Senate Budget Committee

Floor Speech on Fiscal Cliff Agreement (Jan. 2, 2013)

Wed, 02 Jan 2013 06:30:00 EST

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Transcript

These will be my final remarks to the Senate, and I thought I would share with my colleagues my observations on what has just occurred to put in perspective where I believe we are and where we are headed and to lay down a challenge for my colleagues as I depart. A very significant challenge remains for the Congress and the country, and I hope very much that we find the courage to take on these challenges. It is incredibly important to the future strength of our Nation, and we can do it. We have done much tougher things in the past, and we can certainly take on these challenges.

On New Year's Eve we were called into session and were briefed by the Vice President and other staff from the White House with respect to the deal that was before us. I told our colleagues on that night that I believed we had to support the proposal before us because to fail to do so would send us back into a recession. Most economists said the economy would shrink 4 percent in the first quarter, 2 percent in the second quarter, that 1 million more people would be unemployed, and that the 2 million people now on unemployment insurance would lose that and would have no safety net. So, I saw no alternative but to support this agreement.

At the same time, I told my colleagues: I hate this agreement. I hate it with every fiber of my being because this is not the grand bargain I had hoped for and worked for and believe is so necessary to the future of the country. This is not, by any standard, a deficit reduction plan. As necessary as it is, no one should be misled that this deals with our deficit and debt because it only makes our debt circumstance worse.

Now, some question that assessment, but that is precisely the assessment the Congressional Budget Office has come to. I would like to take just a few moments to put in perspective where we are.

The United States is borrowing 31 cents of every dollar it spends. That is an unsustainable circumstance. It is an improvement somewhat because we were borrowing 40 cents of every dollar we spend. So there has been some modest improvement. But, this cannot go on. It has to be addressed or we will weaken the Nation.

This chart puts in perspective the spending and revenue of the United States going back to 1950. Looking back 60 years, the red line is the spending line, and the green line is the revenue line. You can see our spending is close to a 60-year high. We are not quite at a 60-year high because there has been some improvement in the last 2 years. We are close to a 60-year low on revenue. So our colleagues who say this is just a spending problem, I think, are missing the point. This is a problem of the relationship between spending and revenue. The gap -- much higher spending than we have revenue -- is what leads to deficits and leads to additions to the debt.

The path we are on, we are told by the Congressional Budget Office, will take us from a gross debt of 104 percent of our gross domestic product today to 115 percent by 2022 if we fail to act. So further action is absolutely essential.

Why? Why does it matter if our gross debt is more than 100 percent of our gross domestic product? Well, because the best work that has been done on this question -- by Rogoff and Reinhart -- concluded, after looking at 200 years of economic history, the following. I quote from their study: “We examine the experience of 44 countries spanning up to two centuries of data on central government debt, inflation and growth. Our main finding is that across both advanced countries and emerging markets, high debt/GDP levels (90 percent and above) are associated with notably lower growth outcomes.”

To sum it up, when we have a gross debt of more than 90 percent of our GDP, we are headed down a path that dramatically reduces our future economic growth. That means we are reducing future economic opportunity for the people of our country. That is why this matters, because it will retard and restrict economic growth for our people.

Here is what the Congressional Budget Office tells us about the long-term path we are on, in terms of debt held by the public. CBO tells us we are headed for a circumstance where publicly held debt will be 200 percent of our GDP.

So, we are on a course that is utterly unsustainable. If we look at what has been done -- because those who say nothing has been done are not giving the full story either -- the fact is we passed a Budget Control Act in place of a budget. We put in place a law in place of a budget resolution. That budget law dropped discretionary spending to historic lows. We were at -- in the year 2012 -- 8.3 percent of GDP going to domestic spending. The Budget Control Act, the law that was passed, will take that down to 5.3 percent of GDP going for discretionary spending. That is a historic low.

So when someone says nothing has been done, that is not accurate. We cut domestic spending, and cut it in a very significant way. We cut it to a level that will be a historic low, but that doesn't mean the problem has been solved; nowhere close to it.

Because at the same time, the nondiscretionary accounts are rising dramatically. Medicare, Medicaid, and other Federal health spending are the 800-pound gorilla. That is where we see such a dramatic increase in spending, both in real and nominal dollars, and as a share of GDP.

Back in 1972, these health care accounts consumed 1.1 percent of our gross domestic product. By 2050, if we don't do something, they will consume 12.4 percent. That is totally unsustainable. It is gobbling up bigger and bigger chunks of our budget, putting increasing pressure on our deficits and debt, and eating up the ability of the United States to have the flexibility to respond to crises that might occur.

The aging population is the primary driver of Medicare, Medicaid, and Social Security cost growth. We can see in this chart, the effect of cost growth is the yellow part; the effect of aging is the red part; and the spending in absence of aging and excess cost growth is the green part of this chart. In other words, our spending on Medicare, Medicaid, and Social Security would actually be very stable absent the effect of aging and the effect of excess cost growth. Now the effect of aging has become the biggest driver. There is nothing we can do about that because these people have been born. They are alive today. They are going to be eligible for Medicare and Social Security, and we are going to have to find a way to be able to afford this combined effect.

The revenue side of the equation I think is critically important to understand. Many of our colleagues say: It is true we are at a very low share of GDP going to revenue today. In 2012, less than 16 percent of our GDP came as revenue to the Federal Government. Typically, it is about 18.5 percent of GDP. But if we look back on the last five times we have actually balanced the budget around here, revenue hasn't been 18 or 18.5 percent of GDP. The last five times we have balanced the budget, revenue has been 19.7 percent, 19.9 percent, 19.8 percent, 20.6 percent, 19.5 percent of GDP.

So those who say we have to get back to the normal revenue stream, I think miss the point. The average is not going to do it. It never has, at least going back to 1969.

We are going to have to have more revenue at the same time we have more spending discipline, especially with respect to the health care accounts.

We need fundamental tax reform. This Tax Code is out of date, it is inefficient, and it is hurting U.S. global competitiveness. The complexity imposes a significant burden on individuals and businesses. The expiring provisions create uncertainty and confusion. It is hemorrhaging revenue to tax gaps, tax havens, abusive tax shelters.

I have shown many times on the floor of the Senate a picture of a little five-story building in the Cayman Islands called Ugland House. Ugland House, this little five-story building, claims to be the home of 18,000 companies that all say they are doing business out of that building. I have said many times that is the most efficient building in the world. How can 18,000 companies be doing business out of a little five-story building down in the Cayman Islands? They are not doing business out of that building. The only business they are doing is monkey business, and the monkey business they are doing is to avoid the taxes they owe in the United States through shell games in which they show their profits in the Cayman Islands, where, happily, there are no income taxes to impose on those earnings. So they are avoiding showing their income there here and putting it in the Cayman Islands where they can shield it from taxation.

We also desperately need to restore fairness. The current system contributes to growing income inequality. I don't know how anyone can conclude otherwise. I have also shown many times on the floor of the Senate the report on one building on Park Avenue in New York, where the average income is $1.2 million of the people who live in that building and the average tax rate those people are paying is about 15 percent. The janitor in that building is paying a tax rate of 25 percent with an income of $33,000 a year. How is that fair? How can that possibly be considered fair? These long-term fiscal imbalances simply must be addressed, and revenue is going to have to be part of the solution.

Martin Feldstein, one of the distinguished economists in our country, conservative, chairman of the Council of Economic Advisers under President Reagan, said this about the tax expenditures of the country because we are spending $1.2 trillion a year in the tax expenditures category of the United States. We are spending more through the Tax Code than we are through all the appropriated accounts.

People say we are spending too much. Yes, we continue to have a spending problem and a revenue problem. But through the Tax Code, we spend more there than we spend through all the appropriated accounts.

Here is what Martin Feldstein said about the need to reduce tax expenditures: “Cutting tax expenditures is really the best way to reduce government spending....[E]liminating tax expenditures does not increase marginal tax rates or reduce the reward for saving, investment or risk-taking. It would also increase overall economic efficiency by removing incentives that distort private spending decisions. And eliminating or consolidating the large number of overlapping tax-based subsidies would also greatly simplify tax filing. In short, cutting tax expenditures is not at all like other ways of raising revenue.”

I say to my colleagues, even after what has just happened, we are going to have to raise more revenue, we are going to have to cut spending, and we are going to have to reform entitlements. It is as clear as it can be that those things are going to have to be done to get the country back on track. Here is one of the most distinguished economists in the country telling us that reforming tax expenditures is not like other ways of raising revenue in terms of its economic effect. I think Mr. Feldstein has that exactly right.

By the way, who most benefits from these tax expenditures? Here is a chart that shows the increase in after-tax income from tax expenditures and here is the top 1 percent. On average, they benefit per year by over $250,000. The next quintile benefits by $32,000. The lowest quintile tax expenditures benefit by $707 a year. Wow. What an extraordinary disparity. The lowest quintile tax expenditures benefit $707 a year. The top 1 percent, their benefit from tax expenditures, on average, is over $250,000 a year.

Here we are, borrowing 31 cents of every $1 we spend. We are on course taking the debt of the United States from over 100 percent of our gross domestic product to over 200 percent if we fail to act.

