Floor Statements

Mr. President, during the past few weeks, President Obama has repeatedly professed a commitment to clamp down on out-of-control spending and on deficits. That new development, of course, appeals to many Americans who have become increasingly frustrated with the trillions of dollars in new debt that has been racked up by this administration.

The President's newly released budget tells a different story, and it is not one of fiscal responsibility. Just look at the front-page headlines from many of today's morning newspapers and you will see a helpful review of what they think of the budget.

The Wall Street Journal: ``U.S. Deficit to Hit All-Time High.''

The Washington Post: ``White House Expects the Deficit to Approach a Record $1.6 Trillion This Year.''

The Washington Times: ``White House Says the Government Will Run Huge Deficits for the Foreseeable Future.''

The publication Politico: ``Five Years, $5.08 Trillion in Debt.''

In other words, this $3.8-trillion budget is another sea of red ink, more of the same record spending and debt that have come to characterize this administration.

Let me go over some important numbers. Under the President's budget, the deficit, which is the gap between total revenues and total spending in a given year, will reach a whopping $1.56 trillion for the fiscal year 2010. For fiscal year 2011, the deficit is projected to be $1.3 trillion. That will mark the third year in a row of trillion-dollar- plus deficits, beginning in 2009. These 3 years of deficits are more than the total accumulated debt from George Washington to George W. Bush. The President's budget also virtually doubles the debt held by the public over 5 years and virtually triples it over 10. It exceeds 60 percent of the GDP as a share of the economy this year. That surpasses last year's 50-year high.

Interest payments will more than quadruple by the end of the decade,

reaching $840 billion in the year 2020. That is $311 billion more than we spend on education, roads, and all other nonsecurity discretionary spending. That is just to pay the interest on the debt.

Overall spending will remain well above the historical average as a percentage of GDP. By the end of the 10-year budget window, debt will consume 77.2 percent of our economy. As Congressman Paul Ryan, ranking member on the House Committee on the Budget, pointed out recently, even European Union countries--hardly exemplars of fiscal rectitude--are required to keep their debt levels below 60 percent of their GDP.

I wish to mention a finding from a new paper entitled ``Growth in a Time of Debt'' by two economists, Kenneth Rogoff of Harvard and Carmen Reinhart of the University of Maryland. In their paper, they study the relationship between GDP growth and debt, and they find that nations carrying an excessively large debt burden of more than 60 percent of GDP produce a negative effect on short-term economic growth. They write:

When gross external debt reaches 60 percent of GDP, annual

growth declines by about 2 percent. For levels of external

debt in excess of 90 percent of GDP, growth rates are roughly

cut in half.

This only makes sense because you have less money to spend on those things which provide capital, which provide growth in your economy, because you are paying more and more of your income to service the debt.

Remember, our debt will consume 77.2 percent of our economy by 2019. This is important because there are really only four ways to pay down or pay off your debt. The first is to raise taxes. You do not do that when you are in the middle of a recession, and, in fact, it is counterproductive to economic growth in the first place. Second, you cut spending. Well, that is very hard for Congress to do. Third, inflate the currency. Of course, that wipes out savings. It is the least good of the bad alternatives. Fourth, you can grow your way out. Growing your way out is the way to do it, obviously. It is like your family: If you have a lot of debt, you can cut some on spending, sometimes you can make a little more money. You cannot inflate your way out the way the government can. But the preferred way is to grow your way out of debt by, over time, making more money and by being able to pay it down. But there is a point at which, according to these studies, even that does not work--when you have so much debt that you do not have enough money to put back into the system to create the growth we are talking about. And that is what this debt burden and interest cost does.

The administration has been touting a spending freeze worth about $250 billion over a decade to help allay concerns about spending and debt, but it does not start until next October. Therefore, to me, it is a little bit like the alcoholic who says: Well, I am going to quit drinking right after I have my next drink. If it is a good idea--and it is--we should begin now. I applaud any move toward fiscal responsibility, but this proposal will really do little to seriously attack the debt and will not even erase the massive debt accumulated during President Obama's first year in office. As columnist Robert Samuelson put it recently, ``Any savings would be mostly a rounding error in the decade's projected deficits.''

The point is, we have to do a lot more than this. Let's remember that the proposed spending freeze only applies to 17 percent of the budget. Programs targeted for the freeze have already seen a 22-percent increase in their annual appropriations in the past 2 years, plus another 25 percent increase including the stimulus. So it is hard to argue that tough choices are being made when you increase these programs by 22 percent, plus another 25 percent, and then say: OK, now I am going to stop.

Finally, of course, why propose a budget in February with a more than $1.5 trillion deficit and a spending freeze that will not even take effect until October? Maybe another analogy is, it is like the dieter who wants to start the diet tomorrow but never today. The spending freeze is a good idea. So let's not start it in the future, let's start it with this year's appropriations bills.

I would also suggest other stronger measures right now. We can start with the TARP money, for example. Rather than using the TARP money to pay for another stimulus bill, as some of my colleagues have suggested, let's use it to pay down the debt. That money, remember, was borrowed in the first place. We did not have $700 billion lying around. We went to the markets to borrow that, and we have to pay interest on it. A lot of it came from China. We have to pay it back. Let's do that--pay the money back. Do not use it to pay for yet another stimulus program. Remember, it will ultimately have to be paid back.

Second, let's end unlimited funding for government-sponsored enterprises such as Fannie Mae and Freddie Mac. Right now these two entities can spend as much as they like even without congressional authority. I find it interesting that when the President, in his State of the Union speech, said we are going to impose a tax on the banks, he was talking about banks that either never took TARP money or banks that have paid it back. The tax does not apply to Fannie Mae or Freddie Mac. They haven't paid back the money. It does not apply to AIG. It does not apply to General Motors. None of them have paid the money back.

If we are going to have a tax, impose it on those who haven't paid the money back. Don't put it on those who either never needed the money or didn't take it, but, in any event, who have paid it back.

Third, let's rescind unobligated stimulus money. The stimulus has already proven, by most accounts, to be a failure in terms of creating jobs for the money spent. That is even using the administration's own standards to measure its success. Let's use the money that has not yet been spent or obligated to pay down the debt. Again, remember, most of that money has to be borrowed and, therefore, let's not spend it in the first place, thus reducing future debt included in the President's budget.

These are just three specific ways, three relatively easy ways that we could employ to start getting hold of spending and debt. I would also like to suggest that those who continue to evoke the spending policies of the last administration become more focused on the future. That is what Americans want us to do. It makes little sense to complain about high spending from a previous era and then make the situation worse, creating a deficit that is four times as much as the biggest deficit in the previous administration and creating a debt burden that is equal to all of the Presidents from George Washington through George Bush.

