Warm in Winter and Cool in Summer Act - Motion to Proceed - Continued
Floor Speech
WARM IN WINTER AND COOL IN SUMMER ACT--MOTION TO PROCEED--Continued -- (Senate - July 24, 2008)
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FISCAL POLICY
Mr. GRASSLEY. Mr. President, in a little over 3 months, Americans will make a very important choice on the future direction of the country. We will go to the polls, we will select a new President. Americans will also vote on roughly one-third of the Senate and all the Members of the House of Representatives.
According to public opinion polls, economic issues will be among the most important matters voters will consider when they go to the voting booth in November.
Everybody knows that the Federal Government affects economic issues, and we do it through Federal fiscal policy. How we deal with Federal fiscal policy can be viewed as two sides of a ledger: On one side is tax policy, and on the other side is spending policy. The choices about how we as a nation want to balance each side of the ledger will have very important consequences and implications on our economic future.
Most economists agree that high taxes dampen economic growth. Too much spending, just like too much taxation, can also dampen economic growth. As elected representatives of the American people, we have an obligation, as the Constitution directs us, to spend those tax dollars for the common defense and also for the general welfare of the Nation. We all have a stake in a growing economy, and we will all suffer from a shrinking economy.
As ranking Republican on the tax-writing Senate Finance Committee, I believe it is my obligation to explain the choices and the consequences of those fiscal policy choices; therefore, I wish to focus on tax policy as it relates to the choices Americans will face this fall.
In all of the discussion about vague notions of change and vague notions of hope, there are some substantive issues Americans will be facing in the fall. The big question will be how much is the Federal Government going to take out of the American taxpayers' pocketbooks. We will need to evaluate before the election what we are being told on the campaign trail--not just what we are told, compare it with what is likely to occur starting at high noon, January 20, 2009.
I think from history we have some pretty good indicators that tell us what will happen based upon the choices of the American people in the next election. To do that, we must look at our current tax burden. Then we need to take a look at what Senators McCain and Obama are telling us about how they will change the tax burden. Finally, we have to consider the ability of each candidate to deliver on promises. Each taxpayer is going to have to make choices, choices about what these candidates will do on tax issues once they get into that position of power. Every American taxpayer and every American family budget will be impacted by the new President and the agenda of the Congress. Elections have consequences.
Today, I wish to consider future tax policy and do it in the context of the Congressional Record over the last 3 decades.
First, I want to compare the actions of Congress on tax hikes and tax cuts in relation to each party's hold on the White House and do it from the congressional as well as the White House basis. As a baseline, I will show a scorecard of tax hikes and tax cuts for each 4-year Presidential term since 1981.
I have a chart here. The chart shows three things. They start, as I said, with the year 1981. As you will note, the years are divided into Presidential terms, so we start with President Reagan's first term and work our way through to the present, which is the last year of President George W. Bush's second term. You see the bottom lines across there, the ones that have red and blue, and the years there for the Presidential terms.
Right above the line for the Presidential terms, we have a thick line. It is a three-part line. The line shows relative power of Democrats and Republicans. The top third of the line, if red, shows Republicans holding the White House. The middle third of the line shows who held the Senate majority for a certain period. If red, then Republicans held the Senate; if blue, the Democrats held the Senate. Then the bottom line, that is in regard to the House majority. Like the other two lines, if red, it means the Republicans held the majority; if blue, it means Democrats were in charge of the other body.
If you move up the chart, there is a running total of how much on a yearly average that particular Congress and President agreed to raise or reduce taxes. The lines going up or down are in regard to the tax raises or tax decreases. This data is not mine; it was drawn from the Treasury Office of Tax Analysis report that was released--the most recent one in 2006. The amounts are derived from the nonpartisan Joint Committee on Taxation revenue estimates of each of the enacted bills Congress passed during that 26-year period of time.
Let's take a further look at the chart so you get some specifics.
President Reagan made tax relief a cornerstone of his successful 1980 campaign. His election helped Republicans attain a narrow majority for the first time in over a generation. The House, of course, remained in Democratic hands.
In 1981, President Reagan proposed and Congress agreed to a large tax cut. So you have it. The first green line goes there. On average, if fully implemented, it meant that you would have a tax cut of almost $111 billion per year. Over time, the Democratic House pushed for and President Reagan reluctantly agreed to some smaller tax increases, and they are the second line where the tax increases come down toward the zero line there.
For the 1984 campaign, President Reagan made revenue-neutral tax reform a central part of his campaign for reelection. Republicans held a majority in the Senate for that election, and President Reagan had built a case for reform. Republicans in the Senate and Democrats in the House agreed, and the chart reveals tax reform for 1986 of a small amount, as you can see there, but still tax reform. It is significant, I would say.
But in 1986, Republicans lost control of the Senate. I happen to remember that because I was on the Finance Committee for my first 6 years in the Senate. We didn't have enough Republican seats after that, I didn't have enough seniority, and so I lost my seat on the Finance Committee.
Congressional Democrats insisted on and obtained, after their success in that election, a tax increase in 1987. You can see that tax increase there for 1987.