That is why we had the National Commission on Fiscal Responsibility and Reform. The report we put out was called "The Moment of Truth." What we called for in that report was $5.4 trillion in deficit reduction. We used the current baseline. That is what we would have provided, $5.4 trillion in deficit reduction. We lowered the deficit to 1.4 percent of GDP in 2022. We stabilized the gross debt by 2015. We reduced discretionary spending to 4.8 percent of GDP by 2022. We build on the health care reform savings. We called for Social Security reform and savings to be used only to extend the solvency of Social Security itself, and we also included fundamental tax reform that raised revenue and did it in part by reducing those tax expenditures I just referred to.

Here is what would happen to the deficit as a percentage of GDP under the fiscal commission budget plan. We can see in 2012, the deficit is at 7.6 percent of GDP. By 2012, it would be taken down to 1.4 percent of GDP under the plan.

Here is what would happen to the gross debt of the country as a percentage of GDP under the fiscal commission plan. From 104 percent of GDP in 2012, down to 93 percent of GDP in 2022. Stabilize the debt, then begin to bring it down. That ought to be our challenge.

The plan that was just passed took individual rate increases from 35 to 39.6 for couples earning over $450,000. Capital gains and dividends were increased from 15 percent to 20 percent. PEP and Pease were reinstated. The estate tax was increased to 40 percent for those estates above $5 million. The alternative minimum tax was patched on a permanent basis to prevent some 30 million people from being caught up in the alternative minimum tax. It extended other expiring provisions.

On the spending side, the doc fix was put in place for 1 year to prevent doctors who provide care for Medicare-eligible beneficiaries from taking a 27-percent cut. It turned off the sequester for 2 months, the $1.2 trillion across-the-board cut in discretionary spending in both defense and nondefense. It provided for a 1-year extension of unemployment benefits and also for a 1-year extension of the farm bill.

Again, while I believe that plan had to be supported -- and I did, albeit reluctantly because I think if we had failed to support it, we would be headed back into recession, an additional 1 million people would have lost their jobs, the unemployment rate would be headed to 9.1 percent, and 2 million people would have lost their unemployment benefits. So there was good reason to support that plan.

But I want to end as I began. I hated that plan. I hated it with every fiber of my being because the truth is it increased the debt of the United States. That is not just my word; that is the word of the Congressional Budget Office that tells me the revenue loss from that plan is $3.6 trillion; the new spending, $332 billion. The total impact on the deficit and debt, $4 trillion. That doesn't account for the additional debt service which is another $650 billion. The total increase in the debt as a result of that plan is over $4.6 trillion.

So don't let anybody tell you that was a deficit reduction plan or a plan to deal with the debt because it was not and it is not. That leaves the unresolved challenge of our time. Because for this Nation's future, it is critically important that the next Congress, in its early days, try to get back to doing the grand bargain, the big deal, something that would reduce our deficits and debt by at least $4 trillion over the next 10 years to stabilize the debt to begin to bring it down.

I leave here in many ways with a heavy heart because I came here 26 years ago believing one of the foremost responsibilities of a Senator was to guide the fiscal affairs of this country.

I ask unanimous consent to enter into the Record the announcement speech I made in 1986 in running for the Senate. This is what I said 26 years ago in my candidacy for the Senate:

“I have concluded that the serious economic problems facing our state can in large measure only be addressed in Washington. It is economic policies decided in our nation's capital that are pushing our state into a difficult financial position.

“Since 1980, our national debt has doubled. Our national operating deficit has tripled. Our trade deficit has increased six-fold. And we have become a debtor nation for the first time in seventy-one years.

“We can do better. We must do better. And we will do better if we have the courage and leadership to move this country in a new direction.

“Current economic policies, which have increased the national debt in five years by an amount that had taken two hundred years to accumulate, have forced record high real interest rates. Those record high real interest rates have bloated the value of the American dollar, which in turn has put a hidden tax on every commodity exported by our state and nation. That hidden tax has robbed us of our export markets and dramatically reduced our commodity values.

“These economic policies are not only devastating to the economy of the State of North Dakota but are rapidly exporting the economic strength of this country. This process must be stopped.”

I will end with the next paragraph:

“It is time for politicians to stop posturing and promising and start guaranteeing performing results.”

Then I made a pledge:

“I pledge today that, if elected, the federal deficit, the trade deficit and real interest rates will be brought under control or I will not seek reelection in 1992.”

That is a statement I made 26 years ago. Some people are probably wondering, if you made that pledge, how are you still here? Well, 6 years after I made that pledge I announced I would not seek reelection, and I did not. I announced in April of that year I would not seek reelection. Congressman Dorgan was nominated to run for my seat and I thought I was leaving the Senate.

Then the other Senator from North Dakota died in September of that year. The Governor called me and said: Senator, you have to run to fill out the 2 years of his term because our State is going to lose all of its seniority in one fell swoop -- all of Senator Burdick's seniority, all of your seniority, and all of Congressman Dorgan's seniority. We will be the only State in the Nation with no seniority. You will have kept your pledge. You did not seek reelection. You will run in a special election which will be in December, after the regular elections in November.

I will never forget, one of the news media stations back home did a poll and two-thirds of Republicans thought I should run to fill out the 2 years of that term, which I did - which means I am the answer to a trivia question, because I am the only Senator in history who served in both Senate seats from the same State in the same day.

I believed then and I believe now that fiscal responsibility is one of the first obligations of government. My deep regret, my greatest regret, in leaving here is that we have not been able to fashion the grand bargain to put us back on track.

I ask unanimous consent to have a tribute to the Budget Committee staff who have served so ably and so well, served this body, served our country, led by my staff director Mary Naylor, who is truly a remarkable person. I consider her a real patriot because she has absolutely dedicated herself to getting the fiscal affairs of the country in order. If I could, I ask unanimous consent to have printed in the Record a tribute to all of the Budget Committee staff who has served with me so ably and so well.

I also wish to mention Sara Garland, my chief of staff, an extraordinary person, a North Dakota native, somebody who has dedicated herself to public service; Geri Gaginis, my executive assistant, who has been with me more than 20 years, also a North Dakota native -- we call her "mom" in our office because she does a good job of keeping us all on track; Tracee Sutton, legislative director, also a North Dakota native -- an exceptional person, she will be on the staff of my succeeding colleague, Senator-elect Heitkamp; Susan King, also a North Dakota native, who has been with me off and on for many years, an outstanding person; Barry Piatt, my communications director, with me here at the end; Mary Jo Prouty, my office manager, still laboring to close down our office; Molly Spaeth, also with me right here to the final days.

I also want to give special recognition to Sean Neary, who was my communications director for many years, who is now the communications director for the Finance Committee, truly an extraordinary person.

With that, I thank Stu Nagurka. Stu is my communications director in the Budget Committee, has stayed with me right to the end, somebody who has an extraordinary record in government service; in fact, served your own Bill Richardson, Governor of New Mexico, when he was in public service here in Washington. Stu was his communications director and did, I think, as everyone knows, an outstanding job.

His son, I want to note, is our page, Jarrod Nagurka, called back into service because in these days, you know, we are a little short of people. They are people for whom I have the highest regard, Stu Nagurka, Jarrod.

I mentioned Mary Naylor, my extraordinary staff director; John Righter, the deputy; but I mention and have gone into detail on all of my Budget Committee staff in this statement that I made part of the Record.

Finally, let me note that my colleague on the Budget Committee, Senator Sessions, is here. Senator Sessions has been the ranking Republican. He has been a gentleman. He has been somebody I have enjoyed working with. He and his staff have been professional. I think we put on a series of hearings that laid out the issues for our country in a clear and undeniable way.

Again, I leave with only one true regret and that is we were not able collectively to put in place a plan to get our country back on track. But I am not without hope because next year -- this year, later this year -- we will have more opportunities to do what needs to be done.

Chairman Conrad's National Press Club Newsmaker Speech

Wed, 19 Dec 2012 03:00:00 EST

On December 19, 2012, Chairman Conrad spoke at the National Press Club Newsmaker in Washington, D.C. He discussed the ongoing negotiations to avoid the Fiscal Cliff and the continued need for a big and balanced long-term deficit reduction agreement. In addition, he reflected on his 26-year career in the Senate.

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Floor Speech on Our Nation's Budget Challenges

Wed, 12 Dec 2012 08:00:00 EST

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Charts Used During Speech

Transcript

We have this long tradition in the Senate of Senators giving farewell remarks. I want to alert colleagues that mine will be especially long, so they might want to go have lunch and then come back.

I don't consider this my final speech because I am still hopeful we will reach an agreement on the farm bill. The distinguished Chair is here. I hope we can reach agreement on averting the fiscal cliff because that is important to the country. I hope we will have additional chances to communicate with colleagues and the public before we are done.

These are my farewell remarks and observations of 26 years of service here, and it has been an incredible experience.

The first thing I want to do is say thank you to the people of North Dakota for having confidence in me when I was only 38 years old in sending me to represent them in the Senate. I was 38, but I looked about 25, and the people of North Dakota elected me in a stunning upset of a long-established incumbent. I treasure the confidence they have had in me.

