Biodiesel Tax Credit

Floor Speech

Mr. GRASSLEY. Mr. President, I have a unanimous consent request but I will wait until a Member from the other side is here to make it. As a predicate to that, I will make a statement on my reason for doing so.

As the majority continues to struggle in an attempt to pass another massive deficit spending bill through Congress, biodiesel plants in Iowa and throughout the country continue to lay off workers because the Democratically controlled Congress has not extended the biodiesel tax credit. This is a simple and noncontroversial tax extension that will likely reinstate 20,000 jobs nationwide and about 2,000 jobs in my State of Iowa all by itself. These jobs have fallen victim to a tactic used by the Democratic leadership to hold this popular and noncontroversial tax provision hostage to out-of-control deficit spending in Washington.

This past February, I worked out a bipartisan deal with Chairman Baucus to extend the expired tax provision, including the biodiesel tax credit. However, the Senate Democratic leadership decided to put partisanship ahead of job security for thousands of workers in the biodiesel industry. I am here again to try to put thousands of workers back to work, American workers, in the process of producing a clean and renewable fuel. We already stripped out and passed the so-called doctor fix from the larger extenders bill last week. We should do the same with the biodiesel tax credit right now.

Also there is a difference between the biodiesel tax credit and the other tax provisions in the tax extenders bill. The failure to extend the biodiesel tax credit before it expires has ground the industry to a halt, because biodiesel is now more expensive than gasoline and gas stations know they can't sell it. So, of course, naturally, they don't buy it. Therefore, biodiesel producers have stopped producing it because they have nobody to sell it to. While the other tax provisions are important, they are not as time sensitive as biodiesel, because they are not transactional tax incentives like the biodiesel tax credit but instead are based on the taxable year.

I am going to reserve my unanimous consent request until the Senator from Michigan returns. I will go to other remarks I want to make at this point.

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Mr. GRASSLEY. I thank the Chair.

Mr. President, this morning we saw yet another replay of a dialog between some of my friends on the other side and some on my side of the aisle. It kind of goes like this. Republicans make a proposal to make a pending Democratic leadership proposal such as the extenders bill deficit neutral. The Democratic leadership marshals the votes and defeats the deficit-neutral proposal on a largely party-line basis. After the vote, debate ensues. My friends on the other side define the proposal that they defeat in an incorrect way. They define it as a proposal to carry out the policy of a fiscally responsible manner as opposition to the underlying policy in the proposal. Republicans counter that the Republican deficit-neutral proposal carries most, if not all, of the policy contained in the Democratic leadership's proposal.

When the smoke clears, the true differences between the two sides' approaches become very clear. My friends on the other side want to add to the deficit to carry out the underlying initiative--be it an extension of unemployment benefits or a lot of other things in the bill. On this side, we want deficit neutrality at a minimum by rolling back future bloated spending. The Democratic leadership wants to keep in place the future bloated spending. Tax increases are OK, if they are offset. Bring on hundreds of billions of dollars of tax increase, whether they hit individuals, small businesses, or what have you. As an example, the latest tax is due to hit next week. Next Tuesday, July 1, users of tanning bed services will face a new 10-percent tanning bed excise tax. God help us if someone proposes to make the government even a little bit leaner. That proposal will be met with a brick wall of resistance, even if it is a proposal to roll back future unobligated, unallocated stimulus spending, which stimulus spending has not accomplished what it was intended to accomplish, keeping unemployment under 8 percent.

The upshot is this: For my friends in the Democratic leadership, keeping the spending spigot all the way open trumps deficit reduction. Keep the spending going, in other words. Worry about our deficit sometime down the road. Let our grandchildren worry about it.

On the Republican side, we want to trim the spending and save some taxpayers money by managing priorities. That is a worthwhile debate. It is an intellectually honest debate. It is the kind of debate that can inform fiscal policy judgments. But my friends in the Democratic leadership are not content to have the debate on that basis. Instead, we have seen a pattern where they want to change the subject. Instead of focusing on the present and the future, my friends on the other side want to revisit the past. In veering away from current choices and future fiscal consequences, my friends on the other side take the discussion in a whole different direction. My friends on the other side claim they cannot deal with these problems in a fiscally responsible manner because of Republicans. Republicans only left them with fiscal problems.

People watching C-SPAN witnessed this back and forth last Thursday, and around lunchtime the Senate voted on Senator Thune's alternative to the Democratic leadership's extender bill. The Thune amendment took the exact opposite approach to the Democratic leadership's substitute. It cut taxes by $26 billion by extending current law. It cut spending by over $100 billion and reduced the deficit by $68 billion. Those are not this Senator's numbers. They come from the nonpartisan Congressional Budget Office and the nonpartisan Joint Committee on Taxation.

According to the Congressional Budget Office, the last version of the Democratic leadership's extender substitute would have increased direct spending by about $105 billion through the year 2020, and raised revenues by about $50 billion over that period, resulting in a net deficit increase of about $55 billion. As an aside, last Friday Chairman Baucus and I prevailed on the leadership to clear the deficit-neutral bill that extended the so-called Medicare doctor fix. That action will cut those numbers a little bit.

