Concurrent Resolution On The Budget, Fiscal Year 2018
Mr. President, I yield myself as much time as I may consume. I want to say some words about our Budget resolution, which I hope we will be passing this week, and how important it is that we do, in fact, pass this. I want to clarify a few…
Mr. President, I yield myself as much time as I may consume.
I want to say some words about our Budget resolution, which I hope we will be passing this week, and how important it is that we do, in fact, pass this. I want to clarify a few issues because the tax reform legislation continues to be a work in progress, and many elements have been mischaracterized, while others have been made up out of the clear blue sky.
Let me start with the budget resolution and start by thanking Chairman Enzi for the very hard work he has done and the very great work he has
done in bringing together the Republican conference around a budget resolution that I think is very likely to pass.
Let's be candid about what this is about. The budget resolution is about giving us the tools to pass tax reform later this year. That is what this budget resolution is about. It is a misnomer, really, when you think about it. The most important substantive item in the budget resolution, by far, is the procedural tools it will give us to pass tax reform with a simple majority vote in the Senate, so that a minority of the body is not able to block tax reform by filibuster. That is what this is about. That is what we are endeavoring to accomplish here.
Why is it important? The main reason it is so important is because for so long we--our entire country--have been laboring with such feeble economic growth. For the last 60 years, prior to the Obama administration, annual economic growth in America was 3.4 percent. During the entire 8-year administration of President Obama, we never once had a single year where we reached even 3 percent. The Congressional Budget Office believes that we are now locked into the indefinite future of sub-2 percent economic growth, and that is what we just have to accept. We have to settle for the fact that we are no longer a booming economy. We are not capable of being a booming economy.
There are a lot of problems with this. I think it is completely unacceptable to believe that, somehow, because a calendar year turned on a page or because Obama was elected President some years ago, it is not possible for America to have the robust economic growth that used to be ordinary. It is not true that we are somehow consigned to feeble growth, and it matters if our economy is growing at 2 percent. It takes 36 years to double the standard of living for the average family. If we just managed to get the growth to 3 percent, and that is less than the historical average, then we can double our standard of living in just over 20 years. It is a big difference in the standard of living of the people who I represent. That is what this is about.
If we get this budget resolution passed this week, the tax reform that many of us are working very hard on has two big goals, certainly for me. I have had many discussions with my colleagues on the Finance Committee and outside the Finance Committee, and I think these goals are widely shared.
The first is that it absolutely has to provide tax relief for hard- working Americans--middle income, lower income, people of modest means, many of whom live paycheck to paycheck. There has to be a direct tax benefit for those Pennsylvanians, those Arkansans, and those people all across America.
How are we going to do that? It is very clear. There is no question. There will be a reduction in the tax rates that are applied to income for hard-working Americans. There is going to be an increase in the standard deduction that they can take, which means a bigger chunk of their income that doesn't get taxed at all. That is absolutely going to be a feature of this tax reform. We are going to increase the child tax credit, so that people who have the cost of raising a family with kids are going to get a credit toward that cost.
The combined effect of these things are absolutely going to lower the tax rates for hard-working Americans, for lower income and middle- income families. If it didn't accomplish that, it wouldn't even get out of the Finance Committee, much less pass a vote on this floor. That is No. 1. There are still dials to be turned and rates to be set--exactly where the various brackets begin and end. These details are still a work in progress, but that goal is going to be achieved. That is item No. 1.
But the other item is really important too, and that is the process by which all of these very same families get an indirect pay raise. They get a pay raise. It will happen over time, and it will happen in different ways. That happens by creating incentives to maximize economic growth and to get away from this sub-2 percent, barely growing economy we have been tolerating and to get back to something closer to what is normal for America--an economy that is growing at least 3 percent.
What happens if we have stronger economic growth? I mentioned before that we increase the standard of living much more quickly. People get to see their kids have a better life and a better standard of living than they had. They can see that trend is going to continue. It happens because new businesses start to get launched again. It happens because existing businesses expand. Both new businesses and expanding businesses hire more workers. When you hire more workers, especially at a time when most economists think we are at something close to what they consider full employment, it puts direct, immediate, and upward pressure on wages, which is what we have been waiting for.