I also want to thank my colleagues for the responsibilities they have given me. I also want to thank the leadership team of Senator Reid, Senator Durbin, Senator Schumer, and Senator Murray and the confidence they have had in me.

I have been so blessed to have people who have been with me on my staff in many cases for more than 20 years. My chiefs of staff, including Jim Margolis, who is one of the top media gurus in the country. He has done much of the advertising for the President in this last campaign. Also, my thanks to David Herring and Mary Wakefield, as well as Kent Hall, who died an untimely death while working for me. Thank you to Sara Garland, Bob Van Heuvelen, and Wally Rustad.

Thanks also to Tom Mahr, who was my legislative director for than 20 years. I also wish to thank my executive assistant, who has been with me more than 20 years; Geri Gaginis, who we all fondly call Mom in my office because she cracks the whip and makes sure the trains run on time; Mary Naylor, my long-time director on the Budget Committee and who has also been with me more than 20 years.

My Budget Committee deputies John Righter and Joel Friedman have done extraordinary work on behalf of the people of this country. Stu Nagurka is here with me today and is going to help me with charts and has been my long-time communications director.

There are so many more people I want to thank. Most of all, I want to thank my family. My wife Lucy, who has been my great partner through all of this. She was my campaign manager when I first ran for the Senate.

My daughter Jessie, who has in many ways, perhaps, sacrificed the most, because when a person is in this job they miss birthdays and other important events. She has been a great daughter. She was here last night for our farewell party and we had a lovely time. Our son Ivan and his wife Kendra, who are in Oregon where they have a small farm called Tipping Tree Farm. We wish they could be here today. Our grandson Carter, who is a proud member of the University of Oregon marching band, The Ducks, and who served as an intern for me -- not at government expense, by the way, it was at our expense; and our little dog Dakota who has become sort of a mascot of the U.S. Senate. Brian Williams, when he did a show on "A Day in the Life of the Senate," concluded that program by calling Dakota the "101st Senator." I think he will be missed perhaps more than I am as I leave the Senate.

In 1964, I came here. I sat up in the gallery -- in fact, it was the gallery right up there -- and I was 16 years old, and I watched a debate in the U.S. Senate. It was on civil rights. Hubert Humphrey was leading that debate. It so inspired me that I thought, you know, someday I would like to be down on that floor and I would like to debate the great issues of the day and I would like to represent the people of North Dakota. So I went home and wrote out on the back of an envelope that I would run for the U.S. Senate in 1986 or 1988, and I ran in 1986 and was successful. That is the power of a plan.

To the young pages who are here, if any of you seeks to be in the U.S. Senate someday, have a plan, because there are so many people who sort of drift through life without one. If you have a plan, you will be light years ahead.

In that race, as I indicated, my now-wife Lucy was my campaign manager. We won what was then believed to be the biggest political upset in the history of our State. I was proud of that victory and proud to have a chance to represent North Dakota here.

I think we all know our country needs a plan now, and we know plans have worked before. I was here in 1993 when we had just come off the largest deficit in the history of the United States. The country was in the doldrums. The economy was just plugging along, not doing very well, we had a weak recovery from a deep recession, and we passed a plan to get the country back on track. We did it the old-fashioned way. We made tough decisions, some that were unpopular, but it was the right thing to do and it worked. We balanced the budget. We had the longest period of uninterrupted economic growth in the Nation's history. Twenty-three million jobs were created, and we were actually paying down the debt of the United States at the end of the Clinton administration.

We did it again when disaster struck my State in 1997. We had one of the worst disasters ever in North Dakota, a 500-year flood that followed the worst winter storm in 50 years. Many of my colleagues may recall the images from that disaster when firemen were fighting an enormous conflagration in downtown Grand Forks in the middle of a blizzard and there was also a massive flood. Grand Forks was devastated.

Again, we had a plan, a $500 million disaster recovery plan that became a $1 billion plan, and it worked, and we did it the old-fashioned way. We made tough decisions, some that were unpopular, but it was the right thing to do and it worked. The community held a recognition event for me last weekend. The leadership of the community was there, and many people from of the community reported on the remarkable recovery in Grand Forks. It is, I think, an example of what can be done when government responds and does so intelligently and effectively.

Now we face a new challenge. We have a fiscal cliff, or a fiscal curb, or whatever one terms it, but what we know is that if we fail to act, we could be pushed back into recession. Our country needs a plan -- a plan to get us back on track, to revitalize economic growth, to secure our long-term economic future, and to get the country moving again, and we can do it. We have done much tougher things in the past.

Sometimes I hear people being critical of this institution when they leave here. Let me say I am not in their ranks. I leave this institution with enormous respect. The U.S. Senate is the greatest deliberative body in the world, and I sincerely believe the vast majority of my colleagues are serious-minded and have the best interests of the country at heart. I believe the vast majority of my colleagues want to do what is right for the country. We have differences -- enormous differences -- about what is the right thing to do, but I have no doubt most of our colleagues are well intentioned.

In many circles it is fashionable now to bash government and play down its importance. I personally think we would do well to remember what it has accomplished. I can remember so clearly being called to an emergency meeting in this building in the fall of 2008. I was handed a note saying I was urgently requested to come here. It was about 6 o'clock in the evening. I was the last one to arrive. When I walked into the leader's office, there were the leaders of the House and the Senate, Republicans and Democrats, the Secretary of the Treasury from the Bush administration, and the Chairman of the Federal Reserve.

I instantly understood something very serious was afoot. They closed the door and told us they were going to take over AIG, the large insurance company, the next day. They weren't there to ask for our approval or seek our agreement; they were there to tell us they were taking this step and they told us they were taking this step because they believed if they did not, there would be a financial collapse in this country within days, and they gave great specificity as to what would happen if there was a failure to take the action they were about to take.

The public reaction was harshly negative. The notion of the Government of the United States bailing out a large private insurance company created controversy and criticism from almost every corner. Ultimately, the rescue of that company cost $180 billion -- a staggering sum. But do my colleagues know what. We have learned this week that the taxpayers will make money on the deal. Yes, it cost us $180 billion, but the taxpayers are going to make $22 billion on the transaction. If we hadn't done it, we would have risked going into a depression.

So when people say there is no role for government or it should be a limited, shrunken roll, I say, Really? Would we have wanted to stand by and risk this country going into another Great Depression? Let's recall what that was like. More than 20 percent of the people in this country were out of work. I know my own grandfather, who refused to take bankruptcy, owned stock in the local bank. In those days people had unlimited liability if they owned stock in a bank. So when there was a run on the bank, as there was, he was called to bring money to the bank, which he did. He did it over and over, and it took him 9 years to recover. People were hungry. People were desperate. That is what a depression is about.

So when I reflect back to those decisions, I believe they were the right decisions to make. It is not just my view; that is the view of two of the most distinguished economists in this country, Mark Zandi, who was a key economic adviser to Senator John McCain in his Presidential race, and Alan Blinder, the former Deputy Chairman of the Federal Reserve. Here is what they say: Without that Federal response, we would have had 8 million fewer jobs and a 16-percent level of unemployment in this country, and we would have been in the second Great Depression. They call it "Depression 2.0."

So let's remember where we were when President Obama came to office. The Nation was facing the worst economic catastrophe since the Great Depression. In the fourth quarter of 2008, the economy shrank at a rate of almost 9 percent. After the Federal actions, positive economic growth returned in the third quarter of 2009 and we have now had 13 consecutive quarters of economic growth. We have come a long way.

This is a remarkable turnaround in a very short time, measured against previous financial crises. In fact, there has been an academic study just completed that suggests typically it takes 8 to 10 years to recover from a financial crisis. So the recovery here, while not everything we would have hoped, is a dramatic turnaround.

At the same time, our constituents know, and we know, the price has been high. We know we are currently borrowing 31 cents of every dollar we spend. That is somewhat of an improvement, because we were borrowing 40 cents of every dollar we spend. So this is an improvement, but we have a long way to go.

And the public understands we face both a spending and a revenue problem. Spending is near a 60-year high, as this chart shows. The red line is the spending line; the green line is the revenue line. But for those who say it is just a spending problem, I don't think the facts bear that out, because the revenue is near a 60-year low. I think most logical people would say we have to work both sides of this equation.

When we look at our debt, we see that our gross debt has now surpassed 100 percent of our gross domestic product. There was a landmark work done a couple of years ago by Rogoff and Reinhart. They looked at 200 years of economic history and they concluded that once our debt exceeds 90 percent of GDP, our future economic prospects are reduced, and reduced quite significantly: future economic growth reduced by 25 to 33 percent. So this is not just numbers on a page; this is a question of future economic opportunity.

This growing debt is why many of us called for action a long time ago. In fact, it was 6 years ago this month that Senator Gregg and I came up with the idea of a commission to tackle the debt. That idea ultimately led to the President appointing the Bowles-Simpson Commission. Its bipartisan report recommended $4 trillion in deficit reduction in a balanced way, and I think in a fair way. It protected low-income programs, it actually improved the progressivity of the tax system quite significantly, and it was balanced between revenue and spending. Other bipartisan groups have concluded the same thing; that we need spending restraint and we need revenue. So there is a critical role for government here. We have seen it in the past and we will find it in the future.