In 1988, as you recall, President Bush's father, George H.W. Bush campaigned, in 1988, and included a pledge not to raise taxes. President George H.W. Bush won that election, but congressional Democrats solidified their majorities, and, as a part of a deficit-reduction package, President George H.W. Bush forgot about his campaign promise and agreed to a tax increase. And here it is. You can see the big tax increase--in 1989-1990, it was. Shortly after that tax increase went into effect--there are consequences of policy made here in Congress--the American economy went into recession that year.
Then you get to the 1992 campaign. Bill Clinton, in response to the recession, campaigned on a middle-income tax cut and tax increases on higher income taxpayers. President Clinton was elected, and Congress Democrats retained a very comfortable majority in the House and Senate, as you can see by the blue lines there, during those years.
In 1993, less than a year later, on the force of the Democratic votes alone, the largest tax increase of modern era was enacted. There you can see it very definitely, a big tax increase at that period of time. You will note it is at the highest point on the tax increase part of the chart.
Republicans claimed majorities in the House and Senate in the 1994 election.
President Clinton agreed to a revenue-neutral small business tax relief package in 1996. During that campaign, President Clinton campaigned once again on middle-income tax relief. President Clinton was reelected, Republicans increased their majority in the Senate, and we retained a majority in the House.
In 1997, congressional Republicans and President Clinton agreed to a significant tax relief package. It was the first tax relief law since the President Reagan administration, and it averaged about $13 billion a year. There you can see it in the year of 1997.
George W. Bush campaigned on a broad-based tax relief plan for 2000, or in the 2000 campaign. He was elected then, obviously. The parties split the Senate 50-50, with Republicans in control because of Vice President Cheney's tie-breaking vote for organization. Republicans held their House majority.
In 2001, President Bush and Congress agreed on the largest comprehensive tax relief package since President Reagan. Here it is, as you can see, the big tax reduction of 2001, averaging about $82 billion per year.
As things happen around here, I was chairman of that committee for only about 5 months because Senator Jeffords switched from being a Republican to a Democrat, and in the wake of 9/11, corporate scandals, and other events, President Bush, a Republican House, and a Democratic Senate agreed on an economic stimulus package that averaged about $12 billion a year.
Republicans regained the Senate majority in 2002. So in 2003, President Bush and the Republican Congress continued to significantly reduce the overall tax burden.
So here you can see in the 2003 and 2004 tax bills a combined about another $82 billion a year reduction in taxes. If you look at President George W. Bush's first term, enacted legislation totaled roughly $174 billion per year, on average. Republicans held the House for all of that term. Republicans held the Senate for most but not all of that term.
In 2004, President Bush campaigned for reelection by emphasizing the permanence of the lower tax burdens secured during his first term. Republicans increased their House and Senate majorities.
So in 2006, President Bush and the Republican Congress extended the tax relief in the first term through the year 2010. It is shown here. It averages about $22 billion per year. In 2006, the situation now, as a result of that election, Democrats gained majorities in both the House and Senate.
Despite the opposition of the Democratic leadership in the House and Senate, Congress passed and President Bush signed an ``unoffset'' alternative minimum tax. That legislation averaged $13 billion in tax relief.
This year Congress and the President agreed to $34 billion in temporary economic stimulus. At present, the Democratic Congress and President Bush are in a stalemate on an AMT patch extension and other expiring tax relief matters. The reason for the stalemate is the House and Senate Democratic leadership's opposition to passing these bills ``unoffset.''
I want to use one chart to sum up today's discussion. This chart shows a tax thermometer. We have got it up there. The heat side is the tax increase side. This chart shows the relationship between party control of Congress, Presidency, and tax hikes or tax relief.
If Republicans control the Presidency and Congress, then lowering the tax burden, which is a tentative Republican philosophy, is virtually certain to be put in place. So you can point to that point in the chart there that demonstrates having both a Republican President and a Republican Congress is a certainty to have a lower tax burden for the American people.
If Democrats control both the Presidency and the Congress, then an increase in the tax burden is certain to occur. That is what history of the last 25 years shows. So it is a virtual certainty, regardless of campaign rhetoric to the contrary.
If the parties split control of the Presidency and the Congress, the record is, as you might expect, mixed, though generally against tax relief.
So if you look at the median picture there, you see that we have about three decades of history backing this up. I would encourage everyone to take a look at this thermometer chart. When folks go to the voting booth on November 4, they will need to consider the probability of a change in fiscal policy. They will need to consider the potential change to their family budget, from higher or lower taxes, because elections have consequences. They will have to also think about the broader economic effects of higher or lower tax burdens on business or investment, because tax policies by the Congress of the United States do have consequences, some ways good, some ways bad. My view is, higher taxes are bad for the economy.
That change could be dramatic if the vote is for one party to control the House, the Senate, and the Presidency. There would be consequences then, lower taxes if that is House and Senate Republicans, Republican President; House and Senate Democratic, Democratic President, higher taxes.
In my next discussion, which will not be today, I will follow up this one with a detailed examination of what happens in the last bit of history most like the present. I am referring to the 1992 campaign and the legislative record that followed in 1993.
The reason I do that is I think I see the same thing evolving in this campaign. We ought to learn from history, and the voters need to take that into consideration before November 4.
I yield the floor.
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