Debt And Deficit

Floor Speech

Debt And Deficit

Mr. GRASSLEY. I have a chart here from the 2007 speech that deals with perhaps the most famous trigger. Of course, I refer to Trigger, the horse belonging to the cowboy actor Roy Rogers. As I mentioned in the past, Trigger is no longer with us. Today he is stuffed and on display at the Roy Rogers-Dale Evans Museum in Branson, MO. Even so, Trigger, in his current stuffed state, is still much more imposing than the House Democrats' trigger device.

While past Democratic trigger proposals were bad, the current House Democrats' trigger proposal is even worse because it is under the control of a partisan OMB Director and is based upon an OMB Director's estimate--I repeat, an estimate--of health care savings for the years 2013 to 2019.

I do not think anyone really expects this trigger to be pulled. Even the nonpartisan Joint Committee on Taxation, in its $544 billion revenue estimate of the House Democrats' small business surtax proposal, assumes that the estimated savings targets will not be reached and the rates will go up, for sure, in 2013.

Clearly, on the question of how to pay for health care reform, Republicans and Democrats appear to be drifting in different directions. Republicans want to pay for health care reform through changes in the health care system--mostly on the spending side but also on the revenue side--to make health care more accessible and more affordable. In contrast, House Democrats' most recent proposal to pay for health care reform--the small business surtax--goes far outside the universe of health care.

By abandoning the universe of health care in their financing scheme, House Democrats are clearly indicating that the goal of their health care reform proposal is increased coverage at any cost. Even the New York Times--now, believe this: Even the New York Times, hardly a strident critic of the Democrats in Congress or the White House, cautions against this coverage-at-any-cost approach:

If the government simply extends subsidized insurance to millions of uninsured people but fails to force fundamental changes in the delivery or financing of health care, then federal health care costs will keep escalating at excessive rates. That will drive up deficits in subsequent decades unless new taxes are imposed or new savings found.

That is the end of the quote from the New York Times.

We need to reform our health care system, but we need to do it right. That is why I am working with Senator Baucus, chairman of the Senate Finance Committee, along with Senators Snowe, Enzi, Conrad, and Bingaman, to reach a bipartisan solution. My Finance Committee colleagues and our staffs have been working hours and hours each day and night, and weekends, to navigate through the numerous complex issues of health care reform. Has it been easy? Obviously not. However, I am very hopeful we can reach a bipartisan agreement that makes health care in America more accessible and more affordable, while at the same time protecting taxpayers and preventing the Federal Government from taking over health care.

President Obama, in his prime time press conference last week, expressed his agreement with these principles. While stating generally that the reform he is proposing will keep government out of health care decisions, President Obama specifically made the following promises:

I'm not going to sign a bill that, for example, adds to our deficit. I won't sign a bill that doesn't reduce health care inflation so that families as well as government are saving money. I'm not going to sign a bill that I don't think will work.

I will take the President at his words on these promises, but I am going to hold him to them. The President is sending a clear signal that he could not sign the Pelosi bill, the Health, Education, Labor, and Pensions bill, or similar pieces of legislation. Why? Because each of those would drastically expand the Federal Government's control of the health care system, increase the deficit, and fail to reduce long-term health care inflation.

Here is the bottom line. When the long-term budget outlook warns that rising health care costs will cause Federal spending to grow so fast as to put the Federal budget on an unsustainable path, Congress needs to take action. But, at the same time, when our goal is to reform 17 percent of the economy, while facing a nearly $2 trillion annual

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deficit, more than $9 trillion in new debt over the next decade, and a projected debt-to-GDP ratio of over 300 percent by 2050, we have to make sure we are doing this job right. That is what we are trying to do in the Senate Finance Committee. When we get finished, however long it takes, I hope we can send a deficit-neutral health care reform bill to President Obama that increases access, cuts costs, and puts us on a fiscally sustainable path for years to come.

Mr. President, I yield the floor.

Mr. GRASSLEY. Mr. President, I thank the Senator from Rhode Island for his kind remarks.

We are only 9 months into fiscal year 2009, and for the first time in American history the Federal deficit has reached and exceeded $1 trillion. This is not one of those firsts for our great Nation that calls for celebration, and there will not be any celebration.

Unfortunately, the bad fiscal news is not yet over for the year. We are still on track for a year-end deficit of over $1.8 trillion for fiscal year 2009. That is not according to this Senator, that is according to our official scorer, the Congressional Budget Office, the nonpartisan organization.

This 2009 deficit as a percentage of gross domestic product will be a staggering 13 percent, the highest rate since the end of World War II. I have a chart that shows this, a chart that puts the deficit in context.

