President Obama's First Budget

Floor Speech

Mr. GRASSLEY. Mr. President, today our President sent his budget to the Hill. On Tuesday night, in a joint address, our new President, with his usual eloquence, sketched out his fiscal policy goals.

First off, as ranking Republican on the Finance Committee--and I am a senior Budget Committee member--I wish to point out that Republicans were happy to hear the President make deficit reduction a very high priority. If I heard correctly, the loudest bipartisan applause, in terms of responses to the President's policy proposals, greeted that policy point. We Republicans want deficit reduction on our future fiscal path. As we come out of the recession--hopefully sooner rather than later--we need to get the deficit down.

While we Republicans agree with the President on that goal, we disagree on the degree to which the Democratic leadership has dramatically expanded the deficit and added to the debt. A couple of weeks ago, Republicans and Democrats disagreed on what is referred to as a stimulus bill. In both bodies, only three Republican Members supported that conference report. We parted ways on the stimulus bill for many reasons. Most on our side disagreed that we should put $1 trillion of taxpayers' money into an effort to grow the economy by priming the Government pump. We also would have shut off that spending spree once the recovery occurred, as opposed to half of the spending money in that bill being spent in years beyond 2010--supposedly the end of the stimulus effort to the economy.

But what disturbed most of us on this side was the hidden fiscal burden built into the bill--in other words, that period of time of spending beyond 2010. Although advocated as a $787 billion bill, the real cost--the real cost--is much higher. Unfortunately, many in the media accepted the $787 billion score on its face. By contrast, most in the media looked much deeper when the bipartisan tax relief bill of 2001 to 2006 was scored. Of course, I remember that because during that period of time, or most of it, I was chairman of the Finance Committee and involved in that tax relief. So they looked very deeply into what we did in tax relief, and in a bipartisan way, but they seem not to be as concerned about the impact on the deficit of that $787 billion score that is in the stimulus bill. So I would encourage the punditry and other opinion makers to apply the same tough fiscal standards to the hidden spending in the stimulus bill as they applied to the tax relief packages in an earlier part of this decade.

Soon, I am going to have some charts that will demonstrate this difference between tax issues versus the spending issues of the stimulus bill.

According to the nonpartisan Congressional Budget Office, if popular new programs in the stimulus bill are made permanent, the cost will be $3.3 trillion. I have a chart here that lays out what the Congressional Budget Office says the total cost of the bill is--this column right here. Let's move from the left to the right of the chart. First, we have the basic cost of the bill--$820 billion. If the making work pay refundable tax credit is extended, there is $571 billion--the second column here. If the new entitlement spending is made permanent, then the cost of the bill more than doubles; that is, there is almost $1 trillion in new hidden entitlement spending right here--the third column. Over here in the fourth column, if the appropriations increases are baked in the cake, then there is $276 billion in new nondefense discretionary appropriations in the bill. That is the fourth column. And finally, CBO tells us that the interest cost on the overt new spending and the hidden new spending totals $744 billion. Total it all up, and you come out right here at $3.3 trillion. You don't come out at $787 billion; it is $3.3 trillion. And these are Congressional Budget Office figures. They are not from some conservative think tank. They are not from Senate Republican sources. CBO estimated this hidden spending.

There is one way, and only one way, for stimulus bill supporters to dispute what I have said. The Democratic leadership in the House and Senate could pledge to keep temporary spending temporary--basically, the money spent in 2009 and 2010 is the end of it. If the Democratic leaders pledge to support leaving the bill as written and would not push to extend the new entitlements and new appropriations spending, then we could go back to the figure many in the press are reporting on the cost of the bill. If the Democratic leadership makes a pledge to keep temporary spending really temporary--in other words, for the 2 years of jump-starting the economy--we on this side would agree that the bill does not cost this $3.3 trillion. Otherwise, as Members of the loyal opposition--with emphasis on ``loyal''--it is our duty to let the taxpayers know the true cost of the stimulus bill.

Unfortunately, stuffing all of that understated new spending into the stimulus bill will make it harder for Democrats as well as Republicans to reach the bipartisan goal of fiscal discipline, and I have another chart which shows how hard it will be.

This chart shows the trendline from President Clinton's era through George W. Bush's era and for the current fiscal year of the deficit as a percentage of gross national product. As this chart shows, President Clinton's era saw deficits decline in the early years. Once Republicans won control of the Congress and entered the scene, making fiscal discipline a priority, the deficits turned into surpluses during those years. In the George W. Bush era, deficits occurred during the economic downturn of 2000, with the tech bubble burst, the corporate scandals of 2001, and, of course, the economic shock of the terrorist attacks of 9/11. So we have a downturn, or we have an increase in the deficit is the easiest way to say it.

