Federal Aviation Administration Extension Act of 2010

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Mr. GRASSLEY. Mr. President, I yield my time to myself, 15 minutes out of what we control.

First of all, I remember before the President was sworn in he announced that--even though he ran on a platform of increasing taxes on higher income people--you do not raise taxes during a recession. So during the year 2009, there were no proposals to increase taxes from the administration, and, obviously, the Congress went along with that.

Then, in August 2009, the President was in Elkhart, IN, and there was an exchange there along the same line, and the President said this:

You don't raise taxes in a recession. We haven't raised taxes in a recession.

Well, with 9.8 percent unemployment yesterday, it is quite obvious we are still in a recession. This debate is not about cutting taxes. This debate is whether we ought to increase taxes on anybody during a recession. We believe we should not raise taxes on anybody during a recession.

Also, I heard the other side in their early speeches talk about efforts on this side to prevent unemployment insurance from being extended. Well, that is the same song we heard from the majority party during June and July. I would remind people on the other side of the aisle, the results of the election were that the people of this country said they were concerned about jobs, about the economy, and about the legacy of debt.

During that period of time last summer when we were being accused, as we were just accused this time, of not wanting to do anything about unemployment compensation, on June 14, June 17, June 24, and June 30, we tried to not only extend unemployment compensation but we tried to do it in a way that was paid for so we did not increase the deficit. But we were denied that opportunity.

Finally, soon after the July Fourth break, we were given an opportunity to at least vote on an opportunity to extend unemployment compensation and pay for it. But we did not get the votes because for the other side, a deficit does not bother them except when it comes to increasing taxes on somebody else. Then they say the deficit is of concern to them.

But the fact is, as I said yesterday right here as I spoke to my colleagues, if we look at the history of tax increases in this Congress--in Congress generally--over a long period of time, it is one thing to raise taxes if it will go to the bottom line, but we have seen time after time raise a dollar's worth of taxes and it is a license to spend about $1.15, $1.17. So raising taxes does not reduce deficits. The reason is, it is not because people in this country are undertaxed, it is because Congress overspends. For the tax increases of the past and the expenditures that followed, $1 of taxes gives a license to spend $1.15. It is just like the dog chasing its tail; he never catches it.

So here we are, just 1 month after the people of this country very definitely spoke about their concern about jobs, the deficit, and the economy, and we are right back where the President said we should not be both before he was sworn in and then in August of 2009; that we should not increase taxes during a recession.

So I would like to quickly discuss the proposal to increase taxes on some Americans starting in less than a month from now.

The first one would be unemployment. Just yesterday--as I just stated but to be more specific--the Bureau of Labor Statistics said the unemployment rate ticked back up to 9.8 percent from 9.6 percent. In July, the unemployment rate was 9.5 percent. For the 3 months of August, September, and October, it was pretty steady, 9.6 percent; now for November, 9.8 percent. The unemployment rates for minorities are significantly worse than what it is for the average. The trend is in the wrong direction. In other words, the economy is in a very fragile situation. The economy is clearly telling Congress: Handle with extreme care.

The second point is what the economists say. I have a chart that says what various economists say we ought to do. This was a survey by CNN Money. A majority of the economists say preventing the 2011 tax hikes is the No. 1 thing Congress can do right now to help the economy. That would be the 60 percent of the economists who say don't raise taxes for any taxpayers; the 60 percent of the economists who say preventing tax hikes on all Americans is the best course of action.

But only 10 percent of the economists say preventing tax hikes on only the middle class is the best way to help the economy. Sixty percent say don't increase taxes on anybody versus 10 percent who say it is OK to increase them on some. Of course, the survey is by CNN, hardly known as being a Republican network.

Four, some on the other side may say that preventing tax hikes on higher income folks is not important. The theory goes that high-income people would just save the money. There are a couple problems with that point. The first is, we all know the lack of savings and investment is harmful to the economy. But the other more direct response is, they probably would increase their spending on consumption.

Mark Zandi, a respected economist with Moody's, had this to say: Normally, I would firmly agree that raising taxes on people who make over $250,000 a year would not make a meaningful difference in the way they spend money. But I worry that these aren't normal times and that even this income group may be sensitive.

Now, obviously, these are not normal times when we still have almost 10 percent of the people unemployed and a fragile economy. What this Congress does has consequences, and we ought to be very cautious how we approach it.

