Press Conference with Sen. Grassley (R-IA) and Sen. Gregg (R-NH) on Budget

Statement

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SEN. MCCONNELL: Good morning, everyone. I've been amused over the years the debates we've had over taxes. The Democrats always say they only want to raise taxes on the rich. And so I think it's appropriate to ask: Who are these people? I always laughingly say to my audiences at home, "How many of you have a job?" And if their hands go up, I say, "Congratulations. You're rich."

In looking at the statistics, that's only a slight exaggeration. Under their budget, the definition of "rich" would reach down to single workers who earn $34,000 a year and couples who earn $63,000 a year. Now just to put that in context, a first-year teacher in the Louisville, Kentucky, school system makes $35,982 a year. I don't think they believe that they are rich. I don't think they're rich. And so this whole notion that the Democrats' plan to raise taxes will only affect affluent people doesn't stand up to close scrutiny.

I have with me today Senator Gregg, who's our leader on the budget, and Senator Grassley, who's been pursuing pro-growth policies from his position as the ranking member of the Finance Committee over the years. And I'd like to now call on them for their observations. Thanks.

SEN. GREGG: All right, Chuck.

SEN. GRASSLEY: Well, your --

SEN. GREGG: (Inaudible.)

SEN. GRASSLEY: My staff said your chart was first. (Laughter.)

SEN. GREGG: Okay.

SEN. GRASSLEY: You go by charts around here, not by seniority.

SEN. GREGG: First off, thank you, Mr. Leader. And I think your point is extraordinarily well taken. This Democratic budget is nothing more than a classic liberal tax-and-spend event. Here we are on the slow -- a road of a slowing economy, and they want to take us down a detour, which is essentially going to be an economic wasteland for us as a nation, where they raise taxes on working Americans, a significant amount of money. The average working American's taxes will go up about $2,300. That reaches down into people as low as $35(,000) -- $30,000 of income, individuals. And in addition to that, small businesses will be socked with a $4,100 tax increase, and senior citizens will be tagged with a fairly significant increase of somewhere around $2,700.

On top of all this, though -- that's just the start. If you look at what their national candidates are talking about, Senator Obama and Senator Clinton have proposed programmatic expansions, as they've gone around the country trying to get this constituency and that constituency to vote for them, which total around $300 billion of new spending a year. And Senator Obama specifically and Senator Clinton to some degree have said: Well, we're just going to get this money to pay for these new programs, this massive expansion in government, the biggest expansion in government ever proposed, by taxing the rich.

Well, if you take the tax rate from 35 percent, which is what the top tax rate is today on the highest-income earners in America, and you take it back to the Clinton years, when it was 39.6 percent, you generate $25 billion a year of new income, assuming people don't go into tax avoidance vehicles, which is what people tend to do who are smart enough and rich enough and have tax accountants.

But assuming a static situation, you generate $25 billion of income, which means Senator Obama's short about $275 billion. Where's that going to come from? Well, it's going to come from working Americans. That's where it's going to come from. That's in one year. Over a period of five years, they're short about another $1.2 trillion.

So they've got increases in this bill of about $1.2 trillion. They've got their national candidates -- in taxes. They've got their national candidates proposing about $1.2 trillion of increase in taxes. That's getting up there for real money, even under -- even if you're a liberal in this country. That's a lot of money, a lot of taxes, and the American people are going to bear the brunt of it. And that's why this is a bad budget.

SEN. GRASSLEY: The words just given describe the biggest tax increase in the history of the country. The only thing is, through this campaign and through the consideration of this budget, the words "ending the Bush tax cuts" have been used. That's how we're going to finance it. Never any insinuation in those words that the biggest tax increase in the history of the country is going to happen, and happen without even a vote of the Congress.

Now, there's a few people around here that are nervous that maybe some people will figure that out. So you're having the Baucus amendment, to take some of these socially acceptable tax cuts and leave them part of law, but there's a lot that's not included in the Bush tax cut and -- I mean, in the Baucus amendment that's going to do great economic harm in this country by increasing marginal tax rates and having the biggest tax increase in the history of the country.

Now, ending the Bush tax cuts sounds easy, doesn't it? But when you look at the average American paying $2,300 more a year in taxes, that's not something to take lightly. The American people are not going to back an effort that's going to increase taxes on the average American by $23,000. So they're up against this big tax wall that's going to hit the American families by that much.

And in addition, if you want to be -- if the Democrats want to talk about benefiting middle-income people by preserving what Republicans did in the first place, ending the marriage penalty is one, or putting in place the 10 percent tax bracket as another, to help low-income people -- and those were Republican initiatives -- they're still not extending the things that help the tax deductibility of states that have only a sales tax and an income tax, the tax deductibility of that. They're not preserving the tax deductibility of tuition for middle-income people to send their kids to college.

