Mr. President, I come to the floor to make a statement with respect to something I believe is vital that the American public get focused on. Last Monday President Bush proposed a budget to the American people that, if it were adopted,…
Mr. President, I come to the floor to make a statement with respect to something I believe is vital that the American public get focused on. Last Monday President Bush proposed a budget to the American people that, if it were adopted, would basically dramatically change the landscape, reshape the future of our Nation in a lot of different ways. I would like to speak about that in the context of a few ideas today.
I hope I can come here every day, as long as is necessary, to make sure we raise up this, I think revolutionary document, radical document, with regard to what the shape of our economy and the shape of our participation of the Federal Government in our life in America is about.
Perhaps because of its release so soon after the tragic Columbia shuttle tragedy, the budget has not received the public attention it deserves. Frankly, we had unbelievably revealing testimony by the Chairman of the Federal Reserve yesterday with respect to how that budget fits into the overall concept of fiscal responsibility and fiscal prudence that is so important for Americans to understand. But even with that, even with such dramatic statements coming from the Chairman of the Federal Reserve, the budget has not received the public's attention. I think we need to raise up the debate that is embedded in many of the propositions that are made in the President's budget.
I do not think this is a run of the mill--these are the revenues, these are the expenses. By the way, we are going to have a $307 billion budget deficit, but that is not so important. This is a radical change from the direction that we in this country have been moving for a very long time. I don't think we are talking about it in those contexts, and I think the American people should understand the huge implications of its many far-reaching proposals.
There are so many significant elements in this budget that it is difficult for me to actually even know where to start. The big picture is clear. The Bush budget is fiscally reckless, in my view, and imprudent in the extreme in the macroeconomic context, and would substantially reduce the security of America's working families for decades to come. I will try to go through some of that.
But at the biggest level, when President Bush came to office we were projecting budget surpluses of $5.6 trillion over 10 years. We just preceded that with 3 years of budget surpluses. Since then that figure has declined by almost $8 trillion. We had projected $5.64 trillion in surpluses. Now in the same timeframe, until 2011, we are projecting $1 trillion-plus in deficits. Where I come from in the private sector, if you have an $8 trillion negative cashflow, somebody would ask some questions about what is driving it, what is making such an overwhelming difference in the context of our financial posture with respect to fiscal affairs in this country. That is extraordinary.
By the way, take that a step further. It was projected at the same time that we were going to pay down, for all practical purposes, the publicly held debt of the U.S. Government. That was in 2001, early 2001--going down to $36 billion.
Today, out to 2008, we are expecting a $5 trillion publicly held debt. That is extraordinary. That is an extraordinary amount of debt that will go on, not just to be financed by current generations of Americans. The view that we are not going to transfer to our kids and our grandkids future responsibilities to pay for what we are doing today, as we benefit from those expenditures--we are transferring it on. That is $5 trillion.
By the way, it is a heavy burden not only in the debt that the current generation is transferring to future generations, but it is also an extraordinary expense. We are going from a $622 billion cost of our debt under the projections that were established in 2001 to, get this, $2.3 trillion we are going to spend--$2.3 trillion we are going to spend just to finance that debt, that change in that $8 trillion that comes across. That is what it is going to cost us over 10 years to finance the bad fiscal policies we are taking on.
I don't know about most Americans, but I think they can figure out that we have lots of important things in this country that we could spend $2.3 trillion on, relative to this $622 billion, that we would have been able to spend if those changes had not occurred such as Leave No Child Behind, such as making sure our health care systems are properly funded, or that the Social Security trust fund is in place so Social Security can be in place. And maybe most importantly, we could protect Americans with something other than duct tape. We could actually put real protections in our ports, on our highways. We could make sure that the security surrounding our chemical plants across this country was in place. There are lots of things that this country could do if we had that $2.3 trillion that we are going to now give out in interest expense, many of those dollars going offshore, not even to Americans.
I think it is absolutely irresponsible that we are putting ourselves in a position that we are going to run the kinds of deficits we are talking about. In fact, I think that was the overwhelming weight of the conversation we had with the Chairman of the Federal Reserve Board yesterday. If we do not get our fiscal house in order, we are going to put ourselves into a position where the United States is going to have not just small deficits and not just $2.3 trillion worth of interest expense, but we are going to see that explode in the years well beyond the next decade because that is when the baby boomers retire. We will go from 40 million retired Americans to 75 million retired Americans on Medicare and Social Security and that will put unbelievable pressures on what we have as a nation in our fiscal responsibility.