But I think we also have to acknowledge there are problems here. There are problems in this Chamber. As proud as I am of this institution, and I will forever be, I have detected over the 26 years I have been here, a change. It has happened kind of gradually, but it has clearly happened. We now spend too much of our time seeking partisan advantage, and it happens on both sides, and it is all understandable. I understand it. I am not being critical of individuals. We spend too little time trying to solve problems. We spend too little time in our caucuses, in our meetings, focused on how to solve the problems facing the country. I deeply believe this observation is true.

I believe we can do better than this. The institutions of our government have a proud history. The genius of our Founding Fathers can be found in every part of our history. Whether it was conquering the last Great Depression or winning World War I and World War II or launching a man into space or conquering dreaded diseases, over and over our country has organized to better the plight of mankind. We need that same kind of focus and effort now to address our challenges.

I am confident we can do this, but it is not enough to be confident. It is not enough to be hopeful. It requires a plan, and I would like to take the next few minutes to lay out my belief of what that plan should include.

Much of what I will talk about reflects the work of the Bowles-Simpson Commission, the Group of 6 that I have been a part of, and the Group of 8.

It starts by looking at what both sides have laid down. Republicans have laid down the spending cut plan; the President has laid down a revenue plan. My own belief is we should take them both. We should take what the Republicans have proposed on spending, with some modest modifications which I will discuss, and we should take the President's plan on revenue.

The President laid down a plan that said we ought to raise $1.6 trillion over the next 10 years. Boy, that sounds like an awful lot of money -- does it not? -- $1.6 trillion. Not billion, not million, trillion. And people will be quick to say: Oh, my God, that is the biggest tax increase in the history of mankind. Terrible. We cannot do that.

Well, we need to put it in perspective. The first thing we should recognize is this will take us to a revenue level that is 19.9 percent of our GDP. The last five times we have balanced the budget in this country, going back to 1969, we have been at 19.7 percent, 19.9 percent, 19.8 percent, 20.6 percent, and 19.5 percent. Does 19.9 percent fit in? These are the only times we balanced the budget going back to 1969.

To put it in even more perspective, how much revenue are we going to raise over the next 10 years without any change? Well, here is the number: $37.4 trillion. Nobody ever puts these things in perspective. These big numbers are in relationship to what; $1.6 trillion is what in relationship to $37.4 trillion? As a percentage that is an increase of 4.3 percent. My goodness, we cannot increase the revenue by 4.3 percent in this country over the next 10 years? Of course we can. Of course we can, especially if it means we get our house in order and put the country on a more firm fiscal footing.

It does not just matter how much money we raise; it also matters how we raise it. We have a Tax Code now which I cannot defend. I cannot defend it. I took a study that was done by a man named Martin Sullivan last year. He did a very interesting thing. He looked at one building on Park Avenue in New York, and he was able to do it because they happened to have the statistics that isolated that one building.

Do you know what he found? The average income in that building was $1,167,000 for the year -- $1,167,000. The average tax rate of the people in that building was 14.7 percent. The janitor in that building had an income of $33,000. He paid a tax rate of 24.9 percent. Is this fair? Is it fair that people making $1.1 million paid a tax rate of 14.7 percent, and the janitor who served them earning $33,000 a year paid a tax rate of 24.9 percent? Well, I personally do not think so.

I know all of the arguments. I have served on the Finance Committee. I have heard it all. The biggest reason for this differential, by the way, is not the earned-income tax rate, which has had almost all of the attention in this national discussion. Almost all of the attention has been on the earned-income tax rate and raising it from 35 percent to 39.6 percent.

Almost no attention has been paid to the unearned-income tax rate on capital gains and dividends. The unearned rate is currently at 15 percent. That is what allows very wealthy people to pay a tax rate that is a fraction of those who work full time and are paying rates of 25 percent.

So I hope as we move to conclusion we will pay a little more attention to the unearned rates. The truth is, we would not have to have as much of an increase as is being proposed on the earned-income side and have more of an increase on the unearned-income side, and we would make the Tax Code fairer and we could raise the same amount of revenue. That is the revenue side.

But the spending side, Republicans have down. They have put out a proposal that asks for savings out of entitlements and other discretionary spending. And if we look at their proposal and break it down -- again, let's look at health care. We are going to spend $11 trillion over the next 10 years on health care. Republicans are proposing saving $600 million. If we had a compromise between Republicans and Democrats let's say at $500 million, that would be a savings of, again the magic, 4 percent.

We are going to increase revenue 4 percent. If we had savings in health care of 4 1/2 percent, we would save $500 billion. Now, I have had conversations with colleagues who tell me we cannot possibly save $500 billion out of health care, just like people say, well, we cannot possibly increase revenue $1.6 trillion.

Really, we cannot save $500 billion out of a pot of money where we are going to spend $11 trillion? I do not think that is true. I think we can save $500 billion. And I will tell you, there is someone sitting on this floor who has a pretty good idea of how to do it. Senator Sheldon Whitehouse has said to us over and over and over: We are spending more than any other country in the world as a share of our national income on health care. We are spending 18 percent of our GDP on health care. No other country spends more than 11 1/2 percent.

The best minds in this country have told us we are wasting hundreds of billions of dollars in health care that do not improve health care outcomes at all. If we would save money in overall health care, 40 percent of that savings would flow through to the Federal Government. Senator Whitehouse is right about this. We ought to focus like a laser on where the waste is.

We do not need to increase the eligibility age for Medicare. We absolutely do not have to do it to save $500 billion. But what it would do, if we save $500 billion, is it would keep the growth in health care spending about equal to the growth in the overall economy. That would stabilize the growth of health care spending. That would be a huge contribution to the economic competitive position of the United States.

Republicans have also said: Hey, let's save $300 billion on domestic discretionary savings. Now, I will be the first to say we have already had lots of savings on the discretionary accounts. We have saved over $1 trillion in the discretionary accounts. But they say, ok, let's save another $300 billion. I think we should say we will do it if they go with us on the revenue. We will do it because that represents a savings of 2.6 percent of the $11.6 trillion we are going to spend in the discretionary accounts over the next 10 years.

Now, I think we have gotten into a situation where we use numbers that are absolutely big numbers, but we do not put them in perspective. We cannot save 2.6 percent out of discretionary accounts. Well, I believe we can. I absolutely believe we can. I believe we can save more out of defense.

I have supported every penny -- I did not vote for going to war in Iraq. I thought that was a huge mistake. But I have supported every dollar of spending for our troops in the field. I can tell you as the Budget Committee chairman, we can save more money in defense. There are lots of Republicans who know we can do it too.

Other mandatory. That is another category the Republicans said to save $300 billion there. I think they are $100 billion too high because we are already saving over $100 billion out of other mandatory programs to offset the cost of extending certain policies just last year. So let's save $200 billion. That would represent, again, 4 percent of what we are projected to spend over the next 10 years in other mandatory spending; $5.1 trillion is what we are programmed to spend. Two hundred billion dollars of savings there would represent 4 percent.

Again, I have had colleagues tell me we cannot possibly save $200 billion. I have had staff people tell me we cannot save $200 billion. So I say, how much are we going to spend? How much are we going to spend? That $200 billion represents 4 percent of what we are going to spend. We cannot save 4 percent? Yes, we can. Yes, we can.

I was elected on the slogan, in 1986, of "Yes We Can." And somebody else used that slogan a few years later. President Obama used that slogan, "Yes We Can." He called me up. He said: “Do I owe you royalties?” I said: No, I am glad you are using it.”

But, yes we can. We need more of a yes-we-can attitude around here.

So when I rack it all up and I look at what we have already done, we have saved $1 trillion in the Budget Control Act of last year. Here is other mandatory savings I just talked about: more than $100 billion that we have already done to offset the cost of extending certain policies, $900 billion of other discretionary savings already done. So we put that in the bank. We use that as the base.

We put it all together and here is what we have: We save another $200 billion on defense; we have revenue of $1.6 trillion, which is the President's proposal; we have $100 billion of nondefense. That gets us the $300 billion the Republicans have asked for.

On health care we do $500 billion. That is close to what they have asked for, $100 billion less. Other mandatory, $200 billion; that is close to what they asked for. The $100 billion difference reflects what we have already done.

Interest savings. Because we are spending less and we have more revenue, we save interest, $400 billion. That gives us a total of spending cuts of $1.4 trillion. We add in what has already been done $1.050 trillion, and we have a total of $2.450 trillion. We add that to the $1.6 trillion of revenue, we have $4.050 trillion of savings.

Then I personally would extend the payroll tax holiday because CBO tells us, on the tax side, that holiday is the biggest bang for the buck in giving a lift to the economy. It will cost us $200 billion, for a net deficit reduction of $3.850 trillion. For those wondering what happens to AMT and what happens to the doc fix, we have those in the baseline so they are covered in this proposal. We can correct the alternative minimum tax. We can eliminate the doc fix and be done with them.