Americans want this administration to confront the massive spending and massive debt it is accumulating in a meaningful way. The budget the President sent to Capitol Hill this morning does not do the job.

I suggest the absence of a quorum.

The following Senators are necessarily absent: the Senator from Missouri (Mr. Bond), the Senator from New Hampshire (Mr. Gregg), the Senator from Texas (Mrs. Hutchison), the Senator from Arizona (Mr. McCain), the Senator from Kansas (Mr. Roberts), the Senator from Louisiana (Mr. Vitter), the Senator from Idaho (Mr. Risch), and the Senator from North Carolina (Mr. Burr).

Further, if present and voting, the Senator from Idaho (Mr. Risch), would have voted ``nay.''

The following Senator is necessarily absent: the Senator from Wyoming (Mr. Enzi).

Mr. President, when I think of what a Federal Reserve Chairman is supposed to do, I think of two key responsibilities: maintaining stable prices and keeping our dollar strong. Unfortunately, Chairman Bernanke's Federal Reserve has not performed well on either count.

Consumer inflation, as measured by the Bureau of Labor Statistics, increased 2.9 percent from June to December 2009.

Manufacturers' cost of production is up 4.4 percent versus last year; up 5 percent in the past 6 months; and up 9.5 percent in the past 3 months.

Other measures of inflation, such as the 5-year, 5-year forward, clearly show an accelerating trend. Inflation is the last thing our economy needs right now.

As for the dollar, during the last year, its value dropped more than 10 percent. Much of this weakness is attributable to the Federal Reserve setting short-term interest rates at virtually zero.

As such, gold prices have surged, as investors worry that the dollar is no longer a reliable store of value.

OPEC has contemplated designating oil in a currency other than the dollar, and foreign economists have suggested that we issue our own government debt in yen, euros, or yuan, rather than dollars.

While neither of these actions is likely, it is clear that the Federal Reserve needs to pay greater attention to the dollar's value when making monetary-policy decisions. The preeminence of the dollar is synonymous with American prestige abroad. Nothing represents our Nation's soft power more than its strength.

Another chief concern of mine is that, during Chairman Bernanke's tenure, the Federal Reserve and other banking regulators showed an inability to use bank examinations to distinguish between good and bad loans.

Before the housing crisis, banking regulators were permitting financial institutions to lend to individuals who obviously did not have the ability to repay the money they borrowed. Had they been more vigilant, the crisis may have been less severe.

Now, however, in seeking to be more cautious, bank regulators are making another mistake: They have been telling institutions in my home State of Arizona, and throughout the country, not to make loans to even the most creditworthy individuals and businesses.

I have heard numerous stories, from both lenders and borrowers in my State, about bank examiners deciding to downgrade a performing loan because, on paper, the underlying collateral was worth less than its purchase price.

As a result, the banks had to either raise more money, which is incredibly difficult, or else the borrower had to contribute more cash to keep from technically defaulting on the loan.

Why would we have policies that punish responsible borrowers? Why would it be in our interest to force those who are current on their loans into a situation that could lead to bankruptcy? Doing so makes a bad situation worse and creates problems that ripple through our economy.

I am also troubled that Chairman Bernanke refuses to take responsibility for the housing bubble and disputes that the Federal Reserve's lax monetary policy helped create it.

As the respected columnist Bob Robb of the Arizona Republic recently explained:

[Chairman] Bernanke is intellectually shadow boxing. . . .

When a bubble occurs in a commodity which is almost

universally purchased using extensive borrowing, such as

homes, it's fatuous to claim that easy money doesn't play a

significant role.

Chairman Bernanke strongly supported this lax monetary policy, and he should own up to its role in the financial crisis.

These are all reasons to oppose his renomination or confirmation. Nonetheless, I must vote to reconfirm Chairman Bernanke, simply because I am concerned that another nominee chosen by President Obama would be less independent than Chairman Bernanke and would direct the Federal Reserve's resources to support the administration's policy interests, and, therefore, bypass congressional approval for appropriated funds.

This administration has a history of nominating partisan, out-of-the mainstream individuals for key jobs, and replacing Chairman Bernanke would be another opportunity for it to do so.

I would hope that if Chairman Bernanke is confirmed, he will take action to remedy the problems I have just addressed. They demand his attention.

The following Senator is necessarily absent: the Senator from Alaska (Ms. Murkowski).

The following Senator is necessarily absent: the Senator from Alaska (Ms. Murkowski).

The following Senators are necessarily absent: the Senator from Kansas (Mr. Roberts) and the Senator from Ohio (Mr. Voinovich).

The following Senators are necessarily absent: the Senator from Kansas (Mr. Roberts) and the Senator from Ohio (Mr. Voinovich).

The following Senators are necessarily absent: the Senator from Kansas (Mr. Roberts) and the Senator from Ohio (Mr. Voinovich).

The following Senators are necessarily absent: the Senator from Kansas (Mr. Roberts) and the Senator from Ohio (Mr. Voinovich).

Mr. President, it is time for the people of the U.S. Congress to be sure we are listening to what our constituents, the American people, are telling us. If it was unclear before, the Massachusetts Senate race should put to rest any doubts about what is really frustrating Americans. Americans have had it with the soaring level of spending and debt. They know that enormous spending and skyrocketing deficits take a bite out of the economy, dragging down our gross domestic product, our standard of living, and making investors and job creators very nervous. They are concerned about the unfathomable amounts of money now being spent.

For the first year of the Obama administration, the numbers are eye- popping. Consider, one, a wasteful $1.2 trillion stimulus that was a failure, according to the administration's own yardstick; two, a $410 billion omnibus Federal spending bill that increased nondefense spending by 10 percent; three, a $2.5 trillion government takeover of health care that this Senate passed on Christmas Eve. Hopefully, this will never actually become law. We have had two huge increases in the debt ceiling, with a third being debated now, and a massive budget that doubles the deficit in 5 years and triples it in 10. It is not necessary. It is not inevitable. We can and should prevent it. Remember, we have to borrow most of this money. Americans are very concerned about the amount of money we are borrowing from other nations such as China to help finance the exploding debt.