Fifth, we have CBO saying the gross domestic product would be as much as 1.4 percent higher in 2011 if all the tax relief of 2001 and 2003 is made permanent. If the tax relief is only for lower income Americans--as is proposed by the amendment before this body and by people on the other side of the aisle--then, according to CBO, the GDP would only be 1.1 percent higher in 2011.

Now maybe some people think the difference between 1.4 percent an 1.1 percent of more growth is insignificant. But let me tell you, when it comes to 10 percent unemployment that sort of economic growth is going to put a significant number of people back to work if we allow the higher 1.4 percent to happen.

In other words, the difference between preventing tax increases on all Americans and on only preventing the tax increases on some Americans--that three-tenths of 1 percent in 2011 is a very significant difference of economic growth.

I would like to go to a sixth point. Given the recession, given the unemployment rate, given business reluctance to invest and grow, is this the time to reduce the gross domestic product at all? If it were just a matter of either the government got the money or the private sector, that would be one thing, as the government does have a deficit problem. But in this case, it is a matter of money simply not being there because of the hit to the gross domestic product. So we are talking about dead-weight loss.

Then, seventh, fiscal history proves higher rates do not yield higher revenue. As shown on this chart, this is a 50-year history of revenue coming into the Federal Government as a percentage of gross national product. The red line is pretty steady. It does not matter whether we have 93 percent rates back in the Eisenhower and early Kennedy years, and then they were reduced down and down and down and down and down, to eventually, in 1987, when they got down to 26 percent, and, in 1990, they went back up to 39.6 percent. Now they are down to 35 percent. Are they going to go back up to 39 percent, 40 percent?

This chart proves the taxpayers of this country are smarter than we are in Congress because we think we can raise high marginal tax rates and bring in more revenue, and it doesn't have anything to do with what the American people are willing to send to Washington.

I wish to quote not this Senator but the Joint Committee on Taxation in regard to high marginal tax rates not making much difference to what money comes into the Federal Government because the taxpayers are smarter than we are. They are smart enough to know that if you have 93 percent marginal tax rates, why work? So you didn't get any more revenue. There is still about 18.2 percent of the gross national product coming in for us to spend. But we don't give the taxpayers of this country any credit for having any smarts because we think we are smarter than they are, and this chart proves the taxpayers are smarter than we are because we have high marginal tax rates, and it doesn't bring in any more revenue. When are we going to learn?

So the Joint Committee on Taxation says about this:

We anticipate that taxpayers would respond to the increased marginal rates by utilizing tax planning and tax avoidance strategies that will decrease the amount of income subject to taxation.

The ninth point out of 11--and I am about done--I often quote the National Federation of Independent Business, the voice of small business here. Because the President says 70 percent of the new jobs in America are created by small business so we ought to listen to what their voice in Washington has to say for small business and what we do and the effect, good or bad, on the economy.

Members of Congress fled with no action on important issues like expiring tax rates, leaving the cloud of uncertainty larger and darker. In response, consumer sentiment fell and owner optimism remained anchored solidly in recession territory. Thus, spending stayed in "maintenance mode'', deterioration of jobs continued, and capital spending remains at historically low rates. Owners won't make spending commitments when sales prospects remain weak, and important decisions--I wish to highlight this--such as tax rates and labor costs remain so uncertain.

This debate adds to that uncertainty, if you are going to have tax increases.

So here we are on a Saturday. I have a chart up that I think says what today's debate is all about. We don't need a dog and pony show going on, on a Saturday, when we ought to be giving certainty to the economy, because the word "uncertainty'' is exactly what CEOs of major corporations told the President back in June, when he called them in and said: You have $2 trillion in cash sitting in corporate treasury. Why aren't you spending it and creating jobs?

They said: Because of so much uncertainty.

So the bottom line is this. Stop the tax hikes.

Mr. President, may I make a unanimous consent request, please, that Senator Hatch have 15 minutes; Senator Thune, 10 minutes; Senator Kyl, 10 minutes; and Senator Graham, 10 minutes.

The ACTING PRESIDENT pro tempore. Is there objection?

Without objection, it is so ordered.

Mr. SCHUMER. Mr. President, would my colleague yield for a question?

Mr. GRASSLEY. Yes, because you New Yorkers think you can make us Midwesterners look bad, but I am glad to yield.

Mr. SCHUMER. I thank my colleague. Through the Chair, I would simply like to ask my colleague this. I understand we have a different point of view. We both care about deficit reduction. Could he please explain to me why it is OK to take $300 billion of tax cuts for those at the highest income levels--above $1 million--and not pay for it, yet we have to pay for an unemployment extension?