So not only will a working family discover they owe less money to Uncle Sam, but they are very likely to quickly be in a position where they are getting a pay raise because their employer has to pay them more to keep them because we are going to create more demand for workers. How do we do that? One of the ways we are going to do that, I hope--and this is, again, a work in progress; it is underway--is that we ought to make our business tax regime, our big business Tax Code competitive. Anyone who looks at this honestly knows that our Tax Code is not competitive today. American workers and businesses lose out to competition from overseas because other countries have much more competitive tax codes. It is entirely possible, and I think you could make the case, that the American Tax Code is the worst in the world. It is that bad, and when it is that bad, that means our workers and our businesses are much less able to compete. So we are going to try to fix that. That means lowering the rate on income tax for our businesses to something that is comparable to what the rest of the world pays, rather than the extremely high outlier rate that we have today.
It also means that we ought to allow our businesses to expense capital when they put it to work. What does that mean? That means that when a company says we are going to buy a new piece of equipment, a new piece of machinery, a new vehicle, or a new backhoe--whatever it might be--you allow the company to recognize that expense when the expense occurs for tax purposes. That might just seems like common sense. Why wouldn't you do that? We don't do that today. For a large category of new equipment that businesses go out and purchase, even though they have to buy it in the year in which they put it into service and they have to come up with the cash, they don't get to reduce their income accordingly, except over many years. What that means is that it makes it effectively more expensive to buy that equipment. They have to pay tax on money they don't have. That means they buy less equipment.
What difference does this make? It makes a lot of difference. Again, there is a direct effect and an indirect effect. A direct effect is that by allowing businesses to fully expense the capital they put to work, we are going to encourage them to buy more items. That means more work, more production for the kind of machinery and equipment that these businesses are likely to buy. But it gets better than that because when businesses deploy that capital--when they buy a new piece of equipment, a new piece of machinery, when they upgrade their software, or whatever they are doing with this capital expenditure-- they are making their workforce more productive. They are making their employees able to produce more in a given hour in a given day, and when workers are more productive, that is when a business can afford to pay them more, and in fact, has to pay them more. That is where pay raises come from. They come from productivity growth. Productivity growth comes when capital gets put to work. We are going to encourage more of that, and that is going to result in higher wages and higher income for the people we all represent.
The third point I want to make about this tax reform is that it is very important that we fix a broken part of our code that deals with overseas subsidiaries of American firms and foreign firms that operate in the United States. That part of our Tax Code is a disaster. We have all read about the corporate inversions, for instance,
where an American-based company seeks to be acquired by a foreign company for the sole purpose of lowering its tax burden. That happens. It happens because our Tax Code drives it.
We have all heard about the $2 to $3 trillion of profits that American companies have earned in overseas subsidiaries. They will not bring the money home because if they were to do so, they would have to pay another huge tax on top of what they already paid in the jurisdiction of whatever country their subsidiary operates in. Why would we tolerate a system like that? We have an opportunity to fix that. If we fix that, then huge sums of money will come flooding back into the United States. That is going to get invested here. That is going to mean more businesses, new expansion, and more hiring. That is going to be tremendously constructive for our economy, and, going forward, we will eliminate this perverse incentive to have multinational companies headquartered anywhere but in the United States, which is the case today.
In short, this is our opportunity to begin to achieve the growth we have been waiting for. Ever since the great recession, we have not had the kind of economic growth that used to be normal for America. A completely archaic, terribly unfair, ridiculously complicated Tax Code is part of the reason why.
You might ask: How did we used to have such strong growth with this Tax Code? The fact is that most of the rest of the world has been about the business of improving their tax code while we have not. This is our moment and our opportunity to begin to catch up. We can do it in a big way, as long as we pass this budget and give ourselves the tools to do so.
This budget resolution creates the opportunity to do tax reform. Some of my colleagues on the other side of the aisle have criticized the fact that we are setting up a process and using the budget resolution so that the subsequent tax reform can be passed with a simple majority vote in the Senate. They have criticized that. They suggested, in varying degrees, that somehow that leaves them out of the process. Let me be very clear. That is categorically untrue. As to the tax reform bill, we are working on the ideas for this now, and when we actually get to drafting the specifics, it is going to happen in the Finance Committee in the Senate. It is going to happen in the Ways and Means Committee in the House. It is going to be public. The documents are going to be disclosed before the markups begin, and it is going to be open to amendments.
