Mr. President, reserving the right to object, and I will not object, I know we need to move everything back 10 minutes because we were supposed to start at 5:20 p.m. and we are already 10 minutes past that time. So if we move everything 10…
Mr. President, reserving the right to object, and I will not object, I know we need to move everything back 10 minutes because we were supposed to start at 5:20 p.m. and we are already 10 minutes past that time. So if we move everything 10 minutes back--
Senator Webb and I are involved in the Joint Economic Committee's time. Under the Budget rules, we get a certain amount of time to talk about the impact of the budget on the overall economy. That is what I intend to do.
I think it is also important to do this because, obviously, the budget does not happen in a vacuum, and the size of the Federal budget and its impact on the economy is so profound that I think we need to spend quite a bit of time, a lot more than just an hour's time, about what impact the Federal budget has on our overall economy.
The things we do, it is impacting the overall economy. I appreciate Senators Webb's comments about the military actions. We actually have held a Joint Economic Committee hearing on the impact of the war in Iraq, in Afghanistan, on our overall economy.
While I certainly dispute some of what the economists came forward with, I thought it was a useful thing for us to discuss. I think we ought also to look at that as not in a vacuum, given potential large impacts if the United States pulls out of Iraq and Afghanistan and pulls back from engagement on the global war on terrorism. It can have a huge impact on our economy, in many ways unmeasurable, and in a lot of ways difficult to predict.
But the impact is enormous. I think we have to look at this and say: We need to stay in this. We need to be able to get this done. That stability has a clear, positive impact on the environment. And a change toward a more stable environment in the Middle East and toward a democratic process in Iraq and Afghanistan over a lengthy period of time has a very positive impact on the global economy and ultimately on the U.S. economy. I do not think we can discount those features. While members of the Joint Economic Committee on the other side of the aisle prefer to look only at economic costs associated with wars, there are clearly benefits derived from National security, which they should not ignore.
I wanted to talk about now the budget proposal in a couple of ways. I would like to speak first about the impact of tax-and-spend proposals that are too much of a feature in the overall budget put forward by the Democratic majority in the Senate. I appreciate the work by those who constructed the budget. I recognize the difficulty of crafting a budget.
But I think there are some fundamental flaws that exist in the Democrat's budget that if not addressed, or if addressed in the way that the Democratic majority puts forward, are going to have fundamentally negative impacts near term and long term on the U.S. economy and on our opportunities and our hope for the future.
I think as a premise that we need to look at the United States as a place for a growth platform. We need to look at how we can grow the economic activity, increase the freedom for our people and the population overall, provide for everybody, and in that process grow and provide more opportunities for people here and for us in our future and future generations.
If we go the way the Democratic majority is putting forward in this budget, we are going to see increased taxes, we are going to see increased spending of a substantial nature. We are not going to deal with the entitlement crisis we are already in, and we are not going to be able to provide for opportunities in our future.
There are fundamental choices that people need to make and I will articulate these and I will go through them specifically. Our economy is currently experiencing a significant slowdown associated with the subprime mortgage meltdown, difficulties in financial markets, and certainly a slowing in our housing markets, which includes rising foreclosures.
With that backdrop, though, now would seem to be exactly the wrong time to be talking about tax increases. Just on a basic level, you would look at that and say: If you have a slowing economy, is that the time to raise taxes? And I think most people, if you ask them, they would say: No, that is the time you cut tax rates to try to stimulate economic growth.
Yet this Democratic budget provides just the opposite, a very large tax increase, raising taxes by $1.2 trillion, the largest tax hike ever. That is not something you want to do when the economy is slowing. It goes against economic fundamentals. But it also shows the fundamental impact of the Federal budget on the overall economy. This tax increase will be wide and deep, affecting nearly 116 million Americans, millions of American families, including seniors who will owe thousands of dollars more to pay for more and more Government.
And, yes, this budget projects to make the Federal Government even larger and more intrusive. Not satisfied in the Democrat's last budget with a $205 billion 5-year discretionary spending increase; this 2009 Democrat budget will increase spending by $210 billion over 5 years in this budget. Of course, this will lead to more and more debt that will pile up on top of more and more spending.
