history that the Democratic leadership can't propose spending cuts, we know the new reserve fund spending will be paid for with tax increases.

These figures reflect only the demands of the first year of a 5-year budget. If you add them up, they add up to $180 billion in demand on the spending and tax side. As you can see, there is about $44 billion in revenue offsets. If you assume the tax staff will follow the historical average of $1 billion per month, then figure about $15 billion more at best. So if we assume, in a manner most favorable to the proponents of the resolution, that there will be $59 billion, then this budget is short by $121 billion for the first year of the 5-year budget. The demands on the tax-and-spending side then exceed projected offsets by $121 billion for the first year of the resolution.

It is time for all of us to get real about what the proposed spending is in this budget, the needs for tax policy that is promised in this budget, and the small amount of offsets that are available.

So what is going to happen? How do we bridge that $121 billion gap? Either the tax relief and new spending is not going to happen or we will add that to the deficit. That is a frightening proposition, adding it to the deficit.

Let's take a look at the rest of the agenda to those numbers. Over the 5-year budget, going out to the year 2012, keeping existing policies in place will have a revenue effect of $916 billion. This includes AMT relief, if they are serious about not having those 23 million middle-income people paying taxes that they were never supposed to pay in the first place, and extending other broadly supported expiring positions. In the aggregate, this budget appears to provide $180 billion in new resources for extending these policies over the 5-year window. Look further and you will find a trigger. It is the very trigger I talked about last week. Senator Gregg described in great detail how the trigger will work. Suffice it to say the trigger conditions the $180 billion in tax relief targeted for 2011 on no future spending.

Is that the real world, no future spending? Does anyone believe this Democratic majority will not spend future tax increases if given a chance? If your answer is yes, then you are buying a pig in a poke. A pig in a poke is what you are going to get, if you believe that. If you think you are going to get a pig, you are going to get cheated. And I have grown a few pigs in my day, so I know the difference between a pig and a pig in a poke. This trigger mechanism is a pig in a poke. Don't buy it. You will regret it.

So we have a situation where we have $736 billion that we have to figure out what to do about. It is not done about in this budget. You have to deal with tax realities, if you are going to give this sort of tax relief. The answer is that we are going to have to find this money, and it is not here. So it is not a real budget.

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