Now, fortunately, during 2001 to 2003, we had bipartisan tax relief that kicked in, the economy recovered, and deficits started to come down during this period of time right here.

Now we find ourselves dealing with the housing and financial sector problems. Those problems matured during the period of divided government--the last Congress--for the years 2007 to 2008. During that 2-year period, Democrats controlled Congress and, obviously, we had a Republican President. The response of the Republican White House and Democratic Congress was the Troubled Asset Relief Program, TARP, and other stimulus legislation. Those bipartisan actions led to the large deficit here in 2009, and that was the deficit that awaited President Obama. That is over $1 trillion.

Two nights ago--Tuesday night--President Obama pointed this fact out, and Democrats lustily cheered. I found the partisan cheering just a bit odd. I saw people leading that cheer vigorously clapping their hands. This enthusiastic applause from the other side would make you think President Obama was somehow predicting we would have a Mets-Yankees Subway Series in 2009. But, no, the President wasn't making a sports prediction; President Obama was noting that he had inherited a record deficit. Not many on our side find much to cheer about a record deficit, and I doubt that many taxpayers find much to cheer in it either. That is why you didn't see much applause from the Republican side of the aisle Tuesday night as the President was speaking to us. Big deficits aren't anything to applaud about. I was scratching my head on that one. Maybe the Democratic leadership forgot they were running the show here the last Congress. Maybe they looked at some polling data and inferred from that polling data that voters didn't realize Democrats ran the Congress in the last couple of years and were authors of the budgets for that period and last year's stimulus and the TARP deal.

Maybe they figured that the President was taking a sharp and effective political shot, but you must be careful because history says otherwise. The TARP legislation was cut by Democratic congressional leaders, ably led by Chairman Barney Frank in the House and our able chairman from Connecticut, Chris Dodd in the Senate. In the key negotiations on one fateful fall Saturday night, there was only one Republican Senator in the room. There were at least four Democratic Senators in the room. I find it curious that Democrats lustily cheered when President Obama, Tuesday night, rightly pointed out that he inherited a $1.2 trillion deficit. There is no doubt he did inherit such a deficit. We on our side do not dispute that. But for the congressional Democratic leadership to pretend that they did not play a key role in creating the deficit, at least from the standpoint of 2 years of their budgets as well as the TARP legislation and other stimulus things, is beyond being absurd. To be giddy about the record deficits is almost Kafkaesque.

Yet that incorrect partisan assertion is, like this $787 billion figure I am referring to, somehow accepted as fact by opinion makers and pundits. If we go to the last column of this chart, the one with the red line, we see the real fiscal damage of the stimulus bill. In the first few weeks of this Congress the inherited deficit, which was bad enough at 8.3 percent of GDP, was made much worse. It is now 13.5 percent of GDP. We have not had deficits that high since the World War II era.

If you go back over the debate in committee, on the floor and on the conference agreement, you will find that Republicans opposed the bill because, in general, we believed the bill failed National Economic Council Director Summers'--Dr. Summers of Harvard University--three ``t'' tests: that it needed to be timely, it needed to be targeted, and it needed to be temporary. Those are words directly from, I think, a December 28 Post article that Dr. Summers wrote. It was failure in that third ``t,'' the ``temporary''
test, that was most troubling to those of us who voted against it. I have laid out the degree of that failure in the comments today.

The response from many on the other side is that Republicans are in no position to criticize of because the deficits of the years 2001 through 2006. I put this chart back up here again. As I have shown, while briefly rising in 2004, the deficits consistently came down for budgets produced and implemented in the period 2004, 2005, and 2006. Most often the critics from the other side make the widespread bipartisan tax relief of this era the culprit for our deficit. Let's take a minute to put that characterization in context.

I have a chart that compares the revenue loss of the bipartisan tax relief with the full effect of spending in the stimulus bill. On the left side of this chart, over here, you will see all the tax relief enacted in various bills in the period 2001 through 2006. There were quite a few major tax relief bills in this period of time. They yielded tax relief for virtually every American taxpayer. We cut marginal tax rates, we doubled the child tax credit, we greatly expanded education tax incentives, we created the largest retirement savings incentives in a generation and provided significant relief from the confiscatory reach of the death tax, and we protected tens of millions of families from the alternative minimum tax.