They're not preserving a lot of things that are benefiting middle class, because what they need is a fig leaf to cover up this fact, that we're having the biggest tax increase in the history of the country if you just do nothing. And that's what they're proposing to do. And it's very harmful, not only to the American family, but it's going to be harmful to our economy, because in the Baucus tax amendment that's before us -- or anything you want to do to make it look more flowery -- none of that is going to be economic growth.

It may be good social policy, but the things that are going to grow this economy after 2010 are the same things that grew this economy since 2001 -- the tax bills of 2001 and 2003 that have created eight- and-two-tenths million new jobs, things that have gotten us where we are today.

And this isn't Chuck Grassley saying this. Chairman Greenspan has made very clear that the tax policies of 2001 and 2003 have been good for the economy. So we have to make clear that we get the growth policies that are in the Graham amendment passed as well.

Q Senator Gregg, your colleague over in the House, Congressman Ryan, put together a budget that includes tax cuts you're calling for right there and then includes things like cutting farm programs, cutting Medicare, cutting Medicaid, cutting veterans benefits -- (off mike).

Do you think it's credible to put those type of tax cuts in the budget and still produce balance, and that the public would stand for the sacrifices on the spending side?

SEN. GREGG: Well, I haven't looked at the specifics of the House Republican budget. But you've got to respect the fact that they put together a budget, which they feel was appropriate and that addressed the priorities as they saw them.

My view has been, and I believe it's been proven by the last few years, that if you maintain a reasonable tax rate, especially on the formation of capital, the thing that creates jobs, which are capital gains and dividends rates and your basic rate, then you create a huge economic incentive within the economy.

And we've seen revenues, at the federal level, jump over the last three years at a faster rate than at any time in our history. And yes, now we're headed into a slowdown, so that's obviously not going to continue for the period of this slowdown.

But one of the reasons we saw this big jump in revenues, in my opinion, was that we had in place a tax policy, really authored by the senator from Iowa, which created incentive for people to go out and take risks, be entrepreneurs and as a result create jobs and as a result create economic activity which led to revenues.

And I don't necessarily think you have to pay for tax cuts, for two reasons. One, tax cuts leaves people with the money that they have. It's not our money. It's not the government's money. I mean, there's this attitude within the other party that it's their money, they should be able to manage it. Well, I don't agree with that. It's the people's money. They should be able to manage it.

And two, I do believe that if you set tax rates at the right level, you create an economic activity which will generate significant amounts of revenue to the federal government, and we've proved that, I think, over the last few years, especially on the capital gains rates.

So, I haven't looked at the House number. I haven't looked at how they're paying for it, how they're remaining -- because they're stuck with the revenue neutrality rules and the static estimates of the CBO that they have to work within, which is a straightjacket which doesn't allow dynamic scoring and doesn't allow to account for what actually happened over the last three years with significant revenue increases. But if they've made tough decisions in the area of entitlement reform, God be with them. They've done good work.

Q (Off mike) -- non-defense discretionary spending has been -- (off mike) -- per capita and in nominal dollars -- per capita nominal dollars over the last eight years as a measure of GDP shrunk slightly. Anecdotally, at least, Democrats are going to say that that has resulted in failures -- (off mike) -- failures in the ability to adequately monitor our meat supply, failures in our infrastructure, and they will argue that that's why an increase of discretionary spending is justified. Is there -- are they wrong in that?

SEN. GREGG: Yes.

Q Why is that? Why is their anecdotal evidence of underspending incorrect?

SEN. GREGG: It is hard to accept the concept -- or at least the Democrats find it hard to accept the concept that government shouldn't grow faster than the pocketbooks of Americans' incomes grow. But I do accept that concept. I believe you should limit the rate of growth of government to a rate which is below the rate of inflation and which is below the rate of productivity of the economy. And that's the way you get out of a deficit situation. Their basic view is that government should always be expanding, that it always should move to the left. There are ways to save money within this government that you can reallocate dollars, but their view is there is no savings to be accomplished, except that they would probably want to cut defense by -- in some ways.

But the practical matter is that we have enough money in those discretionary accounts to do well what we're supposed to do as a government, and we don't need to continue to grow them at a rate faster than the economy.

Q (Was it ?) an option to those agencies that led to those failures?

