Increasing The Statutory Limit On The Public Debt
Floor Speech
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Mr. GRASSLEY. Mr. President, I think most of the people watching this debate, studying how Congress works and how the Federal Government works, know there is a statutory limit on the amount of debt that can be issued by the Federal Government. If the public does not know this, they are constantly reminded of it because, from time to time, we pass legislation that does what this legislation does, increase the borrowing capacity of the Federal Government.
Right now this legal limit stands at $12.394 trillion, and it applies to money borrowed from Federal investors such as banks and pension funds, as well as money borrowed from government programs such as Social Security and Medicare. Yes, we ought to admit that a lot of the Federal debt is owned by various foreign governments as well. I think the latest I saw, in the case of China maybe investing and holding about 8 percent of all the Federal debt
and then you have other countries as well.
This determination is made when the Secretary of Treasury goes to the market and says: We want to borrow X number of dollars, and people bid on it. Obviously, we take it for the lowest interest rate we can get, whatever individuals or pension fund or foreign entity might want to take our debt for that interest. That happens throughout the year.
The decision to increase the debt limit is never an easy one. In recent years, I have reluctantly supported increases in the debt limit on the grounds that Congress must pay its bills. That is quite obvious. Some countries--such as Argentina--decided, from time to time, they did not want to pay their debt, and they are paying the piper for making those unwarranted public decisions in those countries. We do not want to be in that shape.
But Congress sometimes, and too often, has been very irresponsible. I am going to get into some of this current irresponsibility but, at the same time, I do not wish to say some other political party is entirely responsible, over a period of decades, for irresponsible spending. But I think it has reached a new height recently. Because of that, I will be voting no.
Sometimes deficits are unavoidable. People know about wars. The No. 1 responsibility of the Federal Government is to provide for the national defense, the protection of Americans or a threat to our security. We meet that threat. If that requires borrowing to do it, to protect the United States, we consider that justified.
But you cannot plan for wars. You can plan for peace by having a strong national defense. So war is one reason, recession is another. Natural disasters are another example. All of these can result in lower taxes and higher spending, which produces bigger deficits that add to our Federal debt.
But sometimes deficits can be avoided. Since the beginning of 2009, the majority in Congress has approved a $787 billion stimulus bill, a $408 billion supplemental appropriations bill, an additional $350 billion for the financial bailout, and, most recently, an Omnibus appropriations bill that increased Federal spending by 12 percent over the previous year's levels.
In my recent 21-county tour of southeast Iowa, I discussed the most recent example as an example of how spending recently has gotten entirely beyond the commonsense view that Midwesterners look at spending by government. I pointed out how 1 year ago today, the new President was sworn in. The previous President was under a budget that was established for a 5-month period of time. That last budget under Bush had spending at a 3-percent increase. But just as soon as the new majority came into power with a new President, that 3-percent increase was not enough for the remaining 7 months, it was jacked up to 9 percent and then, for the year we are in, the 12 percent I just spoke about.
I think you have to adopt a principle of spending that has increases in expenditures related to the economic growth of the tax policies that provide revenue to the Federal Government. That doesn't have to be on a year-to-year basis, but over a long period we ought to have that balance. In other words, without increasing tax rates, with economic growth of the tax base, more money will come in to the Federal Treasury under the same tax rates.
Well, that growth in Federal income coming in makes it possible to appropriate more money, but there ought to be some relationship between the amount of money coming in and the expenditures made by the Congress.
The bills I just referred to--the stimulus bill, the Omnibus appropriations bill, and others--I voted against every one of those on the grounds that we could not afford them. The fact that we are here this week facing yet another vote to increase the debt limit proves that is true. Many of my colleagues, particularly on the other side of the aisle, insist that it is not their fault. They continue to blame previous administrations for all fiscal problems.
I want to make it clear that we in the Republican Party got kicked out of the majority in 2006 because we lost fiscal integrity. I hope we are reestablishing that, and I hope that in the process of reestablishing that we can convince the people who had doubts about Republicans that we can regain their trust.
More recently, as I indicated, it seems a great deal of the current debt problem is related to irresponsible spending that has taken place near term.