I think the second major shortcoming of the budget proposal put forward by the majority is the failure to confront the need for entitlement reform. Now this is something we have been talking about for some period of time. I stand ready, and I hope a lot of my colleagues do, to go at, on a joint, bipartisan basis, entitlement reform. We have talked about it a lot. I am going to show charts on this. But the entitlement plans are going to eat up the entire budget. We will go through the specifics, but it is clearly an unsustainable system that we are in right now.
Like in most problems, the earlier you deal with it the more options you have to deal with it. And the earlier you deal with it the more likely it will be that you successfully deal with it. And the earlier you deal with it the less pain there will be over a period of time, than if you deal with it later.
These problems with entitlement promises that are unsustainable are the same. If we can come together, on a bipartisan basis now, start an entitlement reform, A, the country would cheer that we would do it; B, we would have more options; C, it would be more successful; D, it would be less painful. That is the way we need to go at it in dealing with our entitlement reforms.
But in the Democrats' fiscal year 2009 budget, we see that they are again wishing to ignore this pressing problem associated with entitlement spending. So I wanted to take a look now at some of these problems and put a few charts up in front of people I think they are familiar with, but they remind us of the magnitude and the growing nearness of this problem of entitlement programs.
If you look at the red line on this first chart, you see that total primary spending is projected by the CBO, Congressional Budget Office, a nonpartisan office, to rise from its current level of 18 percent of GDP to more than 30 percent at the end of this chart, 2082, a long ways out there, but it shows you clearly where the trend line goes under the current entitlement programs.
Those are not adjustments to entitlement programs, those are current entitlement programs. Yes, Federal spending is projected to rise to over 30 percent of our Nation's GDP, under our current set of entitlement promises.
The second chart shows that the longer we wait to address the unsustainable nature of promises in our entitlement programs, which this Democratic budget totally ignores, the bigger will be the pain.
Now, here you can see reductions in spending that would be necessary to solve our entitlement crisis. For example, if we were to address our fiscal problems solely by cutting Federal spending starting this year, we would need an across-the-board spending cut of close to 7 percent. If we wait until 2020, we would have to cut spending across the board by 9 percent. To wait until 2040, you have to do it by 15 percent.
That is my point; that is, the sooner you start to work on these things the less pain you have to have in the process, and the more likely it is that you are going to be successful in getting this done. These are dramatic spending cuts. But what if we can get started now and on a bipartisan basis, just going on a slight level and give people time to prepare for adjustments that will surely have to be made?
You still get a much larger impact if you don't fix the unsustainable nature of our entitlement promises now, and instead wait longer. The longer we ignore the unsustainable nature of entitlement promises, the bigger will be the pain associated with bringing the Nation back to a sustainable fiscal course.
Now, this is a commonsense proposal. You would say: Of course, then, I should deal with that now. We are offering to do it on a bipartisan basis. The chairman of the Budget Committee from the majority claims that the task force he and Senator Gregg wish to form to study the entitlement programs is the only way to deal with the problems. I am a cosponsor. I would sponsor legislation to do this. But that in no way mitigates the need to get started as soon as we can to reform entitlements now. Why wait for a task force to form? I think we need to get started on this now.
To see how severe problems associated with the entitlement program promises are, consider the next chart which shows CBO's projection of health care spending. Now, here is the big one that eats us up. We know this. We have got fabulous things going in the health care field that probably are going to drive these costs up even more than this chart projects.
I want to see those things developed further as far as the technology and the ability. I was out at the National Institutes of Health this morning looking at some of the things they are working on at the National Institute of Mental Health, understanding the mind and how it works. Fantastic.
I want us to continue to fund that. That is going to probably drive this line up even higher. That may be the nature of where we are. We do not want to stop that funding. But then you see how dramatic and important it is to address this piece of it, the health care piece of it now, and to begin to address it at this point in time.
Net Federal spending on Medicare and Medicaid now accounts for about 4 percent of GDP. CBO projects, given current entitlement promises and not these major changes I am talking about, that spending will grow to almost 20 percent of GDP in the projected time period here of 2082. A long time now, still the trend line is known and knowable and we should use the ability to deal with it more now than putting that off until later on. So spending on Medicare and Medicaid alone, according to the projections on this chart, will use up the entire historic norms for tax collection and beyond.