This magnitude of package is precisely what was called for in the fiscal commission. In The Moment of Truth report, this is what they called for. I think they were right to call for it. I was proud to be part of that effort. I believe this is precisely what we need to do now. So that is the plan. Now we need action. We should do it the old-fashioned way. We should make tough decisions, even some that will be unpopular.

It will be the right thing to do, and it will work. It will stabilize our debt and begin to bring it down. It will provide certainty to our economy. I believe it will unleash the $1.7 trillion that is in the balance sheets of our corporations, and it will unlock the investment potential that lies all across this country.

Let me end as I began by simply saying thank you. Thank you to the people of North Dakota, thank you to my colleagues, thank you to my staff, and most of all, thanks to my family -- to my wife Lucy, to my daughter Jessie, to our son Ivan and his wife Kendra, and to our grandson Carter. To all my family members, my cousins, who have been with me in every campaign, I will never forget your support and your help. I will always consider serving here the honor of my life.

I also thank my colleague Senator Hoeven, who, in the 2 years he and I have overlapped, has been a good colleague. I have enjoyed working with him very much.

I just close by noting, because as many of you know, I am sort of a numbers guy, that I started these remarks in the 12th hour of the 12th day of the 12th month of 2012. I am sure numerologists will make much of those relationships. I began this speech in the 12th hour of the 12th day of the 12th month of 2012, and I leave here forever grateful for the opportunity to serve.

Chairman Conrad Floor Speech Disputing GOP Budget Assertions

Thu, 20 Sep 2012 04:00:00 EST

Related Materials

Chart Used During Speech

Transcript

First, I thank my colleagues, Senator Reid, our leader, and Senator Durbin for their kind words. I very much appreciate those kind words. I also must say I am a little taken aback by what I heard earlier on the floor from some of my Republican colleagues because it truly does represent an attempt to rewrite history, the history I have lived in my 26 years in the Senate.

I announced a little more than a year and a half ago that I would not seek reelection, so I don't have a political ox to gore. But I am here to report what I have seen after 26 years of service. Let me start by saying our Republican colleagues at the leadership level decided early on that their strategy to be successful was to stop things from passing in the Senate. It is very clear that has been their strategy. That is why we have seen more than 380 filibusters in this body, which is completely unprecedented in the history of the Senate.

The Republican leader made it very clear years ago that his highest priority was to defeat for reelection President Obama. He did not say his top priority was to solve the problems of the country. He did not say his top priority was to get our economy back on track. He did not say his top priority was to address the deficits and debt of the Nation. He did not say his top priority was to improve the security position of the United States. He said his top priority was to defeat President Obama.

Shame on him. That should never be the top priority of a leader in this body, Republican or Democratic. The top priority ought to be to help solve the problems the country confronts.

I am a little cranky because many of my colleagues know my wife and I have a little dog named Dakota that is suffering from cancer. Last night we were up from 12:30 until 5:30 as he was bleeding internally. So I must say I am a little cranky after having been up most of the night, and I got a lot crankier when I heard colleagues say things they know are not true.

When they say there is no budget for the United States, they know that is not true. How do I know it is not true, and that there is a budget? Because I remember what we voted on, and it is in writing. It is a law. It is called the Budget Control Act. The Budget Control Act passed last year and contained the budget for 2012 and 2013. Some say that is not a budget. Let's look to the language of the law itself and see what it says.

Here is what it says: “For the purpose of enforcing the Congressional Budget Act of 1974…including section 300 of that Act, and enforcing budgetary points of order in prior concurrent resolutions on the budget, the allocations, aggregates, and (spending) levels set…shall apply in the Senate in the same manner as for a concurrent resolution on the budget...”

What they are trying to do is mislead the American people by saying we have not passed a budget resolution. What they failed to tell people is that instead of a budget resolution, we passed a budget law. What is the difference? A resolution is purely a congressional document. It never goes to the President for his signature. So instead of a resolution, we passed a budget law called the Budget Control Act. It set out spending limits not just for 2012 and 2013, it actually set out, on the discretionary side of the budget, limits for 10 years.

In fact, the Budget Control Act, in many ways, is more extensive than any budget resolution could provide. It has the force of law, unlike the budget resolution that is not signed by the President. It set discretionary caps on spending for 10 years instead of the 1 year normally set in a budget resolution. It provided enforcement mechanisms, including a 2-year provision allowing budget points of order to be enforced. It created a reconciliation-like supercommittee process to address entitlement and tax reforms. It said if the special committee could not agree on reforming the entitlement programs and the tax system of the United States, there would be an additional $1.2 trillion in spending cuts.

Let's add it up. The Budget Control Act first cut $900 billion from the discretionary accounts over 10 years. Then it said if the supercommittee didn't reform the tax system and entitlement system of the country, there would be another $1.2 trillion cut from the discretionary accounts over the next 10 years. That is a total of $2.1 trillion in spending cuts over the next 10 years. That is the biggest package of spending cuts in the history of the United States. That is a fact.

The Budget Control Act set the spending limits for 2012 and 2013 and further set limits for 8 years beyond that. So when they say there is no budget resolution, what they fail to tell people is there is a budget law.

It is interesting if we compare and contrast what their side presented as their priorities in a budget because Mr. Ryan, their candidate for Vice President, came before the House of Representatives and laid out his budget blueprint. What does that do? First of all, it extends all the Bush-era tax cuts.

Think about this. Here we have a circumstance in which the revenue of our country is at or near a 60-year low. The first thing the Ryan budget does is extend all the Bush-era tax cuts, even those for the very highest income. Then it says that is not enough for the wealthiest among us. So the Ryan budget, after extending all the Bush era-tax cuts, goes and provides another $1 trillion of tax cuts for the wealthiest among us.

I have nothing against wealthy people. I hope all Americans have the opportunity to become wealthy; that would be my fondest hope. That was why I was drawn to public service. What could I do that would strengthen the economy of the United States? It has always been my top priority. It is what I truly believe is essential to our democracy.

But in a circumstance in which we are borrowing 40 cents of every $1 we spend, and then to say the answer is more and more tax cuts for the very wealthiest among us and try to pay for it by shredding the social safety net that is critically important to those who are the least fortunate among us, frankly, I think that fails the moral test. I think that fails any moral test of government.

The Ryan budget, which our colleagues have endorsed, would give, on average, those earning over $1 million a year an additional tax reduction of $265,000 a year. I know if I were listening to this I would say, How can it be that someone earning over $1 million can get a $265,000 tax cut, because that is about all they would pay in taxes. Remember, we are talking about the average for those earning over $1 million a year, so we are talking about not just people who earn $1 million a year but people who earn hundreds of millions of dollars a year. And the average tax cut provided in the Ryan budget for those folks is another $265,000 a year.

What does Ryan do in order to offset that massive additional tax cut for the very wealthiest among us? Well, here is an interesting quote from a former top economic adviser to Ronald Reagan, a man named Bruce Bartlett, who was a top economic adviser to Ronald Reagan. Here is what he said about the Ryan budget that our colleagues here have endorsed:

“Distributionally, the Ryan plan is a monstrosity. The rich would receive huge tax cuts while the social safety net would be shredded to pay for them. Even as an opening bid to begin budget negotiations with the Democrats, the Ryan plan cannot be taken seriously. It is less of a wish list than a fairy tale utterly disconnected from the real world, backed up by make-believe numbers and unreasonable assumptions. Ryan's plan isn't even an act of courage; it's just pandering to the Tea Party. A real act of courage would have been for him to admit, as all serious budget analysts know, that revenues will have to rise well above 19 percent of GDP to stabilize the debt.”

Those are not my words. Those are the words of a top economic adviser to President Ronald Reagan, “The Ryan plan is a monstrosity.”

If anybody seriously studies the Ryan budget they would have to conclude that Mr. Bartlett is correct, because Mr. Ryan cuts taxes in a very dramatic way for the richest among us. Let me be clear. The first thing he does is extend all the Bush-era tax cuts. Then, on top of that, he cuts the top rate from 35 percent to 25 percent. That provides over $1 trillion of additional tax cuts for the wealthiest among us. And they refuse to do anything to close the tax loopholes that are allowing certain wealthy people to avoid paying taxes in this country entirely.

I have shown on the floor of the Senate many times a picture of a five-story building in the Cayman Islands called the Ugland House. The Ugland House claims to be the home of 18,000 companies. A little five-story building in the Cayman Islands claims to be the home of 18,000 companies. I say that is the most efficient building in the world. Can you imagine 18,000 companies operating out of a little five-story building down in the Cayman Islands?

All those companies claim they are doing business out of that little building for a reason. They claim they are doing business out of that little building in the Cayman Islands because they don't want to pay taxes in the United States. So here is what they do, and it is very clever. Through paper manipulations, they show the profits of certain subsidiaries of their companies in the Cayman Islands rather than in the places where they actually earned the profits. Why would they do that? Because the Cayman Islands doesn't have a corporate income tax. So by showing their profits in the Cayman Islands, even though in truth they were never earned in the Cayman Islands -- through accounting gimmicks they show their profits in the Cayman Islands and they aren't taxed. They avoid paying here what they legitimately owe here. What does that mean? That means all the rest of us get stuck paying for ourselves and them.