So I find this a hard budget, at a macro level, for us to take on. I hope the American people can understand that we are burdening our children and our grandchildren as we go forward; that we really are putting at risk Medicare and Social Security as we understand it today as we go forward. Frankly, I think without a full discussion and without creating a full understanding in the minds of the American people, we are not doing our jobs. I think it is almost a question of ethics, about what our responsibility is to raise up this discussion so those choices are understood by the American people and not buried in some document of hundreds and hundreds of pages of numbers that really do not translate into the practical impact that the individuals need.
I go back to it again. It is basic economics.
We have had an $8 trillion swing in the cashflow of this government. There is no one I know who would think that is a positive way for us to approach the financial management of this country.
To carry on with slightly more detail, as economists would say, this budget calls for a dramatic reduction in national savings. When you are borrowing all this money, that money isn't going into the private sector. It isn't going into areas of productivity and growth in this country.
That is what we saw happen in the 1990s. We saw 22.5 million new jobs created, and we saw productivity rise from very low levels to the kind of high levels that are driving the successes of the economy in the late 1990s and continue to be the only really positive element we see in the economy today.
When you have that capital going off to the Federal Government, it means less capital to be available to invest in plant and equipment and less capital to implant new technologies and new inventions, and to do research and medical advances. The end result almost inevitably will be lower economic growth in the future, if you carry those kinds of debt burdens into the future. That is not a conclusion based on partisanship or ideology. It is economics 101. Less savings means less investment which means lower growth.
It is just that those are the truisms defined by the basic laws of economics. Less savings means less investment which means lower growth.
By the way, when you are borrowing money at the $8 trillion level at the Federal Government, you are having less savings.
That is just by definition. I guess that is why the 10 Nobel economists
yesterday put out the statement they thought we were on the wrong track with regard to our fiscal policy; that we were putting ourselves into a grave position with regard to our longrun fiscal structure. It is absolutely essential, in my view, that we stand back and get hold of the budget mess I think we are putting in place, if we go forward.
Unfortunately, many administration officials have lately been denying the laws of economics, as far as I can tell, dismissing the importance of fiscal discipline. As OMB Director Mitch Daniels put it, while we have returned to an era of deficits, ``We ought not hyperventilate about this issue.''
I guess we are just taking off the board all that discussion about balanced budget amendments, the No. 1 issue, and the Contract With America, all that discussion we had through the 1990s, all that discussion that the private sector has tried to impart to the public sector; that there really is competition for funds out in the marketplace; that deficits really do drive up long-term interest rates which, by the way, Chairman Greenspan once again reiterated very clearly and unequivocally yesterday; and that we hear consistent conversation about deficits do not matter to the investment function of the economy.
It is hard to believe we are so blind to the fundamentals of economics. Supply and demand do matter. When there is demand for the credit in the marketplace for the Federal Government, it does impact on the private sector and the savings function.
Comments like these--the one about hyperventilating about deficits-- make it seem like we are living in a strange twilight zone, in my view.
As I said, we just came through a heavy period of discussion-- actually before I got into political life--about amending the United States Constitution to establish a rigid Balanced Budget Act. I do not know where that discussion went. I guess we had a change of heart and a change of mind at some particular point. But it really is hard for me to understand. I almost find it humorous, although I don't, really.
We hear comments with regard to my Democratic colleagues that we are concerned about rising deficits. One of the leaders in the House dismissed the importance of fiscal discipline, arguing that ``The Soviet Union had a balanced budget.''
I am not exactly how sure that fits into the overall structure of our debate. But I think it demonstrates we are making so light of this $8 trillion--I repeat, $8 trillion--negative cashflow swing this government is now burdening our people with. It is serious.
I come from a part of the world where you can tolerate some negative income for a short period of team, but, after a while, you go bankrupt. It undermines the reality of your financial success. It will for our Government. It may not go bankrupt, but we will be living with higher interest rates than we need be, and we will be losing the ability to see our private sector invest appropriately and basic saving functions as defined by economics.