But Medicare and Medicaid are not the only entitlement programs. The next chart shows Social Security spending as a share of GDP in the past and spending projections for the future. While spending for Social Security benefits has been between 4 and 4.5 percent of GDP for the past couple of decades, it is projected to rise significantly to 6 percent over the length of this chart's projection, not near the growth of entitlement programs, but still showing a significant 50 percent rise. If you add the 20 percent of GDP accounted for by Federal promises for Medicare and Medicaid, 6 percent for Social Security benefits, you see that the Federal Government has already promised over 25 percent of our total yearly output to entitlement spending. This only counts promised entitlement spending right now. As I mentioned previously, our historical norm for the amount of tax collection that our society gives and puts into the Federal Government is about 20 percent. If you get above that, people really start to yell. So we are already above that in the promises made in three entitlement programs. And that takes into account nothing for the military, for schools, for other social programs, for infrastructure, for unemployment, or for any discretionary spending.
The Democratic majority seems to want to focus on one route here, and that is tax and spend. The Democratic majority, unfortunately, has chosen in their budget to ignore our Nation's looming fiscal crisis that is sure to come from the unsustainable nature of entitlement programs. This fiscal year 2009 budget promises to impose the largest tax increase in the history of this Nation on American families and does this at precisely the wrong time, when the economy is struggling. This will be the largest tax hike ever, amounting to an additional $3,135 in taxes each year for every household, over $3,100 a year increase in household taxes at exactly the time when people are getting concerned about economic activity. Just when we did the stimulus, we raise taxes.
I want to take up the theme of the impact on our economy of this budget. That is the role of the Joint Economic Committee, and that is why they have been given a period of time to comment on this, because this has such a profound impact.
Now I want to talk about the impact of raising taxes at this point in time on the overall economy. I have talked about entitlement programs, the failure to address those, the long-term pain that is associated with that, and the additional pain by putting it off on a longer basis. Now what about the impact of raising taxes at this point in time on our economy and who is going to pay those increased taxes? The Democratic majority's budget will raise taxes on at least 116 million Americans. It is not just on the rich, unless there are 116 million people categorized as that in the United States. It will tax the hard-earned income and retirement benefits of millions of American families and seniors to pay for larger and larger government rather than reform. I think what people want to see is, you guys are going to operate within the amount that you have and reform the system. Reform what you have, don't tax and spend. Let's leave taxes where they are or make them lower so we can grow the economy more and then reform the system within rather than just adding and adding and adding.
The majority would have you believe that they will offer amendments to make the middle-class parts of the tax reductions permanent. They are not including any teeth in that budget amendment, and we will almost certainly not see legislation to accomplish that extension in this Congress. It is just empty promises. Democrats complain that the tax relief measures of 2001 and 2003 primarily benefitted the wealthy. Let's go through a couple of charts to look at that claim and see who is paying these tax increases or paying and receiving the tax relief of 2001 and 2003 and who would pay, if what the majority is putting forward is enacted, the tax increases.
As shown by the changes in the share of total Federal tax liability by income group on the chart, the percentage of all taxes paid by the top income group has increased since the tax relief measures were enacted, and the share of taxes paid by the bottom four income groups has declined. I think this tells a dramatic and different story than what we hear a lot of times in the rhetoric.
Where you look at the various income categories, the lowest 20-percent income category, next 20, next 20 up, and on up, and then we put a block here showing the top 1 percent income category. My point of showing this is on your bottom four income categories, the lowest 20 percent earners under the changes in Federal tax liabilities 2000 to 2005, this is the 2001 and 2003 tax cuts, the greatest beneficiaries under those tax cuts were the lowest income categories. The biggest beneficiary under those tax cuts was the bottom 20 percent. That is as it should be. The lowest income category should have the biggest impact, the most positive impact. You are seeing that in then the next lowest 20 percent, the bottom 40 percent here, then the 60, and then the 80 percent of lowest incomes.
Now you look at the top 20 percent earners, they pay an increase as a percentage of the Federal budget of taxes under these tax cuts in 2001 and 2003. And your top 1 percent is up 8.2 percent in terms of what they pay as their share of Federal taxes.