I said earlier the Ryan budget fails the moral test, and it is not just my judgment that it fails the moral test. How can one justify cutting taxes dramatically for the wealthiest among us and then turn around and shred Medicare, which is what the Ryan budget did? The Ryan budget he initially proposed changed Medicare’s finances over time so that instead of Medicare paying 75 percent of health care costs for seniors who are eligible, the Ryan budget, over time, would switch that so Medicare would pay 32 percent. To be clear, under the Ryan plan, we would wind up with a situation in which the majority of one's health care costs, if one is eligible for Medicare, would be paid by that person, not by Medicare. That is to make up for the massive tax cuts he gives the wealthiest among us.

Here is what the Catholic bishops said. The Catholic bishops say the Ryan budget fails the moral test. I agree with the Catholic bishops. This is what the Washington Post reported in 2012: “A week after House Budget Committee Chairman Paul Ryan said that his Catholic faith inspired the Republicans' cost-cutting budget plan, the Nation's Catholic bishops reiterated their demand that the Federal budget protect the poor and said the GOP measure ‘fails to meet these moral criteria.’”

In any moral test that I know of in any religion, we don't take from those who have the least to give it to those who have the most. I don't know of any religion that practices that as an article of faith -- that we take from those who have the least to give to those who have the most.

Anybody who knows me knows I am pretty conservative. I come from a business family. I have a master's in business administration. Throughout my career, I have been someone who has been judged as fiscally conservative, someone who believes deeply in balancing budgets. I was the grandfather of the Bowles-Simpson Commission; served on it proudly. I was one of the 11 votes for its product -- 5 Democrats,5 Republicans, 1 independent.

By the way, when our colleagues said this morning we haven't worked in a bipartisan way -- well, I have spent 5 years working in a bipartisan way trying to get our debts and deficit under control. Senator Gregg, the ranking Republican on the Budget Committee, and I proposed the Bowles-Simpson Commission. We served on it. We voted for it. I subsequently served in the group of six, three Democrats, three Republicans, who were given the assignment by our colleagues to come up with a plan to reduce the deficit. We worked for a year and a half to try to find a bipartisan solution.

We have had the Biden group. We have had the supercommittee, all bipartisan efforts that have gone on for years to try to produce an agreement. So my friends saying there hasn't been an effort, that is not true.

What is true is when our friends on the other side were in charge, they brought this economy to the brink of financial collapse. That is the truth. Anybody who doubts it can simply go back to the end of the Bush administration and see where the country was. The stock market was collapsing. The housing market was collapsing. The financial system was collapsing. That is what President Obama inherited. He did not create those crises; he inherited them. At the time President Obama came into office, the economy was shrinking at a rate of almost 9 percent a year. We were losing 800,000 jobs a month. Now the economy is growing at a rate of about 2 percent a year, and we are gaining about 200,000 jobs a month. That is a dramatic turnaround.

So when they ask the question: Are we better off now than 4 years ago? Undeniably, we are better off. Undeniably, we are better off. We have gone from an economy shrinking at a rate of more than 8 percent to one growing at a rate of 2 percent. We have moved from a time when we were losing 800,000 jobs a month to a time when we are gaining about 200,000 jobs a month. We have gone from a circumstance in which the stock market was plunging to a circumstance in which the stock market has about doubled during the time of President Barack Obama. President Obama inherited two wars, a war on terror, a financial system that was collapsing, a financial system that had seen, under the previous President, the debt double; foreign holdings of U.S. debt were tripling; and this President has ended the slide and has us going back in the right direction, and with precious little help from the other side.

I ask the American people before they cast their votes to think back to the final days of the Bush administration. I will never forget as long as I live being called to an emergency meeting in this building with the Secretary of the Treasury of the Bush administration, the Chairman of the Federal Reserve, the leaders, Republicans and Democrats, in the House and the Senate, and being told by the Secretary of the Treasury and the Bush administration and the Chairman of the Federal Reserve that if they did not act, they expected a financial collapse within days -- a financial collapse within days. Those were in the final months of the Bush administration. That is what President Barack Obama inherited.

The hard fact is that when our colleagues were in charge of everything -- they had the House, the Senate, and they controlled the White House -- they brought this country to the brink of financial collapse. That is a fact. Thank goodness this President, acting with this Congress, was able to draw us back from the brink, but we have a long way to go. We have a long way to go. It is going to take everybody working together to pull us out of the ditch completely.

I have been part of major efforts for the last 5 years -- bipartisan efforts -- including Bowles-Simpson, the group of six; right now the group of six has been expanded to the group of eight. We have been working nonstop, hundreds of hours of discussions, on a bipartisan plan -- four Democrats, four Republicans -- to be enacted when we return, to get America back on track. That is what is required here.

What we saw this morning from our colleagues on the other side is not the answer; it is the problem. The same old tired political gamesmanship is not going to cut it. What we desperately need is Republicans and Democrats working together to solve America's problems. That is what we owe the American people. I very much hope when we return after this election that colleagues on both sides will be prepared to act in that spirit.

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Chairman Conrad on Erin Burnett OutFront (CNN)

Tue, 18 Sep 2012 08:30:00 EST

Transcript:

Erin Burnett, CNN: Our second story OutFront pay and punt. Really a bad combination of things, isn't it? Well, a bipartisan group of senators, known as the "Gang of Eight," are trying to hammer out a deal to avoid the $1.2 trillion in sequester money and to extend the Bush tax cuts for as many as possible. But it's really a stall, and they admit it. I think they do. You'll hear in a second if they're going to take issue with me on it, but they're really trying to just delay the tax increases and sequester for six months to buy time to make a grand bargain. Now if you're confused because you thought the whole idea of the sequester was to give Congress 17 months to make a grand bargain and now that they failed another six months ain't worth a hill of beans, you're not alone. So let's find out if this "Gang of Eight" adds up. Democratic Senator Kent Conrad, member of the "Gang of Eight," chairman of the Senate Budget Committee is OutFront -- good to see you, sir.

Chairman Conrad: Good to see you.

Burnett: OK, so am I being fair here? You guys are trying to stall this six months because you don't think you can get it done this year.

Conrad: No. You know, I think this all flows from a story that really mixed two different initiatives. One that Senator McCain and Senator Levin are working on to delay the sequester; another effort, separate and apart from that, that is the group of eight, four Democrats, four Republicans, that were asked about a year-and-a-half ago by 30 of our colleagues to see if we couldn't come up with a plan that would be the grand bargain, that would follow pretty closely what the Bowles-Simpson Commission came up with. So I think there's some confusion here as to what the group of eight is trying to do and what McCain/Levin are trying to accomplish.

(crosstalk)

Burnett: If you succeed then are we going to get a grand bargain that prevents the sequester? And we're going to get the grand bargain now, not six months from now?

Conrad: Yes. Look, I can't say what the group of eight will conclude, because we're still negotiating. I can tell you -- I would be happy to tell you what I am pushing for, which is to in the lame duck session, after the election, reach the grand bargain, and that that would be a framework that the committees of jurisdiction would then have six months to meet. In other words, they would be given instructions, how much to cut, from what programs, how to reform the entitlements, how to reform the tax system, how much money to raise. All of that would be agreed upon right after the election. The committees of jurisdiction would fill in the details, how those goals were to be met, and there would also be a down payment that is hundreds of billions of dollars of cuts and revenue agreed to in the lame duck that would take immediate effect. And on top of the framework, there would be penalties if the committees of jurisdiction did not meet their assignments. So that's what we're working on.

Burnett: OK, now I think that makes sense, although here's the thing. These penalties, right, we're supposed to be facing these penalties with the sequester now, but nobody likes the sequester, so if you all get what you want, the sequester gets put off or whatever you're going to call if then for another six months in case they fail and we still don't have anything happen. I mean it just is a frustration. I'm sure you share it, right --

Conrad: Yes.

Burnett: -- that we can't actually get something done, signed and it's going to happen.

Conrad: Well that wouldn't be my intention. I'm really not interested in anymore kicking the can down the road. Look, I started on this effort five years ago with Judd Gregg, the ranking Republican on the Budget Committee, first of all to have a commission that would be totally enforceable in law and we got 53 votes in the Senate for that proposition. Seven of our original Republican co-sponsors, original co-sponsors, voted no against their own proposal. So then we had no choice but to go to a presidentially ordered commission that did not have the force and effect of law. That put us in a weaker negotiating position with less leverage. But, look, we still have an opportunity here to do what needs to be done for the country --

Burnett: Right.

Conrad: -- which is to agree on a plan that will save at least $4 trillion off deficits and debt over the next 10 years. I'm actually pushing for five trillion, because I'd like to actually balance the budget.

Burnett: All right. Well, Senator, thank you very much. We appreciate your taking the time and look, we're rooting for you to get this done and get it done right. He just ended there with a key number. He wants to cut $4 trillion. That's the same as Simpson/Bowles.

John Avlon, CNN: Yes.

Burnett: Simpson/Bowles came around last time, didn't pass, debt ceiling crisis, sequester.