Think about it. Perhaps the most powerful Member of the other body, in effect, was comparing fiscal discipline to a failed regime on how operations work.
I am really troubled about how light we are making this issue of our fiscal responsibility.
Why are the administration and its supporters abandoning fiscal discipline? Quite simply because their overriding priority is to provide huge new tax breaks to those who are doing the best, I guess. There is no other basis of understanding. It looks to me like political policy as opposed to economic policy.
Let us look at these tax breaks. As many of my Democratic colleagues have pointed out, they would provide relatively few benefits to working Americans. But, more importantly, they would do virtually nothing to create jobs or stimulate our economy. In fact, the Bush plan could well cost jobs, and I believe very clearly it is bordering on antigrowth. That is true for at least four reasons I would like to expand on.
First, very simple, very little impact of that initiative the President has laid out--less than 5 percent of the growth package-- would kick in right away in 2003, and very little of it in 2004. Most of its impact would be delayed into the future, undermining the long- term structure of our fiscal health, but doing little for the current package.
By the way, those 10 Nobel economists yesterday also talked about temporary, short-term stimulus was needed to create demand in our economy--create demand now so we can pump-prime the economy and help get it going. And then we will see the growth of revenues be the basis of how we reestablish the cashflow to the Federal Government.
By the way, we don't need to have all of these long-term cash cuts unless you are going to do it in a tax reform package. And, by the way, I totally agree with Chairman Greenspan. Double taxation on dividends is a bad idea. It ought to be done from a comprehensive, revenue- neutral position of tax reform. No one would argue there is very little in tax difference. But it ought to be done with a comprehensive set of tax reforms. The American people understand that. They understand companies are paying only about one half of what they report on their income statements to the public when they try to sell their stock as taxable income. They are doing all kinds of things--some legitimate, some not so legitimate--to try to shelter income.
We need to have a reform package that actually works--to raise revenues but also to make sure we don't have inhibition on American business in formation of capital such as taxes on dividends. But it ought to be on a comprehensive, revenue-neutral basis.
I think most people, when they are honest and step back, will see the logic of that. Certainly the American people do.
Second, the President's tax proposals provide, as I said, most of the benefit for those at the very highest incomes. These are the people least likely to spend a tax break. I think a better approach, as I have advocated with Senator Landrieu--and as Senator McCain talked about a ``payroll tax holiday''--would target tax relief to middle-class working Americans who need help.
By the way, I happen to think this ``payroll tax holiday'' and what Senator Landrieu and I talked about is really fundamental to how we can stimulate the economy today. Three out of four Americans pay more in payroll taxes than they do in income taxes. It is also the people who are stretched the hardest in trying to keep their budget together at home. By the way, individuals have to balance their budgets. So it is not exactly like they can walk away from running their debts up. We can do that in the Federal Government, but you cannot do that at the individual level. Otherwise, your creditors will come and see you and say it is time for you to sell your house.
Third, the Bush plan to exempt most dividend income from taxation would have the effect of taking cash off the balance sheets of American corporations. That would mean less money to invest in plants and equipment and less money to hire new workers and retain old ones. In other words, it will depress the economy further as opposed to stimulating it.
If you want to deal with double taxation on dividends, you do it at the corporate level. It might not be as politically attractive, but it would certainly be more rational that you would treat dividends as the equivalent of interest, and it would allow for the basic judgment of corporations as to whether they wanted to invest, pay dividends, hire new workers, or do whatever the economic, advantageous element of managing their business is about. But if you take the cash off the balance sheet, and pay it out in dividends, because you have an incentive to do that, you end up with far less of an incentive to grow the economy. And, in fact, you may very well get an incentive to stifle growth in the economy. I think it is very dangerous.
Finally, whatever stimulative impact--and very few people think it is significant at all--the budget would have in the short-term, it is likely to be offset by those higher long-term rates, as projected future deficits shoot through the roof.
I know the administration likes to claim there is no connection between deficits and interest rates, as I suggested, but the economic evidence is overwhelming that expectations of future deficits--that is, more Government competition for a limited pool of
capital--almost inevitably leads to higher interest rates.