The administration and its defenders are still blaming President Bush for out-of-control deficits and debt, even though the other party has been in control of the Congress now for 3 years and the President has been out of office for over a year. Here are some important facts. President Bush's deficits ran an average of 3.2 percent of GDP, while President Obama's spending plans call for deficits that will average 4.2 percent of GDP over the next decade--in other words, an entire percentage point higher. From the day President Obama took office until the last day of fiscal year 2010, debt held by the public will grow by $2.3 trillion, according to the Office of Management and Budget. You can't blame that on President Bush. President Bush added less than that--about $3 trillion--to the debt during the entire 8 years he was in office. So in just 20 months, President Obama will add as much debt as President Bush ran up in 8 years.

This administration needs to take responsibility for its actions, start listening to what Americans are saying, and stop talking about the mess they inherited. Americans want Congress and the administration to stop their grand spending plans and focus on what is really needed for an economic recovery.

December saw another 85,000 jobs lost. Unemployment has not gone down; it is holding steady at about 10 percent. In my State, it is over 11 percent.

Mort Zuckerman wrote Friday in the Wall Street Journal:

The problem in the job market going forward is not so much

layoffs in the private sector, which are abating, but a lack

of hiring.

That brings me to concerns over tax policy. Americans look ahead and they see new taxes on the horizon. Unless Congress takes action this year, taxes are set to go up by $2 trillion over the next decade, starting in 2011. The child

tax credit would be cut in half. Marginal tax rates will go up. Dividends and capital gains taxes will increase. It is no wonder that businesses are timid about hiring and investing and consumers are more cautious than ever about their own spending. Even if economists say we are technically out of the recession, dollars have not begun to flow because people and businesses are uncertain about what their burden will be in the coming years. They are very nervous that it will be higher.

We can eliminate some of that uncertainty and instill some much needed confidence in the economy by extending current tax law. Again, unless Congress acts, taxes will increase automatically. If the President is looking for a job stimulator, I suggest this is where to start. If he were to announce on Wednesday night that he is calling on Congress to keep taxes right where they are--in fact, if we can cut them in some areas, that would be even better--I think he would see businesses react immediately and positively to the news. But instead of increasing taxes, we need, as Zuckerman says, to draw up credible plans to bring down bloated deficits without triggering another downturn.

Let's keep something in mind about the American people: They know you can't spend what you don't have. The message this Congress and the administration have been sending to Americans is that even though they are bound by limits, Washington is not. As I said, it is time to start listening to our constituents and then act on their instructions. Stop spending, keep taxes where they are, reduce them where we can, and stop running up deficits.

I yield the floor.

The following Senators are necessarily absent: the Senator from Utah (Mr. Bennett), the Senator from Kansas (Mr. Brownback), the Senator from North Carolina (Mr. Burr), the Senator from Texas (Mrs. Hutchison), the Senator from Oklahoma (Mr. Inhofe), the Senator from Alaska (Ms. Murkowski), and the Senator from Kansas (Mr. Roberts).

Madam President, I ask unanimous consent that the order for the quorum call be rescinded.

Madam President, I wish to talk a little bit this afternoon about the amendment which Senators Conrad and Gregg have proposed and which we will be voting on next week. Both of these Senators are very well versed, as the chairman and ranking member of the Budget Committee, in fiscal policy and in the types of reforms everyone is looking for to get a handle on the deficit and the debt this country is facing. So it is with some trepidation that I oppose an amendment the two of them would offer.

I hasten to say that both are respected Members of this body who approach problems with principle in mind, and in this particular case, having talked to Senator Gregg, I know the idea that only by working across the aisle with each other and compromising can we hope to deal with the most vexing problem that seems to face this body; that is, how to deal with the problem of deficit and debt.

Having acknowledged their good will, however, I have to respectfully disagree with the approach they take in their commission. I do it for basically three reasons.

First, I have never found either the House or the Senate in a position where they were anxious to cut spending and thereby save taxpayer money. I have, on the other hand, seen an effort to raise taxes every time we seem to get into a deficit situation. It seems it is always easier to gather in more taxpayer money than it is to stop spending money they have already sent us. The problem with that is, it is no longer money they have sent us, it is money we have borrowed from other people such as China, for example. That borrowing has costs, foreign policy costs as well as interest costs. We eventually have to pay it back. Because we have borrowed so much, the Chinese are saying we better be careful about how much we have borrowed, and they will have to increase interest rates. There is a point at which you cannot be a great nation by being in debt to all the folks around the world.

It is not as if we haven't collected enough taxes. We are now at something akin to 23 or 24 percent of our gross domestic product on Federal spending. It used to be 18.5 percent or so. It is clear, therefore, it is not tax revenues that are the problem. It is spending that has gotten out of control. We know that from all these statistics a lot of us have been talking about relative to the budget last year and the debt ceiling that needs to be raised presumably next week. We wouldn't have to raise the debt ceiling by almost $2 trillion if we had been more restrained in our spending.

To put it in perspective, before I move on to the next point, the President's budget last year called for more debt in the 5-year period of that budget than all the debt that had been accumulated by every President of the United States from George Washington through George Bush. Think about that for a moment. In 220 years of history, take all the debt, including World War I, World War II, the Civil War, pile it all up, and this one budget included more debt than that. We double the debt in 5 years, triple it in 10 years. That is not responsible. And it is not for a lack of Federal revenues. It is not because we are not taxing the American people enough. It is because we are spending too much. The American people believe that. They understand it. I think it is one of the messages from the Massachusetts election.

When you have a commission that can make recommendations to the Congress that we have to, in effect, abide by, that permit either an increase in taxes or a reduction in spending to solve the problem, it is pretty clear to me which direction we will end up going. We don't have the courage to reduce spending so we increase taxes.

Second, our rules are premised on a fallacy. Unfortunately, I believe it will drive the commission because of this fallacy. The fallacy is, all the money in the country belongs to the U.S. Government and, therefore, if we reduce taxes somewhere, we have to make up that reduction in tax revenues somewhere else, either by raising taxes somewhere else or cutting spending. Of course, we never cut spending. So the idea is you have to raise taxes somewhere. If I want to give the American people a tax break by reducing their taxes, I should have the right to do that. Congress should be making the rules. We should have the right to say: We are going to reduce your tax burden. But under existing rules, unless you have 60 votes for a permanent change such as that--and even then it is difficult because of our scoring rules--any revenue that is lost because of an action we take in reducing taxes has to be made up somewhere else in some other way. It has to be offset.

What that generally means is, since we don't find ways to cut spending around here very often, you raise taxes over here to make up for the tax revenue lost over here. If I want to reduce the capital gains tax by 5 percent, for example, or to give a real-life example, I want to reduce the estate tax--and Senator Lincoln and I want to do that--I can't do that without ``paying for it.'' We just want to reduce the estate tax so that people when they die, their heirs will not have to pay as much estate tax. No, you can't do it. You have to make up the revenue that you would lose. It is one of the reasons why we don't cut taxes around here very much. Because it is hard to find offsetting revenue that is acceptable to people.