What do they target us with when they want to blame us for the deficit? They criticize the 2001 and 2003 tax cuts which they insist were excessive and unfair. Such criticism overlooks several facts. First, these were not Republican tax cuts. They passed both the House and Senate with bipartisan support. Second, Federal revenue quickly returned to the historical average following these tax cuts, so they were not excessive relative to the government's historic claim on revenue.
I suppose you can take any period of time you want, but in the post-President Kennedy period of time, it seems to me the average take of the economy that has come through the Federal Government in the way of taxes has been about 18 to 19 percent. Even including the tax cuts of 2001 and 2003, those cannot be considered excessive relative to the government's historic claim on revenue; in other words, what the government takes as opposed to what they leave in the pockets of taxpayers in the United States.
It is very important to remember that our Tax Code is not fully indexed to inflation and economic growth. Thus, every year without a tax cut results in a small but not insignificant tax increase or more revenue coming into the Federal Treasury without our actually changing rates. Indeed, without the 2001 and 2003 tax cuts, Federal revenue would have risen well above that historic average of 18 to 19 percent. In fact, when we passed those tax cuts, it was very near 21 percent.
Third, critics insist that the 2001 and 2003 tax cuts unfairly benefitted the wealthy. Again, critics are wrong. I quote the Congressional Budget Office. Around here, we don't question the Congressional Budget Office. Maybe you want to. But if you want to question them, it takes 60 votes to override their determination of something, if there is a budget point of order.
According to the Congressional Budget Office, the bottom 90 percent of households pays the smallest share of Federal taxes in nearly 30 years while the top 10 percent pays the largest share. When taxes are measured as a share of income, the bottom 90 percent of households pays the lowest effective rates in nearly 30 years while the top 10 percent pays their historic average.
You can say it many times, but it never sinks in because people have their own ideas of how to show populism, and it is to always hit the wealthy of America. From that standpoint, you have to understand that percentage of top income earners, if you compare what they are paying into the Federal Treasury now with what they were paying in even during the Reagan years, you will find it is a much higher percentage right at this point.
In regard to what I just said about historical averages, President Obama's budget and the budget resolution adopted by the Democratic majority in Congress last year both called for the continuation of 70 to 80 percent of the 2001 and 2003 tax cuts. So you can bad-mouth those tax bills all you want, but the new President, the new majority wants to maintain about 70 to 80 percent of them. So some of it isn't so bad, but you never hear that. It is all about the 2001 tax cuts being everything for the wealthy.
If these tax cuts were so excessive and so unfair then, why does the majority party support so many of those tax cuts right this very day?
The desire to blame our current predicament on the previous administration also overlooks two other facts. First, the Democrats controlled the majority of the Senate during half of the previous administration, including its final 2 years. I think it is disingenuous for them to deny any responsibility for where we are today.
Second, when the new administration took office in 2009, it sent up a budget that proposed to increase the debt three times faster than the previous administration. You know where that takes us to from the 40-year average? I talked about the 40-year average of the proportion of the GNP that is coming into the Federal Treasury as far as taxes are concerned at 18 to 19 percent. Take a 40-year average on what the percentage of the national debt is to gross national product. It is about 40 percent. This is going to be reaching 80 to 90 percent under this budget that was sent here in the previous year.
The majority party essentially approved most of that very same budget. So they have now signaled the intention to continue to increase the national debt at a record pace.
Finally, let me say a word about the health care bill adopted by the Senate. Rather than taking an incremental approach and waiting for the results to see what works and what doesn't work, the majority wants to raise taxes and cut Medicare to pay for a brand new health care entitlement program. If they use all of the tax hikes, and all of the Medicare cuts they can support to pay for more spending, how will they ever reduce the deficit? At what point will those who want to blame our current predicament on previous administrations take responsibility for actions that are taking place now?
This week we have an opportunity to do that. I am glad we have a long period of time to discuss the debt limit but connect it with a lot of policies that seem to be out of proportion to problems that we previously had. If they want to continue to vote for more deficit spending, it seems to me they should vote to raise the debt limit or take actions that would reduce the need for such a dramatic increase in the debt limit.
I yield the floor.
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