It was actually refreshing yesterday at the Senate Banking Committee to hear someone--who I do not necessarily always see eye to eye with, with respect to economic policy--make a clear and unequivocal statement that deficits do matter with respect to interest rates and the performance of the economy, and particularly with respect to the performance of the investment activities of this Nation. This is, again, simple supply and demand. If you have $8 trillion worth of deficits that you would not have had otherwise--or $5 trillion--it is going to compete with the private sector for capital. That, ultimately, is going to have something to do with the shape of our economy in the future, and it is absolutely the most important element of the savings function in the country.
So the administration's tax breaks, in my view, for all of those reasons, are antigrowth as much as they are anything else. Again, I reemphasize that I think it is a political proposal, not an economic one. They have the effect of starving the Government of resources needed to protect the security of working families, while we are basically rewarding those who I think are doing reasonably well.
The last I checked, in the 1990s, people did pretty well economically. There were more millionaires made in the 1990s, while we were creating 22.5 million jobs than I think we are doing so far in the new century. I wonder why it is that we think we need to have all these structural changes when, in fact, if we just get some demand going, taking up some of that overhang of excess production we have in our country, that we could get going.
There are, though, some issues in this budget that go beyond these macroeconomic issues. And they are really important. I do not want to make light of them in and of themselves.
I think budget deficits and whether you have a stimulus program or growth program are all fair questions, but are we going to continue as a nation to participate in helping protect the security of working families, protect the security of Americans everywhere?
I think what is really radical about this budget is that it is beginning the process to undermine whether we are really going to provide that kind of support. Because we have to make choices, we are going to have to make choices whether we are going to run those deficits, driven in at least a significant part by the kinds of tax cuts we have, or whether we are going to retain some of those resources to be able to invest in the security of working families.
I will take a few examples from the President's budget.
First, the budget fails to provide funds that are badly needed to protect our Nation against the threat of terrorism. This is maybe the most important domestic issue. While there is some funding for some homeland security programs, we have really turned our back on a lot of the critical priorities, such as port security and border patrols.
I heard today that actually we will have fewer people at border crossings, based on this budget, than we had prior to 9/11. I just visited the New York/New Jersey Port a weekend ago. The fact is, we are inspecting less than 2 percent--less than 2 percent--and that has not changed. We have been using that same number in debates on the floor of the Senate. It was not changed in our port at all.
The resources are not being made available to check containers, and we are doing nothing to improve the safety and security of the American people--certainly the people in New Jersey and New York--with regard to our ports. We are doing nothing with regard to improving the security surrounding our chemical production facilities in this country. And all this just keeps going on and on, without putting our money where our mouth is with regard to homeland security. We talk about it as our top priority, and we do not put the resources with it.
Time and time again, we have asked to try to increase the budget appropriations in this area and have not been able to do it. I think maybe it is the most important domestic issue. It is certainly on the minds of the people of New Jersey, and I suspect it is for most Americans.
Second, the budget reneges on the President's promise to provide a meaningful prescription drug benefit for our seniors. Instead, the administration, in effect, forces millions of seniors to drop their own doctor and move to a private sector approach in order to secure a prescription drug. It moves away from fee-for-service plans. This amounts to a backdoor attempt, in my view, to privatize Medicare.
We have not seen all the details, so it is a little hard to be as specific as I would like to be, but I have to tell you, if it is anything similar to the headlines we have heard in the State of the Union speech, there are a lot of us who are going to fight this tooth and nail. This is not the promise we have given to the individuals who have been paying payroll taxes for years and years with the expectation there will be a serious Medicare benefit at the end of the day. As you know, if anybody does any analysis, not only are the payroll taxes that go to Social Security being used to finance tax cuts for those who are already doing well, we are now using payroll taxes for Medicare to also do that. And we have gone through all those numbers. It is very hard to understand how we are putting this together.
Many of my constituents say: What is going on with those payroll taxes that we are paying every day? We go to work with the expectation that we are going to get Medicare benefits and Social Security benefits at the end of the day when we retire. It is really wrong, and I hope, as we discuss this budget, that becomes clear and more clear to the American public.
Third, the budget process proposes to gut health care coverage for the most disadvantaged Americans. Under the administration's plan, Governors, in effect, would be--I was going to say bribed--encouraged to leave the current Medicaid system and move to an alternative that probably would end up with poor and disabled Americans losing coverage.