To carry this a little further, Senator Lincoln and I would simply like to repeal the estate tax. That is not going to happen. So we have agreed to a compromise in which we would have a $5 million unified credit; that is to say, that is the amount that is exempt from the tax and that is per spouse in a family. It would be indexed for inflation and then anything that remains above that in the estate would be taxed at the rate of 35 percent. That costs a certain amount of money, according to the budget scorers. I am not sure how much. Let's say $80 billion. We have to figure out a way to pay for that. So the question is, Is there some other place where we can raise revenue? Ordinarily, raising revenue means raising taxes. We don't want to do that. So we are relegated to the kind of political games, such as maybe phasing it in over time, because it doesn't cost as much if you bring the rates down over time, where you gradually increase the unified credit over time. That is how we got to the crazy situation we are at today, where we had the rate go down over a period of 9 years and then this year it went to zero. But next year it goes right back up to 55 percent. So the rules we have around here create crazy policy. Yet we are stuck with it.

I am afraid a commission that has the ability to both make tax revenue increase recommendations as well as

spending reductions will not only focus a lot on the taxing side, because it is very hard for Congress to reduce spending, but also will be bound by the same rules so we will never get tax cuts anymore. Because every time you want to decrease a particular tax over here, you will have to raise taxes over here. I think we should start from the premise that the money in the country belongs to the people. It is their property. The government should not take it unless it needs to and unless the people acquiesce through their representatives. If Congress decides it wants to take less money from the people, for example, so they will have more money to invest in small businesses to create jobs and put America back to work again, we ought to be able to do that without saying: We are going to give you a tax break here, but we are going to have to raise your taxes over here by an equivalent amount. If the money belongs to the people, we wouldn't have a rule such as that. I think it is very elitist and very wrong to essentially start with the proposition that the money belongs to Washington so you can never give it back to the people without recouping it in some other way. That is the second reason why I think this is not a good idea.

Third, we should be focusing on spending reductions. Everyone talks about not spending as much. Yet we have increased spending dramatically over the years. One of the reasons why is because our constituents want lots of things. If a particular special interest asks for some spending, there tends to be political support for that. The opposition to it being spread over all the people, in effect being everyone's problem, is no one's problem. So you have in spending bills here Members who put earmarks in bills or request certain spending, and there is a constituency for that. By the way, when I talk about special interests, I am not necessarily talking about bad people. Every family in America is represented by some special interest. You have veterans in the family, and you have the veterans groups supporting them. Does anybody think those are bad special interests? If you have farmers, they belong to the Farm Bureau. That is not a bad special interest, but they may be coming to Washington asking for something specific.

I was visited today by the head of the police department and fire department in my city of Phoenix. Both of them are represented by groups in Washington. They are not bad special interests. There are a lot of special interests in the country. Because the government is so big and so powerful, a lot of what they do consists of persuading Washington it should engage in one policy or another because that is where all the power is, that is where the money is, and so they have to hire lobbyists to come back here. We listen to those special interests. Who pays the bill? Our constituents, the taxpayers, who don't have many representatives back here.

There are groups, such as the National Taxpayers Union, for example, that keep track of how much money we spend around here. They rate Senators based on how much they spend.

Citizens Against Government Waste is another one. But they are pretty general, and they are not specific such as a lot of the special interests. What you end up with is a big push to spend money and not much of a push to save it.

When colleagues of mine, such as my friend Tom Coburn or my colleague from Arizona, John McCain, come to the floor and criticize earmarks in bills, spending they don't think is necessary, they are criticized. Why don't you play the game? Why are you creating such a stir? Senator Coburn has an amendment we will be taking up next week that says let's at least get rid of a whole group of programs that a commission in the United States has decided are duplicative and not necessary. I have forgotten how many child nutrition programs we have or special education programs or job training programs. Probably many more than can efficiently spend taxpayer money to do the good things they are set up to do. But we never seem to get around to putting more efficiency into the system.

I think it was Ronald Reagan who said the closest thing to immortality in the United States is a government program. They are easy to create but hard to get rid of.

When you make deals that if you will just say we will solve the deficit problem, we will save money over here if you will raise taxes over here--I mentioned Ronald Reagan; I will mention him again. That was the deal he cut with Tip O'Neill and the Congress at the time. We got the tax increases, but we didn't get the savings. One of the things Ronald Reagan always said he regretted was being so naive as to make a deal assuming that if he agreed to raise taxes over here, Congress would agree to make savings over here. It is hard to do. Congress very rarely does it.

Another problem is, raising taxes for the purpose of raising revenue has two problems with it. No. 1, we don't end up saving money. We just end up spending it on new things. No. 2, it affects behavior from taxpayers in a negative way. If you raise taxes on businesses, for example, they will not hire as many people. They will not be able to invest as much money in their business. They will probably not make as much money. If they don't make as much money, what happens to their tax liability to the government? It goes down, not up.

On the other hand, frequently--and this has been demonstrated especially with taxes that have a direct relationship to revenues such as the capital gains tax--if you reduce the tax, business activity increases, producing more revenue for the government to tax, and Federal revenues actually go up. This is not true with all taxes, but it is true with some taxes. I mentioned capital gains.

If you have a high capital gains rate today and businesses are told the rate is going to go down next year, do you think you are going to see a lot of assets sold this year? You will have hardly any economic activity unless it is absolutely necessary. But on January 1 of next year, when the rate goes down, you will see all kinds of activity because the rate at which that activity is taxed is reduced. By the same token, if you have a rate that is low today and you say it is going to go up tomorrow, you will see a lot of activity today but not much tomorrow. That economic activity is what produces revenue, which is what the government taxes. As I said, ironically or paradoxically, a lower rate generates more revenue to the Treasury.

That is what happens when you reduce the capital gains rate.

I believe if the President were to announce tomorrow he is asking Congress to pass legislation to send to him that would fix the marginal income tax rates, the dividends rate, the capital gains rate at exactly where they are right now, for, let's say, a period of 5 years, the certainty that would create--even though some of those rates are too high, in my opinion; let that go--the certainty that would create because the rates would be known for a period of 5 years--and these, by the way, would be the so-called Bush tax cut rates so they would be much lower than they would be if they were allowed to go back up again--if the President were to do that, I think he would see the stock market skyrocket the next day. He would see job creation that would be incredible because businesses would know their taxes are not going up, that they could afford to hire people, and they would do so.