My point in saying this is, these tax cuts have worked as they should have. They have cut the overall tax rate for individuals, and particularly for lower income individuals. They have stimulated the economy, and they have shifted the tax burden to the higher end of the income distribution. When you say tax cuts for the rich, your really should be talking about tax cuts for most Americans and the percentage they pay. This is as it should be. This is how it was designed. So when people say we have done these tax cuts for the rich, we are not going to extend them, does this chart show tax cuts for the rich? I think it shows tax cuts primarily benefitting the lower 80 percent of wage earners and having a burden shifting to the top 20 percent of income earners. That is the design it should have. It has grown the economy overall. It has been the way we should go.
Yes, despite the tax relief measures that many tout as tax cuts for the wealthy, the share of taxes paid by the top 10 percent of income earners rose more quickly than during previous periods, including periods with higher top marginal tax rates. According to the most recent data, the share of all Federal income taxes paid by the top 10 percent has reached an all-time high of 73 percent. Let me say that again. According to the most recent data, the share of all Federal income taxes paid by the top 10 percent has reached an all-time high of 73 percent. You can see the trend line of what is taking place from 1979; the top 10 percent of income earners, 1979, the percentage of income taxes paid was below 50 percent. In 2000, 68 percent; now it is all the way up to 73 percent, as it should be.
Democrats talk about raising taxes on the wealthy, but fail to mention that not extending the tax relief measures of 2001 and 2003 will result in huge tax increases for all Americans, as this chart displaying average percent increases in taxes by income levels shows. I wanted to show you this one. Low- and middle-income families will be the hardest hit by the scheduled tax increases that will occur in 2011. These families benefitted the most from a reduction in the bottom tax rate, from the child tax credit and marriage penalty relief contained in the 2001, 2003 tax relief measures. If the tax relief measures of 2001 and 2003 are not made permanent, families with $50,000 in income will see their tax bills rise by 261 percent in 2011.
On the other hand, families with $500,000 or more in income will experience a 12- to 13-percent rise in their taxes. Is that what you want for a structure of tax increases, putting the largest hikes on the lowest earning families and the smallest hikes on the upper earners? I don't think that is the way you want to structure tax increases. I don't think that is the way the American public would want to see that structured. I don't think the American people would want to see any tax increases. The average household will pay an additional $1,833 under the Democrat's plan. Many will have their taxes rise by even more. Seniors, families with children will pay an additional $2,000 or more. Married couples will pay an additional $3,000. Small business owners will have their tax bills rise by more than $4,000.
Another shortcoming in this budget is the failure to adequately address the growing burden that the AMT will place on many middle- income families. Although the AMT was enacted initially to prevent millionaires from avoiding taxes altogether, it will soon ironically affect a greater percentage of middle-income married couples with children than millionaires. Let me show this chart, the ones it is going to impact.
This says, middle-income married couples with kids will be more likely than millionaires to pay the AMT in 2010. Here is your married couples with kids, AGI of $75,000 to $100,000, 89 percent will be in the AMT; millionaires, 39 percent will be in the AMT. The AMT needs to go. I think we should go and offer an optional flat tax for the overall Tax Code and do away with the AMT altogether. You can see its disproportionate negative impact on families, not hitting its target and having an overall very negative impact on the economy.
Given the time I have left, I want to talk about a proposal we are going to put up in this budget and it is a bill on the CARFA commission, the Committee on Accountability and Review of Federal Agencies. It is something we have talked about before and we have had it up as a proposal in the Congress. I have had it up as a proposal and I have had a number of cosponsors. On the current CARFA bill, we have 24 cosponsors. I hope it will be a bill that my colleagues in the majority will look at and support. It is built on the BRAC Commission. I would note that the BRAC Commission provided for a process to close military bases. Before we had BRAC, it was impossible to close a military base. Any time you wanted to close one, the people in that district, that State would fight you. You would never get any of them closed. We put together this BRAC process. They came up with a list of bases to close, and then they presented it to Congress. Congress got one vote up or down, close all of them, keep all of them, deal, no deal. Through that system, we have now saved the Federal taxpayer over $65 billion from that process of closing military bases and consolidating them in a few areas, working toward greater efficiencies. It has been very successful.
What we need to do now as a part of the Federal budget is take that to the rest of the Government so we can close Federal programs that are no longer working.