On the larger bill, however, the contrast could not be clearer. The Republican Conference, along with one member of the Democratic caucus, voted to change the bottom line fiscal effects of the Democratic leadership's extender substitute. If Senator Thune had prevailed, his amendment would have reduced the deficit by $13 billion more than the amount the Democratic leadership's extender substitute would have added to the deficit. The Thune amendment reached this better fiscal result by simple common sense of restraining Federal spending. All but one Member of the Democratic caucus then in attendance, 57 Senators, voted against the Thune amendment. One of the Senators who voted for the Thune amendment came to the Senate floor to highlight the differences between the Democratic caucus and the Republican Conference in the approach to this extenders bill.

A Member of the Democratic leadership also made some comments on the current fiscal problems. Instead of focusing on the question of whether to offset the policy or not, that Member decided to change the subject. As we saw this morning, that Member of the Democratic leadership wanted to go back several years and talk about fiscal history.

This morning, like last week, there was a lot of revision or perhaps editing of the recent budget history.

I expect more of it from some on the other side.

The President signaled as much in an interview with George Stephanopoulos a few months ago. I agree with the President that there is a lot of revisionism in the debate.

The revisionist history basically boils down to two conclusions: One, that all of the ``good'' fiscal history of the 1990s was derived from a partisan tax increase bill of 1993; and, two, that all of the ``bad'' fiscal history of this decade to date is attributable to the bipartisan tax relief plans.

Not surprisingly, nearly all of the revisionists who spoke generally oppose tax relief and--do you know what--support tax increases. The same crew generally supports spending increases and opposes spending cuts.

In the debate so far, many on this side have pointed out some key undeniable facts. The stimulus bill passed by the Senate, with interest included, increases the deficit by over $1 trillion. The stimulus bill was a heavy stew of spending increases and refundable tax credits, seasoned with small pieces of tax relief.

The bill passed by the Senate had new temporary spending that, if made permanent, will burden future budget deficits by over $2.5 trillion. That is not Senate Republicans adding that up. It is the official congressional scorekeeper, the Congressional Budget Office, nonpartisan as they are. In fact, the deficit effects of the stimulus bill passed a year ago March--passed within a short time after the Democrats assumed full control of the Federal Government--roughly exceeded the deficit impact of the 8 years of bipartisan tax relief.

All of this occurred in an environment where the automatic economic stabilizers, thankfully, kicked in to help the most unfortunate in America with unemployment insurance, food stamps, and other benefits.

That antirecessionary spending, together with lower tax receipts, and the TARP activities, has set a fiscal table of a deficit of $1.4 trillion for the fiscal year that ended several months ago. That is the highest deficit, as a percentage of the economy, in post-World War II history.

It is not a pretty fiscal picture, and it is going to get a lot uglier with the budget put forward by the President this year. It is the same result under the budget crafted last year by the Democratic leadership.

So for the folks who see this bill as an opportunity to ``recover'' America with government taking a larger share of the economy over the long term, I say congratulations. America has been recovered with a vast expansion of government and the American People have a lot of red ink to look forward to.

Members who voted for the budget and the fiscal policy envisioned in it put us on the path to a bigger role for the government. But supporters of that fiscal policy need to own up to the fiscal course they are charting.

That is where the revisionist history comes from. From the perspective of those on our side, it seems to be a strategy to divert, through a twisted blame game, from the facts before us. How is the history revised? Let's take each conclusion one by one.

The first conclusion is that all of the ``good'' fiscal history was derived from the 1993 tax increase. To test that assertion, all you have to do is take a look at data from the Clinton administration.

The much-ballyhooed 1993 partisan tax increase accounts for 13 percent of the deficit reduction in the 1990s--13 percent. That 13 percent figure was calculated by the Clinton administration's Office of Management and Budget.

The biggest source of deficit reduction, 35 percent, came from a reduction in defense spending. Of course, that fiscal benefit originated from President Reagan's stare-down of the Communist regime in Russia. The same folks on that side who opposed President Reagan's defense buildup take credit for the fiscal benefit of the ``peace dividend.''

The next biggest source of deficit reduction, 32 percent, came from other revenue.

Basically, this was the fiscal benefit from pro-growth policies, like the bipartisan capital gains tax cut in 1997, and the freetrade agreements President Clinton, with Republican votes, established.

The savings from the policies I have pointed out translated to interest savings. Interest savings account for 15 percent of the deficit reduction.

Now, for all the chest-thumping about the 1990s, the chest-thumpers, who push for big social spending, didn't bring much to the deficit reduction table in the 1990s. Their contribution was 5 percent.

What is more, the fiscal revisionist historians in this body tend to forget who the players were. They are correct that there was a Democratic President in the White House. But they conveniently forget that Republicans controlled the Congress for the period where the deficit came down and turned to surplus.