On the other hand, when you leave the tax rates in question or hint they are going to go up or, in fact, ensure they are going to go up--as they did under the health care bill, for example--it is no wonder businesses do not create jobs. In the health care bill, we actually have a couple payroll tax increases. All tax increases hurt business and hurt their ability to invest more and to hire more people, but a payroll tax is a direct tax on jobs. It says: The more people you hire, the more taxes you are going to pay; the more people you keep on your payroll, the higher your tax liability is going to be.

There is one provision that says, if one of your employees leaves and gets a subsidy for the insurance exchange, you have to pay an 8- to 10- percent payroll tax on all the rest of your employees. That is a job killer. Another tax raises, by just under 1 percent, the Medicare payroll tax. That is a job killer.

So there is a relationship between job creation and taxes, economic activity and, therefore, revenues to the Federal Treasury and tax rates. Tax rates and

taxes are not the same thing. You can reduce tax rates and actually collect more taxes. Again, it sounds paradoxical, but it is true. Think of this analogy: When you go to the store just before Christmas and they slash their prices by 40 percent, they are not doing that to go out of business. They are still making money. They make more money on the volume that increases because a lot more people come into the store--even though they have reduced the cost of each of the items-- than they would if they increased the cost of the items. I guarantee you, if they raised their prices just before Christmas, their competitors would be reducing their prices, not so they would make less money but so they would get more people in, they would have more volume, and they would end up making more. That is what happens when you reduce certain tax rates when you are the Federal Government. You actually increase your revenue.

So I am very reluctant to support a commission which I believe will undertake to reduce our deficit by raising tax rates. It is not good for job creation. It is not good for the economy. It is not good for families, of course. Ironically, I do not even think it is good for the Federal Government, but I mostly do not think it is because, at the end of the day, we always have the courage to talk big about cutting spending, but we do not do it.

I will close with this. The last budget increased the funding for the departments of government dramatically at a time when we are in a deep recession. Families are having to cut their budgets. Yet you go to the Department of Agriculture, and I think it was a 23-percent increase or 26-percent increase, about the same for the Department of State and so on. I think the average was over 12 percent. Only the Defense Department took a hit.

I think that says something else we need to be very careful of. It is one thing for a commission that is not elected by the people to have the specific goal of reducing the deficit. It is quite another to have the perspective of all the matters Members of Congress have to pay attention to in making decisions that offset each other or that take into account the needs across the entire spectrum of government.

It would be very bad, indeed, if we were not able to factor into our decisions, for example, the need to increase Defense spending next year. Because it got hit last year, it is going to have to be increased. I daresay, I hope and I almost predict the administration will find a way to increase in its budget this year Defense spending because it cannot be sustained at the level it is. Yet if we were having to cut spending across the board, that would be difficult to do.

That is what we are elected to do as Members of the House and the Senate. As hard as that job is, we should be doing it to adequately represent our constituents. I understand the argument we need some help sometimes, and, frankly, I support some alternatives to what I am talking about. Senator Sessions and Senator McCaskill, for example, have an amendment which I support because it focuses on spending. It starts with the 2010 budget, which is more than I would like to start with, but at least it says spending has to be constrained relative to that budget.

I think there will be another amendment that relates to spending which focuses on other ways to save money. Senator Brownback, for example, similar to Senator Coburn, has talked about trying to end duplicate programs or Departments or agencies or programs or commissions whose job is finished and we do not need them anymore, for example. Those are the kinds of things I think we need to look at, and we can save big money if we do.

The final point I wish to make is, some say: Well, isn't this a little bit like the health care commission that would reduce Medicare spending? The answer is, there is a similarity at least in concept. The idea in the health care commission, though, is to reduce spending primarily by reducing what we pay doctors and hospitals and other health care providers. That is a tough way to reduce Medicare spending and still provide the services our senor citizens deserve.

The way it should be done is to find the so-called waste, fraud, and abuse--and that is easier said than done. No one denies it is there. But we have had decades to get to the problem, and if we could, we would be doing it right now. I have no doubt if President Obama knew he could save $100 billion by eliminating waste, fraud, and abuse, he would have gotten about the job by now, and he would not be waiting to see what kind of provisions we put in a health care bill before starting the job.

The private sector cannot afford to waste that much money. Federal bureaucrats, as hard as they work, do not have the responsibility. It is somebody else's money. It is everybody else's problem. It is not my problem. In the private sector, they cannot afford to do that. It is one reason the insurance companies get criticized, because they have people making sure they do not pay claims that should not be paid, and sometimes they are criticized for that kind of activity. Their administrative costs are a little bit higher than the government's because of that. They hire people to make sure they do not have a lot of waste, fraud, and abuse. So the amount of waste, fraud, and abuse against the insurance companies is pretty low, and they are able to stay in business as a result.

With the Federal Government, you have the sort of ``Did you ever wash a rental car?'' syndrome, where it is somebody else's money, you do not have to be as careful about protecting it, and, as a result, there is a huge amount of money lost in government programs, such as the Medicare Program, for example.

The amendments Senators Sessions and McCaskill are presenting and, I believe, Senator Brownback and some others will be presenting are going to focus on how we can actually save money in the way I am talking about, rather than cutting services, because that is the wrong way to save money, if they are essential services, as the Medicare services are. That is the distinction between those two items that I think is important to draw.

So the bottom line: The people who are proposing this commission idea are very well motivated and I respect their position. Reasonable people can differ about the wisdom of what they are proposing. I would prefer to, first, focus on whether we could actually reduce spending with a little help from a commission or some other kind of group, depending upon which of the amendments you want to adopt that actually identifies where we can save the money and force us to act upon that. I would rather do that first than to start out with the proposition that we can do it through tax increases because that is a sure way to hurt economic recovery, prevent job creation, take more property and freedom from the American people and, potentially, in the long run, provide for less revenue to the Federal Government.

A friend of mine always likes to say: There is a rate. Well, there are two rates, he says, at which the government collects exactly no revenue: zero and 100. It is true. If you set a very high tax rate, you are going to get very little of whatever it is you are taxing. If you want economic activity that represents economic growth in this country and a high standard of living and a lot of job creation, you cannot achieve that by imposing a lot of taxes, even if you were not worried about the deficit. The way to solve that problem is to stop spending money rather than trying to take more money from the American people.

Madam President, I suggest the absence of a quorum.