I want to show you this report card of how successful is the Federal Government. This is the Federal Government report card, and this is done as a scoring by Federal agencies, where they score the effectiveness of various programs for hitting their intended target when they were started and for the budget they have been given. I want to note that if you gave a GPA to the Federal Government on accomplishments that it does with the money it has been given, the overall grade point average that the Federal Government gets is a 1.14 out of a 4.0 GPA. Now, that is not very good.
What happens--everybody knows this is what takes place--we get a program started, it gets funded, and it is never ended. It may be completely successful and all is accomplished, but the program continues because we do not do any sort of culling process at all. Then we want to do something new, but wait a minute, we did not do away with the old.
The BRAC process we are talking about putting on the rest of Government--this CARFA Commission--would put that process on the rest of Government and I think dramatically improve this GPA because now you start getting rid of programs that are no longer effective, just like when we had military bases that were in places that were there because of maybe the Spanish American War or the early wars in this country-- completely out of position, no longer necessary but sustained because they had supporters in the system, even though they were not being effective.
Well, imagine if you take that system of protection and nonculling and apply it to the rest of Government. How many programs do we have that we have created over the 200-plus-year history of the country, and we have never done away with any of them? We have not even adequately evaluated their effectiveness. You can see why we would be able to improve the government's GPA score and be able to have more money to put in higher priority
areas, such as the National Institutes of Health, where I would like to do a war on cancer; or the things we need to do for infrastructure in the country. Yet we have never been able to eliminate any spending.
Here is a systems approach, under my proposal, that has worked in another area, that has been key, that has produced $65 billion in savings, that we need to take to the rest of Government.
So one of the amendments I will be putting forward is asking for the establishment of this CARFA Commission--Commission on Budgetary Accountability and Review of Federal Agencies--that will provide a list--a group on an annual basis--of programs that should be eliminated and give Congress then one vote, up or down: agree or disagree whether to eliminate this whole group or to keep the whole group.
I think that is something we need to do overall. It ought to be something we can come together on, on both sides of the aisle. I would note that in traveling across this country and talking with people, one of the big things the American public wants to see us do is get together and get something done on something that is significant to them.
One of those things is that we would be much more responsible to the Federal taxpayers as to what we are spending their money on. If we can become more responsible on that and work across the aisle and they could see Federal programs that are being eliminated because they are no longer effective or they are wasteful--and then they would actually see that taking place--I think people would then trust us more with taxpayer dollars rather than not trusting us with taxpayer dollars. If we can show them that, they would see us doing it on a bipartisan basis.
This is something for which the outcome is certainly not stacked. This is something that both sides could support as a process because we have in the past. We could finally see something starting to take place in eliminating waste, fraud, and abuse in the Federal Government. Everybody is opposed to waste, fraud, and abuse in this body-- everybody. Yet it continues because the system is built to spend, it is not built to save, it is not built to reduce. We have a system that is built to save and reduce, and it is called that BRAC system in the context of military bases. Then that saved money is put into higher priority needs. Let's take that system out to the broader body of government.
This is the short period of time given to the Joint Economic Committee to talk about the impact of the overall budget on the U.S. economy. The impact of this budget that the majority is putting forward is profound and it is negative on the overall U.S. economy. I urge my colleagues to vote against it because of that.
It fails to address any sort of entitlement reform. It increases taxes at exactly the wrong time. You do not need to increase taxes, I think, at any time because of the scale of taxes. But when you have a slowing economy, it is the absolute wrong time to raise taxes. The Democrat's budget also does not deal with reform of the AMT, the alternative minimum tax, which it should. It raises taxes on lower income individuals in this society and in our economy, not on upper income individuals. Again, it does have tax increase at exactly the wrong time. And it does not include things such as fundamental spending reform through a CARFA type of process we used in the military base BRAC system before.
Because of these failures of big-ticket, overarching items, this is the wrong budget at the wrong time that will have a negative impact on our overall economy. It will have a profoundly negative impact on our overall economy. It is not the right medicine of what we need to move forward. For us to grow this economy at this point in time, we need lower taxes, not higher taxes. For us to grow this economy and provide for our future, we need entitlement reform now. We also need to be able to get at our wasteful spending in the Government. We need to adjust our systems to be able to do that. Those are reforms that if we did them now--and did them at this point in time--we could have a much brighter and sustained future. This budget does not provide for those. For those reasons, I will be opposing this budget.
Mr. President, I yield the floor and reserve any time I have on the Republican side for the JEC.