In this major tax relief program we made the Tax Code--now everybody is saying this is counterintuitive--but we made the Tax Code more progressive in those pieces of legislation. But, as would be expected, the Joint Committee on Taxation assigned significant revenue loss to these packages. That is up here on this side of the chart where you see what the Joint Tax Committee says. It scores at $2.2 trillion. As I understand it, for some folks that figure raises their blood pressure. It would raise mine too if I liked to hike taxes and keep taxes high. You can understand it from the perspective of those critics--those taxes represent $2.1 trillion that folks in this body and the other body would rather spend. But we all know that tax relief did a lot of good.

I have another chart about tax relief doing a lot of good. For a family of four at $50,000 a year of income, we have $2,300 more for that family budget to operate under. For a single mom with two kids it means she keeps $1,100 for her to spend instead of 535 Members of Congress spending.

From what we heard on the campaign trail a few months ago, and we heard a couple of days ago here in the Capitol building, President Obama agrees with most of this tax relief program. He said his first budget will retain most of that tax relief that is in those various bills.

For purposes of this discussion, let's assume the merits--I want to assume the merits of the arguments of the critics of the bipartisan tax relief program; that is, let's assume all of the $2.2 trillion was policy that, despite what President Obama will propose, is policy these critics disagree with. For a fiscal damage assessment, let's compare the revenue loss of this widespread tax relief, leaving money of $1,100 in the pockets of a single mom or $2,200 in the pockets of a family of four--let's assume the real cost. So, for fiscal damage assessments let's compare the revenue loss of this widespread tax relief with the real cost of the stimulus bill signed last week by the President.

I am going to go back to the chart that makes the comparison. So here it is. On the right side you will see that CBO estimates the 10-year cost of the bill if the temporary proposals are made permanent. Guess what, it is higher than it is over here. The total is $2.5 trillion. This one stimulus bill costs about 10 percent more than the full effect of the tax relief bills passed between 2001 and 2006. For a lot of those bipartisan tax relief bills, again, virtually every American taxpayer benefits from these tax relief bills. On average, the American taxpayer's tax bills would be 10 percent higher today if this bipartisan tax relief plan were not in effect. We heard a lot from the critics of tax relief about fiscal discipline. Where are those same people today? Why are they not applying the same standard to the one partisan spending bill that they applied to the widespread bipartisan tax relief bill?

It was good to hear my President, President Obama, raise the important goal of deficit reduction Tuesday night. He got applause from our side of the aisle. He was right that he inherited a serious budget deficit. The Democratic leadership applauded that line because they falsely claim that only Republicans bequeathed the deficit to President Obama. The reality is that a Democratic Congress as well as a Republican President bequeathed the deficit from bipartisan policies they jointly developed. To those who claim Republicans have no right to discuss deficits, they need look no further than their own actions. They need to take a look at the fiscal effects of the stimulus that was crafted early in this new Congress and compare the costs in that bill with all of the bipartisan tax relief that they criticize.

In other words, compare this here, what happened in 2 weeks, with what happened over a period of 5 or 6 years of deficit reduction. The partisan stimulus bill's costs exceed that of the bipartisan tax relief.

As we examine President Obama's first budget, let's take a cue from his speech Tuesday night. Let's make deficit reduction a priority and let's do it in an intellectually honest fashion. A lot of fiscal damage was done in the stimulus bill enacted a few days ago. That is not so of what was assigned to the years 2009 and 2010, but what was assigned way out into the future years, as if somehow the stimulus bill were a platform for the subterfuge of getting things done in 2 weeks that ought to have the very crafty look-see that goes on in the very sophisticated appropriation process between April and September, weighing one priority against another priority.

As we proceed, then, to write a budget in a couple of weeks, let's do it in an intellectually honest manner. Let's take off the political blinders and deal with the cold, hard fiscal facts. Let's be realistic about expiring tax relief, its merits, its economic growth effect. That is shown by that one chart where the deficit went down an extreme amount, even though we had cut taxes, which I know to most people sounds as though it can't happen. If you reduce tax rates, you have to reduce revenue. If you raise tax rates, you are going to bring more in. But I think our history over the last 6 years shows that you can reduce taxes and still reduce deficits.

Let's take off the political blinders and deal with cold, hard fiscal facts. Let's be realistic about expiring tax relief, its merits, its economic growth effect and its political popularity. Let's sharpen our pencils, get out our yellow notepads and rev up our calculators as we consider new nominally temporary spending or tax cuts. We owe it to the American people who send us here.

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