They tend to forget they fought the principle of a balanced budget that was the centerpiece of Republican fiscal policy.

Remember the government shutdown of late 1995, my friends on the Democratic side? Remember what that was about? It was about a plan to balance the budget. We are constantly reminded of the political price paid by the other side for the record tax increase they put in the law in 1993. Republicans paid a political price for forcing the balanced budget issue in 1996. But, in 1997, President Clinton agreed. Recall as well all through the 1990s what the year-end battles were about.

On one side, congressional Democrats and the Clinton administration pushed for more spending. On the other side, congressional Republicans were pushing for tax relief.

In the end, both sides compromised. That is the real fiscal history of the 1990s.

Let's turn to the other conclusion of the revisionist fiscal historians. That conclusion is that, in this decade, all fiscal problems are attributable to the widespread tax relief enacted in 2001, 2003, 2004, and 2006.

In 2001, President Bush came into office. He inherited an economy that was careening downhill. Investment started to go flat in 2000. The tech-fueled stock market bubble was bursting. After that came the economic shocks of the 9/11 terrorist attacks. Add in the corporate scandals to that economic environment.

And it is true, as fiscal year 2001 came to close, the projected surplus turned to a deficit. But it is wrong to attribute the entire deficit occurring during this period to the bipartisan tax relief. According to CBO, the bipartisan tax relief is responsible for only 25 percent of the deficit change, while 44 percent is attributable to higher spending, and 31 percent is attributable to economic and technical changes.

At just the right time, the 2001 tax relief plan started to kick in. As the
tax relief hit its full force in 2003, the deficits grew smaller. This pattern continued up through 2007.

If my comments were meant to be partisan shots, I could say this favorable fiscal path from 2003 to 2007 was the only period, aside from 6 months in 2001, where Republicans controlled the White House and the Congress. But, unlike the fiscal history revisionists, I am not trying to make any partisan points, I am just trying to get to the fiscal facts.

There is also data that compares the tax receipts for 4 years after the much-ballyhooed 1993 tax increase and the 4-year period after the 2003 tax cuts. I have a chart that tracks those trends.

In 1993, the Clinton tax increase brought in more revenue as compared to the 2003 tax cut. That trend reversed as both policies moved along.

Over the first few years, the extra revenue went up over time relative to the flat line of the 1993 tax increase.

So, let's get the fiscal history right.

The progrowth tax and trade policies of the 1990s, along with the ``peace dividend,'' had a lot more to do with the deficit reduction in the 1990s than the 1993 tax increase. In this decade, deficits went down after the tax relief plans were put in full effect.

No economist I am aware of would link the bursting of the housing bubble with the bipartisan tax relief plans of 2001 and 2003.

Likewise, I know of no economic research that concludes that the bipartisan tax relief of 2001 and 2003 caused the financial meltdown of September and October 2008. I have a chart that shows what the President inherited from a Democratic Congress and a Republican President.

As I said, from the period of 2003 through 2007, after the bipartisan tax relief program was in full effect, the general pattern was this: revenues went up and deficits went down.

That is the past. We need to make sure we understand it. But what is most important is the future. People in our States send us here to deal with future policy. They don't send us here to flog one another, like partisan cartoon cut-out characters, over past policies. They don't send us here to endlessly point fingers of blame.

The substitute before us takes us in the direction of more deficits and debt. The Thune amendment, which was rejected by most of the Democratic Caucus, would have put us on a path in the opposite fiscal direction. My friends on the other side fool no one if they pretend that the fiscal choices made by the Democratic leadership and the President over the last year have nothing to do with this rapidly rising debt.

President Obama rightly focused us on the future with his eloquence during the campaign. I would like to paraphrase a quote from the President's nomination acceptance speech: We need a President who can face the threats of the future, not grasping at the ideas of the past.

President Obama was right.

We need a President, and, I would add, Congressmen and Senators who can face the threats of the future. Grasping at ideas of the past or playing the partisan blame game will not deal with the threats to our fiscal future.

It is not too late to correct the excesses of the stimulus bill or the bloated appropriations bills that will come. The Senate missed an opportunity with a partisan rejection of Senator THUNE's alternative.

We took a small, bipartisan step last Friday. The Senate unanimously approved a paid-for Medicare doc fix bill, led by my friend, Chairman BAUCUS. That was the way we need to go.

There are more bipartisan fiscally responsible efforts underway. Senator MCCASKILL's and Senator SESSIONS' amendment, which calls for a timeout on the exponentially rising levels of appropriations spending, is a good start. The President called on the Democratic leadership to do something similar.

That is what the American people want and need. There is a way to reach a real bipartisan compromise. It is right in front of the Democratic leadership. Efforts to change the subject and blame Republican Congresses of many years ago won't answer the questions about what needs to be done now.

Efforts to blame every fiscal problem on a Republican President who retired a year and a half ago is no answer. It is a strategy that avoids responsibility for the trillions of new spending that the Democratic leadership and this President have muscled through with large majorities. It is time to match the power with responsibility. The American People expect no less.

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