Avlon: Four trillion --

Burnett: It feels like they're kicking the can. I know they don't want -- he doesn't want it to be, but that's --

Avlon: No he doesn't and look, I mean God bless, he's at least trying to do the hard work –

Burnett: He's trying, yes --

Avlon: -- and you know he's someone who is going to be -- he's been fighting this fight for a long time. And sure, there are going to be people who say, look, this will buy us a little bit of time. We can move the fiscal cliff just a little bit. But Kent Conrad really has been a leader, but he is leaving, and so that adds to part of the problem here.

Burnett: Right.

Avlon: So he can do all the good work there, but at least he's focused on the lame duck. There are too many members of Congress that you and I have spoken to are in totally denial about the fiscal cliff --

Burnett: Who are in total denial. And of course my thing is, all right if you get this passed and I hope you do, I know it takes time to implement it, but I see this, hey in six months, guess what, we don't like all the cuts that you said we had to make. We want to do it again.

Avlon: That's right.

Burnett: And it's just frustrating. OK, all right, well at least he is fighting the good fight. And that brings me to our third story....

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Chairman Conrad on Morning Joe (MSNBC)

Tue, 18 Sep 2012 03:00:00 EST

Transcript:

Joe Scarborough: Senator, you are a hero of mine in a town where I have few heroes, and one of the reasons why is because your issue is an issue that really propelled me to get involved in public service. We had Bob Woodward on yesterday, a very depressing story, but a story that we’ve all heard behind the scenes. How do we break this impasse between Republicans and Democrats, the President and the House? How do we get a budget deal?

Chairman Conrad: You know, I think it’s entirely possible after the election. You know, I laid before the Senate Simpson-Bowles, and I said we’re not going to vote on it now because I know people aren’t ready to vote on it yet. But after the election, maybe colleagues will be prepared, Republicans and Democrats, to move forward.

Scarborough: There is such fear, I mean your own caucus doesn’t want you to put out a budget. Republicans will talk about how long it has been since Democrats in the Senate have put a budget out. I certainly know that’s not because of you, but there’s extreme pressure for Democrats not to show their hands. Can you believe you would get to a stage in your career in the United States Senate where you weren’t even allowed to put out a budget?

Conrad: Let me deal with that issue because I think there is a misunderstanding about whether or not a budget has been passed or not. I would say that the other side of the story is last year instead of a budget resolution, which is what the Republicans are talking about, we passed an actual budget law. And, as you know, a resolution is purely a Congressional document; never goes to the President for his signature. So last year, we passed the Budget Control Act, an actual law, that limits spending for 10 years. No budget I know of has limited spending for 10 years; cut $900 billion from the domestic accounts. In addition, you’ll remember that Budget Control Act said look, we’re going to give special power to a special committee to reform the entitlement programs and reform the tax system. If they don’t, we’re going to put in place another $1.2 trillion of spending cuts.

(crosstalk)

Scarborough: But, we’ve posted another trillion dollar deficit; there’s no plan to balance the budget until 2040 or 2045. You’ve got to agree with me that we’re in a mess fiscally, an absolute mess. A train wreck is coming.

Conrad: Look, both of those are true. Last year, we passed the biggest spending cut package ever passed -- over $2 trillion. That’s a fact. So when Woodward said yesterday there had been no spending cuts passed during this Obama administration, that’s just flatly wrong. That’s just wrong.

Scarborough: Well, spending cuts compared to what? I mean you look at the spending over the past four years, we’ve never had that much of a spike in spending as well. So if you come off of that a little bit, great, but we’re still $16.5 trillion in debt.

(crosstalk)

Scarborough: …there’s no politics spinning here, is there?

Conrad: Well, on two points that were made yesterday there is a factual difference. One, no spending cuts. In fact, the Budget Control Act passed last year, $2 trillion of spending cuts put in place, that’s the biggest spending cut package ever. Second point, yesterday it was said there hasn’t been a budget for three years. In fact, the Budget Control Act, and I’ve got the language right here say that this will –

(crosstalk)

Scarborough: You guys have not put a budget resolution out because Democrat Harry Reid told you he didn’t want that to happen.

Conrad: No, that isn’t what happened. No, Joe, that really isn’t. I know that’s common wisdom, but that isn’t what happened. What happened is instead of a resolution we passed an actual law.

Scarborough: I heard you say that.

Conrad: For two years. Look, what we need is the longer term plan. That’s why I put before the Senate Bowles-Simpson. And Bowles-Simpson would reduce deficits and debt by $4 trillion if we could get it passed. Colleagues aren’t ready to do it before the election, I think that’s understandable. The big chance is after the election.

Scarborough: Didn’t you urge the President not to endorse Bowles-Simpson?

Conrad: I did.

Scarborough: Why?

Conrad: I did because I believe that House Republicans would immediately oppose it. What happened in Bowles-Simpson? In Bowles-Simpson, which the President has been accused of not supporting, his members of Bowles-Simpson -- he had six appointees -- five of the six voted for Bowles-Simpson. In the Senate, five of the six Senate representatives voted for Bowles-Simpson. The House of Representatives, five of the six voted against it including Paul Ryan. So, you know the problem wasn’t the President’s representatives. The problem wasn’t the representatives of the Senate, Republicans or Democrats. The problem was the House, Republicans and Democrats.

Scarborough: So Jeff Greenfield, you have the House Republicans passing budgets that the Democrats in the Senate and the President immediately eviscerate. Paul Ryan Passes a Medicare plan that’s immediately demigoged. And the Senate side, you’ve got the President’s debt commission that Republicans in the House won’t endorse. It seems like we’re heading towards that fiscal cliff and we’re all going to fall off. I hope we prepare ourselves.

Greenfield: Well, if you remember Dr. Strangelove, they create the doomsday device which can blow up the entire world because no one could conceivably ever trigger it. Of course, the movie ends with it being triggered. And one of the things I think -- if I’m going to take the long view -- is that we are now, and you’re about to leave this august body, we are now at the state of dysfunction in the operation of our political system that is unlike anything that I’ve seen. I mean you may have to go back to the decade before the Civil War, and I hope I’m not –

(crosstalk)

Greenfield: This is so much of a factor of theatre as opposed to reality, as opposed to people confronting the bigger stuff. I almost found this conversation is like, here, and the issue is up here.

John Heilemann: Let me ask you a question. There are two operative theories. The Democratic theory is that President Obama gets reelected, the fever will break and extremists in the House Republican caucus will somehow recede and now a deal will be passable. Not just in terms of the fiscal cliff, but in terms of a grand bargain, on entitlements, taxes, etc. Republicans say you know Mitt Romney actually, given the failures of Obama to get both sides to work together the last four years, Mitt Romney is better positioned. Just talk about the different political dynamics that will play out in both cases. If Obama wins, Mitt Romney wins. How would the tectonic plates shift to get us to a deal?

Conrad: Well here’s what I believe, and this is the place where I agree with Joe is that we’re on an unsustainable course. We’re borrowing 40 cents of every dollar and that can’t continue much longer. If Obama wins, I believe there is a moment of opportunity in the lame duck session to have a plan laid out. And by the way, the good news is there is a group of 8 of us -- four Democrats and four Republicans -- that our colleagues have asked to put together a plan so if colleagues are ready to act, and hopefully they will be, that we have done the homework. And we are working very hard. We’ve got I think very close to an agreement on a framework that would be passed in the lame duck. We would give the committees of jurisdiction the responsibility to cut spending, to reform entitlements, to, yes, raise some revenue, but not by raising tax rates. And that that plan could then be put in place. But look it’s going to take, really, the Senate to come together, the House to come together, and to me the big question is exactly what it was in Bowles-Simpson. The President’s representatives voted yes, the representatives in the Senate voted yes, the representatives of the House voted no and that’s going to be --

Scarborough: And the budget chairman of the Senate told the President not to support it.

Conrad: No, No I didn’t tell him not to support it. What I said to him was don’t endorse it, go out and make the case, just as you have made many times on this show --

Scarborough: Right and you’ve made.

Conrad: And I’ve made for five years. Judd Greg and I worked out a plan to have a commission and you’ll remember that they voted down to have a statutory commission. Then we weighed in, and it’s all covered in Woodward’s book, we weighed in to get this presidential commission. And I believe there is a chance coming very soon because reality requires it. All of the tax cuts are going to expire, you’re going to have the sequester, the $1.2 trillion of addition spending cuts from the Budget Control Act that will take effect this next year. The alternative minimum tax is going to come back on, the Doc Fix is not in place and that means those doctors who cover Medicare patients are going to take a 27 percent cut. There is a reality moment coming soon.

Scarborough: Then let us hope that members of both sides embrace that reality. Mr. Chairman, thank you for coming.

###

Chairman Conrad Floor Speech on Economic and Budget Issues

Mon, 10 Sep 2012 08:00:00 EST

Related Materials

Chart Used During Speech

Transcript

I have come to the floor on different business, which is to talk about the budget circumstance we are in and to try to answer the question we have heard asked in recent days: Are we better off now than we were 4 years ago? I believe the answer to that question is very clear.

I think to answer the question we have to take ourselves back 4 years and remember the conditions we faced then. I will never forget as long as I live being called to an urgent meeting in the Capitol late one evening in September 2008. I was the last one to arrive. There were assembled the leaders of the House and the Senate, Republicans and Democrats, the Chairman of the Federal Reserve, and the Secretary of the Treasury of the Bush administration.