Mr. GRASSLEY. Yes; I thought I made that point very clear. Because the taxpayers are smarter than we in Congress are. They know if they give another $1 to us to spend, it is a license to spend $1.15. So it just increases the national debt. When it comes to paying for unemployment compensation, we can pay for unemployment compensation because the stimulus bill was supposed to stimulate the economy and it is not being spent. If you put money from stimulus into unemployment, you don't increase the deficit, and you also have the money spent right away.

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Mr. GRASSLEY. Madam President, I would like to know how much time I have.

The PRESIDING OFFICER. Seven minutes forty seconds.

Mr. GRASSLEY. Madam President, there are a lot of issues that have been brought up in the last hour that need to be responded to. I probably will not get to all of them, but I would like to start with a recent one that was just stated.

It is not a case that tax cuts are more important than any other issue for those of us on this side of the aisle, not at all; growth of the economy, because growing this economy is the only way we are going to get people employed, bringing in more revenue, and getting the deficit down.

We are not going to get the deficit down by increasing taxes, and I will explain that in just a minute. It is going to take economic growth. You have to get the economic engine started again. We have to get the unemployment down. It is the economy we are talking about.

I heard several of my colleagues this morning say if we do not go along with big tax increases, we are giving a bonus to a lot of people in this country who maybe do not need any more money. Well, if you accept the idea that if Congress acts or does not act, we are giving people a bonus, you are starting with a proposition that for all the income people make in this country, Congress is going to decide where that income ought to go and that somehow we are going to give people a bonus if we do not take some sort of action in the Congress. Well, that is ludicrous. That is the ultimate of the lack of economic freedom in this country. Because every penny anybody makes, whether it is through the work of their hands or their brain, is money that belongs to the people of this country; otherwise, they have no economic freedom.

The Constitution gives the power to tax for the legitimate purposes of government. But it does not give us the opportunity to tax to give bonuses to people because the money is theirs in the first place. It is only a question of how much we are going to take away from people for the legitimate constitutional purposes of government.

Then, where do you get the idea that we are going to give a tax break if we do not do something in Congress? The issue is not tax breaks to anybody. The issue is the tax policy of the last 10 years passed in 2001 that will sunset December 31 of this year. Should we continue that tax policy or should we increase taxes on some or all people? That is the issue. We are not talking about a tax break for anybody. In other words, there is not going to be any tax policy different than what we have right now. That is what we feel is the best for the economy. We should not increase taxes on anybody.

You get the impression from the other side that if we start taxing certain people in this country more that somehow the deficit is going to go down. Well, I heard the President recently on some news program discussing this issue, and I do not have an exact quote, but, in effect, he said that as for as he is concerned, rather than not raising taxes on people and bringing that money in to reduce the deficit, he said: I have better ways to spend the money.

I spoke earlier this morning about the fact that people do have a better way of spending the money, not only the increase in taxes that might come in but even beyond that.

I have quoted some individuals so many times, but I brought the exact quotes with me now because I was paraphrasing them before. But Peter Ferrara wrote an article in the Wall Street Journal entitled: "Beware the Balanced Budget Deal.'' He said:

Washington's traditional approach to balancing the budget is to negotiate an agreement on a package of benefit cuts and tax increases.

Then he went on to say:

What happens [if you do this] is the tax increases get permanently adopted into law. But the spending cuts are almost never fully adopted and, even if they are, they are soon swept away in the next spendthrift budget. Then--because taxes weaken incentives to produce--the tax increases don't raise the revenue that Congress initially projected and budgeted to spend. So the deficit reappears.

Then he talked about Reagan making such a deal with Democrats in the Congress to have $3 in spending cuts for every $1 in tax increases. Then he has this sentence:

Reagan went to his grave waiting for those spending cuts.

Then, recently, there was an article by Stephen Moore and Richard Vedder that talks about raising taxes to reduce the deficit. There are a few sentences I am going to read:

Instead, Congress will simply spend the money.

He uses the figures they have studied: ..... we found that over the entire post World War II era through 2009 each dollar of new tax revenue was associated with $1.17 of new spending.

They refer to some other studies; that it is somewhere between $1.05 and $1.81.

But no matter how we configured the data and no matter what variables we examined, higher tax collections never resulted in less spending.

Madam President, do I have time left?

The PRESIDING OFFICER. The Senator has 25 seconds.

Mr. GRASSLEY. I yield the floor.

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