SEN. GREGG: It's a lot of programmatic activity that's not being managed very well, and it's a lot of programmatic activity that the Congress has put on the books that isn't necessary. It's a lot of duplication. And actually, Senator Allard has superb amendment right on this point, I hope you'll take a look at it, that deals with using the studies which have come forward to try to reduce the size of discretionary spending, and you can either take that money and reduce the deficit or put it towards discretionary spending you think is a high priority, which there are some.

Q Sir, could each of you tell us why you either support or oppose the DeMint amendment on earmarks?

SEN. : The DeMint amendment on earmarks.

SEN. GRASSLEY: I'm going to support the earmark amendment. Well, I don't -- first of all, does it do away with earmarks or make them more transparent?

Q (Off mike) -- moratorium.

SEN. GRASSLEY: Pardon?

SEN. : It's a one-year moratorium.

SEN. GRASSLEY: Yeah, I submit a lot of earmarks, but if I play by the rules of the game, if there's no earmarks, I will not submit any earmarks.

Q Do you think that's a good idea, sir, to not have earmarks?

SEN. GRASSLEY: I think that creditability in government is very important. Our system of government rests on what you think about us that are in government, and I think that the earmark and the playing of politics has reduced considerably creditability for government. And we need to do things that'll enhance credibility.

SEN. GREGG: Did you want my response to that? (No audible response.)

My view is that the Congress controls the purse and has a(n) obvious role in deciding how dollars get spent that's very significant. And the key to earmark reform -- and there does need to be reform -- is absolute transparency with the name of the member who asked for the earmark beside it, and then some sort of mechanism which makes for an effective challenge on earmarks.

I'd be happy to submit any earmark I put in or request to a 60- vote threshold on a point of order and make it something that people can pursue easily, so that if -- for example, John McCain used to come to the floor and list all sorts of earmarks that he felt were inappropriate, if he wanted to raise a challenge -- he'll be president so he won't be doing that -- but if he wanted to raise an individual challenge, he would be -- have the capacity to do it in a straightforward way.

But I think an outright abolition of earmarks is an abolition of the authority of the Congress. And it basically passes, to the executive branch, massive amounts of authority which I'm not sure you want to embed in a bureaucracy which is unaccountable. At least members of Congress are accountable.

Secondly I think the second earmark reform that should occur is that there is no savings under any proposal I've seen on the earmarks. I mean, what is this sort of game? This is just basically throwing up a motherhood name and not getting any --

If your purpose is to save money then any earmark, in my opinion, that is reduced or eliminated, that -- the baseline should be reduced. And that -- you are not talking serious reform unless you have that as part of your amendment, in my humble opinion.

Q One of the things that the transparency though has proven about earmarks is this nexus between companies that benefit from earmarks and the contributions that the executives from those companies then send to members of Congress. Do you believe that that is appropriate?

SEN. GREGG: Well, I don't think -- I think that assumption is pretty hard -- I'm not sure that that's true. I don't --

Q Well, sure, it's true. There's, you know --

SEN. GREGG: Well, if that's the case --

Q (Off mike) -- reports that virtually every earmark Murtha does, he gets some form of --

SEN. GREGG: Well, then if you've got visibility on it, that should be a test in his next election; it should be a test on the floor when the earmark comes up to be challenged.

But I don't, you know, I mean, that's a good reason to have pure transparency and the ability to test those earmarks in a very open debate with a mechanism that isn't so complicated that you can never get to them.

Thank you.

Q (Off mike.)

SEN. GREGG: No. We made some offers and so far we've made no progress. It looks to me like this is going to be a very long, very, very long, maybe historically long vote-a-rama, the way things are going. I mean, they're doing side-by-sides on every amendment we offer.

I would point out the obvious. They wrote the budget. (Laughs.) They have the document. When we offer an amendment, it's to the budget, which means their side-by-side is the budget. But they have to have the last word so they have to have their side.

Well, if we're going to have side-by-sides on every amendment we offer that causes them a little bit of suffering or a little bit of pain, or maybe they just don't want to have their members make that vote, we're going to be here for a tremendous amount of time.

Because they may try to back us off from our amendments by pushing us into Thursday. I can absolutely assure you, some of the personalities on my side of the aisle will find that approach to be counterproductive when we'll actually -- there will be a more aggressive amendment strategy.

Q Senator, while we're on the topic, can we have your prediction as to when the last vote will be? Tomorrow -- (off mike)?

SEN. GREGG: Right now, if we continue under this scenario, I honestly don't think we will complete until late Friday night, if we're lucky. That's my guess. We're going to set a record under this present tempo. Thank you.

Q Do you think the presidentials will be here up until late Friday?

SEN. GREGG: Well, if they plan to vote, they better be.

Q Bring a snack?

SEN. GREGG: (Laughs.) Bring a snack.

Q Thank you, sir.

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