Here is also a chart that puts the debt into context. I want to remind the Senate that I agree with President Obama that he did, in fact, inherit part of these deficits and debt. What is not often pointed out is this: The deficits and debt were bequeathed back then on a bipartisan basis because the Democrats controlled the last Congress. Starting in the year 2007 that Congress wrote the budget, it wrote the spending bills; that democratically controlled Congress wrote the financial bailout bill. A Republican President, George W. Bush, signed those spending bills. President Bush signed the financial bailout bill. The chart shows the bipartisan deficit President Obama inherited--and that would be the gray part of the deficit chart--and the chart shows the bipartisan debt President Obama inherited. That would be on the chart as well.

Today we have seen more revisionist fiscal history from many of my friends on the other side. It boils down to two very basic propositions. The first proposition is, all good economic policy and beneficial fiscal effects are due to the partisan tax hike of 1993. The second proposition is that all bad economic policy and detrimental fiscal effects of this decade are due to the bipartisan tax relief plans of 2001 and 2003.

How convenient for my friends on the other side of the aisle. If we take this fiscal revisionism to its logical extreme, the answer of some on the other side might be to tax every dollar of income earned by the American taxpayer. There seems to be an attitude that any policy that allows Americans to keep more of their own money is just automatically bad, while any policy which takes more of their money and spends it is automatically good.

I think it is fairly clear the fiscal revisionists on the other side do not have a problem with huge deficits; rather, they are threatened by the prospects of Americans deciding what they want to do with their very own money.

In fact, the deficit effects of the stimulus bill passed within a short time after Democrats assumed full control of the Federal Government exceeded the deficit impact of the 8 years of the bipartisan tax relief. Again, this is comparing the tax relief with the stimulus as you see in the chart.

Since the stimulus package spilled a lot of red ink, let's take a look at how the economy has done. Unemployment currently stands at 9.5 percent, the highest rate in the last 26 years. The economy has shed 6.4 million jobs since this recession began, and that also includes, though, 2.6 million jobs lost since President Obama took office.

Even with the passage of the massive $787 billion stimulus bill in February, the promise of jobs, jobs, jobs that went with that $787 billion stimulus bill, there is still no end in sight to the rise of unemployment and job losses.

The President himself recently said:

My expectation is that we will probably continue to see unemployment kick up for several months.

While the short-term news is bad, I have bad news for you. The long-term news is much worse. If the Obama budget is adopted, by 2019 we will have added over $9 trillion to the national debt held by the public, and our debt as a percentage of the economy will grow in excess of 80 percent, in excess of 80 percent, a level also that has not been seen since this country was in World War II.

Let me say, the 50-year average of that national debt, according to the economy, has been about 40 percent. So we are talking about more than doubling what it has been over the last 50 years.

The huge spike in spending that we have seen over the course of the past 9 months has been advertised as temporary. But even so, the deficit as a percentage of GDP in 2019 is projected to be 5.5 percent, a level that everybody, including the President, agrees is unsustainable. You can see that on our charts as well.

Looking beyond the 10-year window paints an even bleaker picture. I have a chart from the Congressional Budget Office that projects a terrifying rise in debt held by the public as a percentage of GDP over the next 40 years. As we can see from the dotted line, the highest level of debt held by the public as a percentage of GDP, 107 percent, occurred in 1945 as a result and at the end of World War II. In either of the two scenarios outlined in the Congressional Budget Office's long-term budget outlook, shown by the red and green lines on the chart respectively, we are on a course to break this record sometime in the next 15 to 35 years and reach ratios of debt to GDP of up to 128 percent or, at the extreme, 321 percent by 2050.

The Congressional Budget Office's own words are these:

The systemic widening of budget shortfalls projected under CBO's long-term scenarios has never been observed in U.S. history.

Some may ask: Why is this a big deal? What does debt held by the public have to do with my everyday life? The Congressional Budget Office makes three points answering this question. This is the Congressional Budget Office, a nonpartisan group of experts whose sole job is to project, at least 10 years ahead of time, what the situation is with every spending bill and the impact of the deficit. This is what they say: If the ratio of debt to GDP continues to rise, lenders may become concerned about the financial solvency of the government and demand higher interest rates to pay for the increasing riskiness of holding government debt. No. 2, if the debt-to-GDP ratio keeps increasing and the budget outlook is not improved, both foreign and domestic lenders may not provide enough funds for the government to meet its obligations. And No. 3, if the first two points happen, no matter whether the government resolves the fiscal crisis by printing money, raising taxes, cutting spending or going into default, it is certain that economic growth will be seriously disrupted.

Whenever economic growth is seriously disrupted, job growth is seriously disrupted as well. Clearly, a debt-to-GDP ratio approaching 100 percent would have a disastrous impact on everybody's everyday life.