My Democratic colleagues on the Finance Committee are going to be able to offer whatever amendments they like. They can work with us on shaping this, and I hope they will join us in voting for it. It is much better if we could end up passing this with a big bipartisan vote. A tax bill that absolutely does lower the direct tax burden on lower income and middle-income families and encourages more economic growth ought to be something that could be broadly supported. They will have every opportunity to weigh in. They will have every opportunity to amend it. There is nothing about this procedure that in any way excludes Democratic participation.
What it does do, though, is that it says that we will not be held hostage by a minority that wishes to thwart this. If we can persuade at least 50 Senators and a Vice President who is so inclined in the Chair, we will have the ability to pass tax reform. I think it would be malpractice for us not to create the opportunity to do tax reform with a simple majority since we have that vehicle available to us. I believe we are going to pass it today.
Another point I would like to address is the discussion that somehow we are going to blow a hole in the deficit with this. It couldn't be further from the truth, in my view. The budget resolution allows the Finance Committee to report back a tax reform package that will, by a very particular and very precisely defined process, be deemed to forego $1.5 trillion in Federal revenue over the next 10 years. But when you start to unpack that, you realize that, in all likelihood, if we do this tax reform right, we are going to reduce the size of the deficit over this 10-year period. We are not going to increase it.
Why do I say that? First of all, the $1.5 trillion in foregone revenue contemplated by the budget resolution is very misleading because it pretends that the current policy we have of a number of temporary tax relief measures is going to go away. It pretends we are not going to continue those or extend them. In all likelihood, Congress routinely extends them. They will probably be extended. That is worth about $500 billion of that $1.5 trillion. What we are really talking about is $1 trillion of less revenue over the next 10 years. You have to keep in mind, that is on a base of about $43 trillion. It is something on the order of recalling 2.5 percent of projected Federal revenue.
I think the question to ask is, How much extra economic growth will it take to fully offset $1 trillion worth of forgone revenue? Well, that math is pretty easy because the joint tax plan and the Congressional Budget Office have quantified this many times. The answer is something like approximately four-tenths of 1 percent. Four-tenths of 1 percent of extra economic growth, in response to the tremendously pro-growth incentives that we want to put into this Tax Code, will fully offset that.
The Congressional Budget Office is projecting, on average, for the next 10 years, our economy is going to continue at this feeble 1.9 percent--1.9 percent is their number. If getting these reforms right, if lowering the tax burden on working families, if allowing business to expand, making our international and business Tax Codes competitive, if we do that right, I have absolutely no doubt we can generate much more than an additional four-tenths of 1 percent of growth.
When we get the specifics, we will have an opportunity and we will have many analyses that we will be able to look at to address this question of just how much economic growth we will have. In my view, it is extremely likely that we will significantly surpass this very modest hurdle of four-tenths of 1 percent of growth.
Finally, the minority leader made reference to this being a big tax cut for the wealthy. I will remind my colleagues, we can have differences of opinions. We can have a debate here, and we will, but let's remember, this tax reform bill is not written yet.
The two big goals I mentioned I think are universally shared on our side of the aisle, tax relief for middle-income working families and pro-growth policies. We haven't written the details yet. We haven't established exactly what the brackets will be, exactly what the rates will be, where they will kick in, how the passthrough rates apply. There are a lot of important details that are going to be worked out in committee, which is exactly what my colleagues on the other side of the aisle insisted we should be doing, and that is what we should be doing. It also means, since that product is not yet finished, it is not possible for anyone to pull out a number and say X percent of this bill is going to go to this category of people. That is not knowable because the bill is not finished yet.
I am thrilled about this opportunity that we are going to create this week to pass the tax reform later this year that will allow us to achieve the growth we have been waiting for, and that means allowing my constituents, Pennsylvanians, and people all across America to achieve the standard of living they deserve, that they are working hard to achieve, and that they will be able to enjoy.
I yield the floor.