Mr. President, I will have something to say about the amendment offered by the Senator from North Dakota at a later time, but I wanted an opportunity to be sure to speak to the Thune amendment, which has also been pending and which I understand we may be voting on as early as this afternoon. I wish to make it clear I am in very strong support of the amendment offered by the Senator from South Dakota.

The amendment of the Senator from South Dakota would immediately end the Treasury's authority to spend unobligated TARP funds; that is, those funds that have either been repaid or were never spent in the first place as part of the so-called TARP. The amendment would also use repaid TARP funds to lower the deficit, bring down the debt ceiling-- which is, of course, the amount of legal U.S. debt--and is the ultimate issue we are going to be voting on at the end of our exercise, presumably sometime next week.

I initially supported both tranches of the TARP stabilization money because I was told by the Secretary of the Treasury and others, and I believed, that the money would be used to shore up banking, thus stabilizing the financial system in the United States, and that would permit lending to resume. My State of Arizona was hit particularly hard by the collapse of the housing bubble, so we needed more lending--for small businesses as well as for commercial lending and other things such as auto finance, real estate lending, and so on.

Unfortunately, the promised flow of capital has not materialized. Today people in my State still struggle to refinance their homes and businesses, and businesses in particular are struggling to make payments on their property, rollover commitments that they already have, and even pay for things as basic as their inventories or their payroll. You have to ask how did this happen with all of this TARP money out there.

Partly it is because TARP was perverted into a tool for increasing the scope of government. It has been used for purposes for which it was never intended. Some of the money has been used to bail out political interests such as auto companies and parts suppliers. That was never intended. I would never have supported the second tranche of TARP funding had I believed that was how the money would have been spent.

Now it is becoming a piggy bank for the second stimulus bill recently passed by the House of Representatives, a bill that would cost taxpayers $260 billion more in deficit spending. By deficit spending, of course, I am referring to the fact that this is all borrowed money. This is not money that we have and are deciding to spend in a certain way. We have to go out and borrow the money in order to give it to these people.

By law, the returned TARP funds are supposed to be used for deficit reduction. That is the way it was written into the bill. The Thune amendment would make sure this happens. Again, this is important because this is not money that we already had that the taxpayers had sent to Washington and we were just waiting to spend on something. We had to go out and borrow this money from folks such as the Chinese, and we have to pay them interest on the money.

When we have to go out and borrow the money in order to provide it for one of these purposes, we have to recognize that when we pay it back, we ought not immediately spend it again. We ought to pay the money back to the government so the money then can

repay the lender and get that obligation off our books. Returning the money to the Treasury is equivalent to paying the money back to our lenders. That, in turn, allows us to reduce our Federal debt.

This also has the effect of reducing government borrowing so that the private sector is more able and more easily able to borrow money. That way, businesses can begin to invest more, and we can begin job creation.

Frankly, that is why groups such as the National Federation of Independent Businesses support the Thune amendment. The whole idea is to repay the money that the Federal Government has borrowed so there is less pressure on the sources of lending so the private sector will be able to more easily borrow for their purpose.

Here is what the NFIB said in a recent letter:

Small business believes it is time to end TARP by passing

the Thune amendment. We appreciate Senator Thune's efforts to

create an exit strategy for the unprecedented level of

government ownership in American businesses. The full $700

billion that was originally allocated for TARP is no longer

needed and should not be used as a bucket of money for the

Treasury Department to create new Federal programs.

I would add, or for the House of Representatives to create new Federal programs to the tune of $260 billion more.

I think the American people could not be more clear in the message they have been sending in election after election: Stop spending so much money so we don't have to borrow so much money so it will be easier for our own families and businesses to borrow money. They have had it with massive spending and the culture of massive debt that has seized Washington. They are watching very closely because it is their money, after all, that will have to be used to pay the interest on the debt when we borrow this money from people such as the Chinese.

Instead of turning right around and deciding we have some great idea on which to spend this money again when it is retired, let's retire the debt instead, thus reducing the amount we have to increase in the debt ceiling. I think this is what our constituents want us to do. It begins with ending TARP, and the Thune amendment puts us on the path to doing exactly that.

I urge its passage.

I suggest the absence a quorum.

The following Senators are necessarily absent: the Senator from Missouri (Mr. Bond) and the Senator from Kansas (Mr. Roberts).

Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. President, I further ask that I may be permitted to speak for as much time as I consume.

Mr. President, it was exactly 1 year ago that Barack Obama was sworn in as President of the United States. He began by promising to launch a new era of responsibility, bipartisanship, and transparency at home and to improve America's standing abroad. That message appealed to

the American people. The President came into office with high approval ratings, widespread support, and plenty of bipartisan good will in this Chamber. Taking stock now a year later, it is apparent the President has not delivered the change he promised. The President's approach to spending, debt, and big government has surprised and frustrated the American people. It is not what they bargained for. Much of the legislation introduced by the majority has passed on party-line votes and without the transparency he promised.

On this 1-year anniversary, I want to talk specifically about the conflict between President Obama's campaign promises and the policies he has promoted during his first year in office.

Despite his pledge to embrace fiscal responsibility, President Obama's domestic agenda has reflected a belief that big government and massive spending are the keys to promoting economic growth. From car company bailouts, to cash for clunkers, to a wasteful $1.2 trillion stimulus bill that failed to keep unemployment from topping 8 percent, as the administration claimed it would, Federal spending has soared. So has the national debt. President Obama said earlier this year that we cannot keep on borrowing from China, and that is true. So why does the President continue to advocate spending money that we do not have and will have to borrow? What ever happened to his campaign promise of a net spending reduction? Government spending grew by $705 billion in fiscal year 2009, an increase of 24 percent from 2008, and appropriations legislation enacted this year will increase spending by 8 percent more in 2010.

America's 2009 Federal deficit, which is the gap between total outlays and total revenue, made history--and not in a good way. It exceeded $1.4 trillion, which is the highest amount in history and more than three times as large as the biggest annual deficit during the previous administration.

The recordbreaking budget President Obama submitted to Congress doubles the deficit in 5 years and triples it in 10. It also creates more debt than the combined debt of every President from George Washington all the way through George Bush. There is no way to blame President Bush for this situation.

The total debt has reached an almost unimaginable sum--almost $12 trillion. This week, the Senate will take up an increase in the debt ceiling, which is the total amount of legal U.S. debt. That increase will come on the heels of a $290 billion increase in the debt ceiling that was passed late last year and another increase that was passed early in 2009 to accommodate the stimulus bill. Interest payments on this debt are expected to reach $800 billion--just interest alone--$800 billion per year by 2019. Clearly, we have not entered a new era of fiscal responsibility but, rather, quite the opposite.