I tell you, I know in New Jersey that we have to cut the number of people who are accessing this, particularly kids in the Children's Health Insurance Program, because we do not have the resources to be able to deal with bringing them into these programs which have long been something that has provided broader health care.
There is big, bipartisan support for a concept around here called Start Healthy, Stay Healthy, which is to bring prenatal care to a lot of our less economically enabled citizens. And it is through the Medicaid system and State programs. We are having to cut all of those kinds of programs because the resources are not available.
I have to ask--anyone has to ask--is that what the administration means by ``compassionate conservatism''?
I could go on and on with the misplaced priorities, from my point of view, of the administration's budget: Its underfunding or complete elimination of so many education programs, including afterschool care; its cuts in environmental protection--the riders included in the omnibus bill that is coming over which doesn't have to do with the 2004 budget, is a mind-boggling way to legislate environmental laws--its abandonment of a program to put police officers on the streets, the COPS program--there are law enforcement officials who are enraged about their ability to continue to protect the public; again, it sort of relates to homeland security--its cuts for children's health insurance; its abolition of the HOPE VI homeownership initiative, which is one of the great programmatic efforts to try to get people to buy into their communities, to be a part of the community, a whole host of other housing programs.
I could go on, and I probably will as the days go on, because these issues need to be identified in the mind of the American public. This is a budget that is changing the shape of what the role of the Federal Government is. Maybe that is what people want. Maybe they don't want afterschool programs for kids. Maybe they don't want the COPS programs. Maybe they don't want Leave No Child Behind underfunded. Maybe they do want it underfunded. Maybe they want no increase in affordable housing. Maybe they don't want them, but we ought to tell them what they are getting as opposed to piling it up into a whole host of numbers and covering it up with other things that
don't make it clear why we are doing what we are doing.
I also want to talk about the administration's proposal to fundamentally change the tax treatment of investment income, another area where--a little bit of my background--it strikes me as really debilitating to the longrun fiscal posture of this country. I know proposals to allow sheltering of investment income sound attractive to many. I used to promote a few of them myself. I think we all agree about the value of expanding opportunities for all Americans to save, to better prepare for retirement. But when you look at the administration's proposal, it has little to do with promoting retirement security for working families.
In fact, there are a whole series of these. For most Americans, these proposals are much more likely to undermine retirement security, and they will apply to a very narrow segment of American retirees or future retirees. Most Americans are not using all the tax-supported programs we have today. They are only using about 25 percent of them, if memory serves. And these programs will drain resources critical to the Federal budget to protect Social Security and Medicare in the future--again, as we go from 40 million retired seniors to 75 million. They represent a dramatic shift in the tax burden, a redistribution of wealth, to speak bluntly, to the benefit of those who have substantial investment income and to the detriment of people who depend on wages and support themselves and, by the way, pay payroll taxes.
Once again, those people who are paying payroll taxes are funding tax breaks in the income tax system--really hard to understand.
These new tax proposals are not merely radical in their redistribution of the tax burden, they are fiscally irresponsible and reckless in the context of our overall budget situation. There are a few elements of this program that need the light of day. They need the focus of the American people, whether it is homeland security, taking care of our kids' educational system, our health care, but probably most important, the longrun ability to fulfill the promise of Social Security and Medicare. That is what this debate is about. Are we really going to have the resources to do the kinds of things the American people have been promised?
It is not enough to say: We don't want to do this. We have promised the American people they will at the end of the day have their Social Security benefits, guaranteed benefits. We need to make sure we have the fiscal structure that is in place that allows that to happen.
This budget will not allow for that to take place. It needs lots of debate from the American people, lots of debate by the Senate, and a lot of debate in general until we get to a conclusion that is a long way from where we are starting.
There is too much at risk here, too many jobs in the first instance, too much in the longrun investment in our economy, to grow our productivity, too much investment to protect the American people with regard to homeland security and the war on terrorism, too much risk with regard to health care and disparities, the ability to provide a meaningful prescription drug benefit to seniors, too much at risk with regard to Social Security.
I hope we can truly flush out what the choices are being made through the context of this budget.
I appreciate the opportunity to speak. It will be one of many times I would like to come to the Chamber to make sure the American people understand we have a radical reshaping of America's priorities through this budget. Frankly, it is a political statement, not an economic program. Nothing less than the future of our country is at stake. We need a real and serious debate about it.
I yield the floor.