So where do we go from here? Clearly, we are well on our way to fiscal catastrophe unless we change course. What is the best way to break out of
this recession, to start creating jobs, to reverse the mountainous growth of deficit and debt and get the economy moving again? That is a very important and long question. Let me see if I can answer. In general, Democrats and Republicans seem to have opposing viewpoints when it comes to the solution to this problem, with Republicans favoring lower taxes and lower spending, while Democrats favor higher taxes and higher spending. However, both Republicans and Democrats agree that health care reform is a crucial ingredient to solving the long-term budget crisis.

Both Republicans and Democrats agree health care reform needs to be paid for as well. The Congressional Budget Office is also on the same page, asserting that, in their words:

In the absence of significant changes in policy, rising costs for health care will cause federal spending to grow much faster than the economy, putting the federal budget on a nonsustainable path.

Over the past few months, the rising cost of health care has been characterized by a few creative illustrations. First, we have heard the chairman of the Budget Committee refer to the rising cost of health care as ``an 800-pound gorilla.'' Second, we have heard the President describe the rising cost of health care as ``a ticking timebomb.''

Today I wish to add a third illustration. The rising cost of health care is a massive, fire-breathing debt and deficit dragon. In the King Arthur legend, the greatest knight among the Knights of the Round Table was Sir Lancelot. Sir Lancelot was also a dragon slayer. In order for Sir Lancelot to strike down the dragon, he had to be equipped with suitable weapons. The same is true today with the rising cost of health care. As Congress contemplates ways to cut down on the massive, fire-breathing debt and deficit dragon, it must wield the proper weapons.

As you can see here, we have the debt and deficit dragon.

A few weeks ago, House Democrats proposed a graduated surtax of up to 5.4 percent on taxpayers making over $280,000 to partially offset their health care reform bill. This small business surtax would push the top marginal tax rates up to between 43 percent and 46.4 percent, a rate that would jump to over 50 percent in 39 States with Medicare and State and local taxes added in. This is according to the Tax Foundation. So is this small business surtax the proper weapon to strike down the debt and deficit dragon? I have a chart that shows not Sir Lancelot but Sur Taxalot on his way to slay the debt and deficit dragon with his mighty surtax. This is Sur Taxalot, as we can see. The surtax is a large, heavy, painful weapon and lethal to America's job engine, the goose that lays the golden egg, small business America.

Take a good look at Sur Taxalot.

However, it is not effective against the debt and deficit dragon because it does nothing to slow the dragon's exponential growth. The cost of health care that the dragon feasts upon will continue to increase much faster than the revenues that Sur Taxalot can collect with his surtax.

CBO Director Doug Elmendorf testified in front of the Budget Committee 2 weeks ago. Dr. Elmendorf stated: None of the legislative changes looked at by CBO so far, including the House Democrats' small business surtax, ``represent the sort of fundamental change of the order of magnitude that would be necessary to offset the direct increase in federal health costs from the insurance coverage proposals.''

Clearly, unlike Sir Lancelot, Sur Taxalot is no dragon slayer.

Now let's look at how House Democrats' small business surtax works. In 2011 and 2012, singles making between $280,000 and $400,000 and families making between $350,000 and $500,000 will pay an extra 1-percent surtax. Singles making between $400,000 and $800,000 and families making between $500,000 and $1 million will pay an extra 1.5 percent. Finally, singles making more than $800,000 and families making more than $1 million will pay an extra 5.4 percent. Then in 2013 and after, these surtax rates go up to 2 percent, 3 percent, and 5.4 percent, respectively. The only way these rates would not go up in 2013 is if the President's adviser, the Director of OMB, determines in 2012 that there will be more than $675 billion realized in estimated health care savings by the year 2019.

That is right: The trigger mechanism is back. The House Democrats have made the surtax rate increase subject to a trigger. They have left the judgment on whether to pull the trigger in the hands of a partisan Presidential adviser, not a nonpartisan organization such as the Congressional Budget Office.

As Members of Congress, we should jealously guard our constitutional prerogatives to be the one branch of government tasked with deciding whether revenue is raised by increased taxes or revenue is reduced through decreased taxes. As the great Chief Justice John Marshall said almost 200 years ago:

The power to tax is the power to destroy.

So why would we hand such an enormous power over to the executive branch? I recall, over the last 8 years, hearing from the other side of the aisle that the executive branch was attempting to usurp congressional authority. So where is that jealous guardian of congressional authority now? It seems to be absent.

We have seen this trigger mechanism from the Democrats before. While it has been a couple years, I have spoken at length about this trigger right here on the floor of the Senate.

I ask unanimous consent that a copy of my speech of May 9, 2007, entitled ``A Trigger and a Tax Hike on the American People'' be printed in the Record.

There being no objection, the material was ordered to be printed in the RECORD

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