Of course, the most expensive piece of legislation passed last year was the health care bill. The $2 trillion-plus bill, the most consequential domestic legislation in a generation, was hardly a work of fiscal responsibility or bipartisanship. It passed both bodies of Congress on a partisan vote. The legislation will create a massive new entitlement at a time when America cannot afford its existing entitlement programs.

The bill is filled with deals for special interests that President Obama said would be banned from doing business with his administration. Last week, for example, the White House reached a deal with labor union leaders to exempt, until 2018, union health care plans from a tax that will hit many other Americans.

The bill also violates several key pledges President Obama made about health care reform--first, the pledge that it would be deficit neutral. Richard Foster, who is the Chief Actuary for the Centers for Medicare and Medicaid Services, estimates that under the reform legislation, national health spending will rise by $222 billion over the next 10 years, and the Congressional Budget Office tells us that the Senate bill double-counts the savings from certain Medicare reforms. It uses certain funds to extend the solvency of Medicare by 9 years while simultaneously using those exact same funds to offset the cost of the bill. According to the Congressional Budget Office:

To describe the full amount . . . as both improving the

Government's ability to pay future Medicare benefits and

financing new spending outside of Medicare would essentially

double-count a large share of those savings and thus

overstate the improvement of the government's fiscal

position.

In short, this bill is not deficit neutral.

The President also pledged that middle-income families would not see their taxes raised. This is the second broken pledge. As Republicans have explained repeatedly, this bill is packed with taxes that will hit many middle-income Americans, including seniors and the chronically ill. In fact, the Senate version contains a total of 12 new taxes.

The third broken pledge relates to costs. President Obama said his health care bill would reduce costs. It does not. Costs for many families will actually increase thanks to a litany of new Federal requirements and mandates.

This whole process has also shown that the President's professed commitment to transparency was nothing more than a campaign slogan. He promised at least seven times that the health care negotiations would be aired on C-SPAN, as he put it, ``so the American people can see what the choices are.'' But that didn't happen. As Speaker Pelosi reminded us, the President promised a lot of things on the campaign trail. Those who were not invited to the Democrats' secret negotiations did not know the details of the respective health care bills until just before each of them came out for a vote, and we are talking about bills that are more than 2,000 pages long and contain hundreds of hidden provisions.

Even before the health care legislation is concluded, the President is proposing yet another spending bill, a second stimulus package. The stimulus bill--they call it a jobs bill now--that recently passed the House of Representatives would cost taxpayers $260 billion more in deficit spending. I do not believe the way to create jobs is to expand the size and expenditures of the Federal Government. I believe we must encourage growth in the private sector, not by taking money out but by putting money back in. It is understandable and unfortunate that job creators may be nervous about economic conditions. The economy is still shaky and new taxes loom on the horizon.

After seeing the dismal employment report in December, a month in which the economy lost another 85,000 jobs, Diana Furchtgott-Roth, a former chief economist of the U.S. Labor Department, advised the administration to ``press the reset button on economic policy.'' More specifically, she urged the President not to raise taxes, scale back Federal spending, focus on deficit reduction, and reject the new environmental regulations that will drive U.S. jobs overseas.

I hope in the coming year President Obama will consider more sensible domestic policies so that we can rein in the out-of-control spending that has characterized his first year. This would truly be change we can believe in.

I would also like to discuss the tension between rhetoric and reality in the President's foreign and national security policies.

Throughout the campaign, President Obama pledged he would improve America's reputation abroad and repair supposedly damaged alliances. In September 2007, Candidate Obama said:

America's standing has suffered. Our diplomacy has been

compromised by a refusal to talk to people we don't like. Our

alliances have been compromised by bluster. Our credibility

has been compromised.

So what has been the President's strategy for boosting America's standing? He has gone on an apology tour of sorts, a fundamental consequence of which, in the words of Charles Krauthammer, has been ``to effectively undermine any claim America might have to world leadership.''

The President has devoted much energy to improving relations with our adversaries. Not only have these efforts failed to yield positive results, but they have also led the administration to mistreat several key U.S. partners.

The administration's approach to Iran has been regrettable, to say the least. President Obama came into office hoping to negotiate a ``grand bargain'' over the Iranian nuclear program. He embraced a policy of engagement with the radical Iranian theocracy.

So far, this policy has done nothing to stop Iran from developing nuclear weapons and brutalizing its own people. But it did prevent the Obama administration from offering robust support to the pro-democracy demonstrators who flooded the streets last summer to protest a stolen election. Rather than embrace the protestors, who were standing up for liberty and human rights, President Obama initially said that he did not want ``to be seen as meddling in Iranian elections. Those protestors, by the way, are still out in the streets, waging a courageous struggle for democracy.

Despite all these U.S. efforts to engage the Iranian government, the negotiations over Iran's nuclear program have gone nowhere, and the Iranian president recently declared that Iran ``will continue resisting'' international demands until the United States abolishes its own nuclear arsenal.

We must remember that Iran is the world's leading state sponsor of terrorism, a government that murders peaceful student democracy activists. The events of the past year have shown that the Iranian regime is not a good-faith negotiator. Now is the time to maximize leverage over Iran through targeted sanctions. Meanwhile, we must not take any options off the table if we hope to prevent an Iranian nuclear weapon.

The President's Iran strategy was based on the idea that U.S. engagement would produce real concessions. That did not work with Tehran, and it has not worked with Moscow either. Despite U.S. diplomatic efforts, the Russian government continues to withhold support for strong U.N. sanctions against Iran, it continues to bully its democratic neighbors, such as Georgia and Poland, and it continues to practice authoritarian domestic policies. America's allies in Eastern Europe and Near Asia are getting nervous. President Obama's cancellation of a planned missile-defense system in Poland and the Czech Republic, and the manner in which it was executed, gave the impression that the U.S. had caved to Russian pressure.

There are few regions in the world as volatile as the Middle East. Unfortunately, the Obama administration has alienated our closest Middle Eastern ally, Israel, by stubbornly pushing it to adopt a comprehensive ``settlement freeze.''

As Elliott Abrams, a former deputy national-security adviser, has written in National Review, the administration has managed to damage the U.S.-Israel alliance, weaken Palestinian Authority President Mahmoud Abbas, and produce ``a massive policy failure.'' We all want a just and lasting solution to the Israeli-Palestinian conflict. But demanding unilateral concessions from the Israeli government is no way to achieve it.

As for Latin America, it was highly regrettable that the U.S. imposed sanctions on Honduras, since the removal of former Honduran president Manuel Zelaya was a constitutionally justified act of democracy. Despite initially siding with Zelaya, a close ally of Venezuelan leader Hugo Chavez, the Obama administration appears ready to recognize the validity of the recent Honduran elections. The administration should now lift suspension of aid, cease any further contact with Mr. Zelaya, and denounce his extra-constitutional behavior.

With regard to Venezuela, the President's policy of engaging Hugo Chavez proved a failure. Writing in The Weekly Standard, Jaime Daremblum, Costa Rica's former ambassador to the United States, says, ``If Obama believed his personal charm and assurances of goodwill would be sufficient to sway Chavez and the Castro brothers, he was mistaken.''

Indeed, Chavez has responded to friendly U.S. overtures by continuing to suffocate Venezuelan democracy, continuing to cooperate with Iran and Russia, and continuing to harass neighboring democracies, such as Colombia, where Chavez has funded vicious narcoterrorists. In an editorial last spring, the Washington Post noted, ``This may be the first time the United States has watched the systematic destruction of a Latin American democracy in silence.''

Meanwhile, pending free-trade agreements with U.S. allies in Colombia, Panama, and South Korea still have not been approved by this Congress. That represents yet another foreign-policy failure for this administration. I sincerely hope the President urges Democratic leaders to take action on these agreements sometime this year, preferably soon. Implementing these three trade deals would provide a boost to the U.S. economy and would also strengthen the U.S. position in two important regions.

I also hope the President resists the temptation to support protectionist measures that will hurt our economy and damage our foreign relations. In his first year, the President signed a stimulus package containing a protectionist ``Buy American'' provision, agreed to discontinue a U.S.-Mexican trucking program, and imposed a tariff on Chinese tires. These policies were economically foolish, and they damaged America's credibility as a promoter of trade liberalization.

Finally, a word about the administration's antiterror policies, and its decision to increase the number of U.S. troops in Afghanistan. I am pleased that President Obama has maintained many of the policies that were formulated by President Bush, including the use of military commissions to try suspected terrorists. However, I am disappointed that the President has decided not to use a military commission to try Khalid Sheikh Mohammed, the mastermind of the 9/11 attacks, and several of his co- conspirators.

Giving these terrorists a civilian trial in New York City will pose significant national security risks; among other things, it will compromise U.S. intelligence-gathering methods. The administration has chosen to prosecute several other terrorists before a military commission. So why not Khalid Sheik Mohammed? Why should the highest- ranking al-Qaida leader captured since 9/11 be given a civilian trial while other al-Qaida members are given military commission trials?

The war against al-Qaida is just that, a war. It is not a law enforcement matter. By announcing that Khalid Sheik Mohammed and other senior al-Qaida members will receive a civilian trial, the Obama administration has signaled that terrorists belong in the U.S. criminal-justice system. They do not. These men are enemy combatants waging war on the United States.

The terrorists who are scheduled to receive civilian trials in New York City have been held at the Guantanamo Bay detention facility. When the President took office, he promised that Guantanamo would be closed within a year. It is now a year later, and Gitmo is still open, as it should be.

There is a good reason that President Obama has not yet been able to fulfill his pledge: Closing Gitmo is a bad idea. The process of removing those detainees who are still being held at Gitmo will create a series of logistical problems and security threats.

Last month, six Gitmo detainees were sent back to their home country of Yemen. Just a few days later, a Nigerian man with links to a Yemen- based terrorist organization attempted to blow up Northwest Airlines flight 253. The flight 253 bombing attempt highlights the deadly threat posed by al-Qaida's Yemen affiliate, known as ``al- in the Arabian Peninsula.'' The administration has wisely halted the transfer of Gitmo detainees to Yemen. But it seems intent to try the flight 253 bomber as a criminal defendant, rather than an enemy combatant. That is deeply misguided, for the reasons I have just listed, as well as the unnecessary difficulties it raises for our intelligence gathering.

The most important front in the war on terrorism remains the battle for Afghanistan. Several weeks ago, the President announced that he would be deploying an additional 30,000 U.S. troops to finish the mission. I strongly support that decision, yet I also worry that the President has set an artificial timeline for withdrawing American forces. The President declared that a withdrawal would begin no later than July of next year. I hope that he is willing to embrace a flexible timeline. Military decisions in Afghanistan should be determined by conditions on the ground, not by the political climate in Washington.

The U.S. commitment to Afghanistan has been costly, and it will continue to be costly. That brings me to the connection between U.S. policies at home and U.S. strategy abroad. While domestic policy is not written to influence

foreign policy, it affects what we can spend on defense and security.

President Obama recently acknowledged the relationship between U.S. economic strength and U.S. global leadership, when he said, ``Our prosperity provides a foundation for our power. It pays for our military. It underwrites our diplomacy.''

Well, that is absolutely true. Our leadership is contingent on our prosperity--and our ability to pay for a robust national defense.

But massive amounts of new spending, new taxes, and European-style government programs will weaken the U.S. economy and make it more difficult for us to exercise global military leadership.

Just look at what happened last year: While $1.2 trillion was pumped into the stimulus bill and the majority in this chamber passed a $2.5 trillion government takeover of health care, the defense budget was practically frozen. Missile defense has been cut, and there's been a reduction in the number of interceptors in Alaska that protect us from a North Korean attack.

So, there has to be balance in spending scarce resources.There is a tipping point at which excessive social spending chokes economic growth and weakens military power.

European nations can get by with relatively low levels of defense spending and high social spending because, for decades, they have enjoyed the protection of America's security umbrella. As Mark Steyn writes in National Review ``Sweden can be Sweden because America is America.''

But if we become more like Europe, if entitlement programs beginto swallow our budget whole, will we still be able to afford the burdens of global military leadership?

I submit that military decline is not an option for the United States. As former Secretary of State Madeline Albright put it, we are ``the indispensable nation.''

That is what American exceptionalism means. It means that, because of our unique history, our unique power, and the unique appeal of our founding principles, America plays a special role in global affairs.

I fear that many of the policies adopted over the past year will make it harder for America to continue playing this special role. I hope that during the year ahead, the administration will pursue a more sensible and responsible course.

The following Senator is necessarily absent: the Senator from Kentucky (Mr. Bunning).

Further, if present and voting, the Senator from Kentucky (Mr. Bunning) would have voted ``nay.''

Mr. President, I ask unanimous consent that two newspaper articles be printed in the Record.

The following Senator is necessarily absent: the Senator from Kentucky (Mr. Bunning).

Further, if present and voting, the Senator from Kentucky (Mr. Bunning) would have voted ``nay.''