The Secretary of the Treasury and the Chairman of the Federal Reserve quickly told us they were going to take over the giant insurer, AIG, the next morning. They weren't there to ask our approval or seek our support; they were there to tell us what they were doing. They told us if they did not do it, they believed we would have a financial collapse within days.

This was September 2008. Barack Obama was not the President of the United States; George W. Bush was the President of the United States, and we were on the brink of financial collapse, according to the description of his own Secretary of the Treasury.

Let's remember what the economy was doing in the fourth quarter of 2008. The economy was shrinking at a rate of over 8 percent. In fact, it was shrinking at a rate of almost 9 percent. In the first month of 2009, the last month of the Bush administration, we lost 800,000 jobs in 1 month. So when people ask if we are better off today than we were then, just as a factual matter there can be no dispute. We are dramatically better off today than we were 4 years ago.

Four years ago we were on the brink of financial collapse. Four years ago the economy was shrinking at a rate of almost 9 percent, and we were losing 800,000 jobs a month. Those are facts. They cannot be disputed.

Today we are growing, not as fast as we would like; jobs are being created, not as fast as we would like; but that is a dramatic improvement over 4 years ago. Let's remember the housing market was in crisis. Home building and sales were plummeting. There were record foreclosures. The financial market crisis threatened global economic collapse. That was 4 years ago. Anybody who wonders can go back and read the headlines themselves. Those were grim days.

I also remember as though it were yesterday being part of the group who was given a responsibility to negotiate the TARP -- the Troubled Asset Relief Program. I remember being in this complex late on a Saturday night, again with the Secretary of the Treasury of the Bush administration, and him telling us if we did not come up with a solution by 5 o'clock Sunday night, the Asian markets would open and they would collapse, and our markets would open the next day and they would collapse.

So when people ask if we are better off today than we were 4 years ago, as a factual matter there really is no question -- none. We are dramatically better off.

The other thing we should keep in mind is, what happens after a severe financial crisis such as the one we faced 4 years ago? Dr. Carmen Reinhart, from the Peter Peterson Institute for International Economics, and her husband, Dr. Vincent Reinhart of the American Enterprise Institute -- which, by the way, is a pretty conservative place -- have done an analysis, and here is what they found: After a severe financial crisis such as the one we suffered 4 years ago, economic recoveries are shallower and take much longer. Here is the quote from their analysis: “Real per capita GDP growth rates are significantly lower during the decade following severe financial crises. In the ten-year window following severe financial crises, unemployment rates are significantly higher than in the decade that preceded the crisis....”

That is what we had in 2008. Again, Barack Obama was not the President of the United States; George W. Bush was President of the United States, and we had a severe financial crisis. We were on the brink of financial collapse. It takes a long time to dig out from a disaster of that magnitude.

Two of the most distinguished economists in the country -- one of whom, by the way, advised John McCain in his most recent Presidential race, and the other who is Deputy Chairman of the Federal Reserve -- did an analysis of what would have happened without the Federal response, what would have happened in terms of jobs. Here is what they found: With a Federal response we got 8 million jobs we would not have had otherwise. In other words, if there had been no Federal response, the red line is what would have happened to jobs. The green line is what happened as a result of Federal action: 8 million fewer jobs lost than if there had been no Federal response.

Again, this is work that was done by Alan Blinder, former Vice Chairman of the Federal Reserve, and Mark Zandi, who was one of the economic advisers to John McCain in the last Presidential race.

So when we go back to this question, are we better off now than we were 4 years ago, I think the answer is unequivocally, yes. We are dramatically better off than we were 4 years ago.

Now, those people who are still unemployed don't feel better off. I understand that. That is dreadful, that is painful, and it is painful in every way. Not only does it hurt in the pocketbook, but much more than that: It hurts the way people feel about themselves. It hurts the way people feel about their role in their families. So we have lots of work to do, but if we are going to be honest with people about comparing where we are today and where we were 4 years ago, there really can be no serious question about the answer to that question.

This chart shows the economy in the fourth quarter of 2008 -- that is the last quarter of the Bush administration -- was shrinking at a rate of almost 9 percent. Now the economy is growing at a rate of 1.7 percent, for the most recent quarter. Is that good? No. Would we like it to be stronger? Absolutely. But is this better than almost any other developed country in the world? Yes. The Eurozone is in recession. Their economies are shrinking. Japan is not doing as well as we are doing.

So when we look around the world and compare ourselves, the answer by comparison is we are doing remarkably well given the depth of the financial crisis we experienced.

Not only is it true in economic growth, it is true in terms of private sector jobs. Again, in the last month of the Bush administration, this economy lost over 800,000 jobs -- in 1 month. In the most recent month in the United States, we gained 103,000 private sector jobs. That is a turnaround of over 900,000 jobs in a month. That is a dramatic improvement.

And if we look at the stock market, we can answer that question as well. Are we better off now than we were 4 years ago? Well, this chart shows the stock market. In March of 2009, it hit its low of 6547 -- the low during this period. Look where it is today. More than double what it was 4 years ago.

So, again, if we are seriously asking the question, Are we better off than we were 4 years ago? In terms of economic growth? Yes. In terms of job creation? Yes. In terms of the stock market? Yes. In terms of economic performance? Yes.

I have also heard my colleagues on the other side say at the convention just concluded that there has been no budget here for 3 years. Well, there has been no budget resolution. But there is a budget law that was passed called the Budget Control Act. And a law is much stronger than any resolution. A resolution is purely a congressional document. It never goes to the President for his signature. A law, obviously, has to go to the President for his signature.

So when they say there has been no budget passed, there has been no budget resolution passed, but, instead, Congress passed the Budget Control Act. Look what it said in the Budget Control Act: “...the allocations, aggregates, and [spending] levels set in subsection (b)(1) shall apply in the Senate in the same manner as for a concurrent resolution on the budget for fiscal year 2012....”

That same language is repeated in the next paragraph: “...the allocations, aggregates, and levels set in subsection (b)(2) shall apply in the Senate in the same manner as for a concurrent resolution on the budget for fiscal year 2013....”

I say to you, a budget is a limitation on spending. The Budget Control Act contained very clear limitations on spending for 2012 and 2013. So when our friends say there has been no budget passed by this body, oh, yes, there has. There has been a budget passed for 2012, and one for 2013. Instead of a resolution, it was done in a law.

What we do not have is a long-term plan, a 10-year plan. That is what we need. But it is pretty clear both sides are not ready yet, and perhaps will not be until we have had this election, to sit down and agree to the kind of 10-year plan we so desperately need.

The Budget Control Act represented the largest deficit reduction package in the history of the United States. How can that be? Well, because it contained $900 billion in discretionary savings over 10 years, and it included the so-called sequester that we hear so much about that added another $1.2 trillion of spending cuts over the next 10 years, for a total of $2.1 trillion in spending cuts. That is the largest deficit reduction package we have ever passed.

So, again, when people say there is no budget, there has been no action taken, it is not accurate. The Budget Control Act operates in the same way as a budget resolution, and it is a law, not a resolution that is purely a congressional document that never goes to the President. The Budget Control Act passed both Houses of Congress, went to the President for his signature, and cut $2.1 trillion in spending.

People may not like it. There are a lot of things I do not like about it -- certainly the sequester. I think we ought to find alternative savings for it. But the fact is, this is now law, and it cut $2.1 trillion.

That still leaves us with the problem that we are borrowing 40 cents of every $1 we spend, and that cannot be permitted to continue.

So we have to add a package on top of the Budget Control Act. We have to do more. I would prefer, strongly, to do another at least $3 trillion. I tried to convince the Bowles-Simpson Commission to do a package of $5 trillion of deficit reduction. Actually, I tried to persuade them to do a package of $5.6 trillion of deficit reduction because we can balance the budget if we would do a package that large. The people who were on that commission will tell you I tried repeatedly to convince my colleagues to go big, let's do a package that really balanced the budget.

And we could do it. It is not that hard. I think people sometimes get it in their head this is some impossible task. I told them, let's talk about a 6-percent solution. If we would do 6 percent more revenue than current law provides and 6 percent less spending, we would save $6 trillion over 10 years and balance the budget. I actually would argue for more weighting on the spending cut side of the ledger than on the revenue side. But I do this for illustrative purposes, to indicate we cannot do 6 percent? Come on. We cannot do 6 percent? Sure we can.

The occupant of the chair, the Governor of West Virginia in his previous life in politics -- I will tell you, he did not have any trouble making tough decisions, and I will bet you he reduced spending a lot more than 6 percent. He survived. He is here. He is respected.

We can do this. Hey, we have done much tougher things than this in the past. I hope colleagues think about this carefully.

This next chart is so important because it looks at the spending and the revenue lines of the Federal Government going back to 1950. This is 60 years of our economic history on one little chart. The red line is the spending line. The green line is the revenue line. And look what it shows. We got to, in 2010, an all-time high in spending for the last 60 years, taking out the effect of inflation, so you have an even-steven comparison over that 60-year period. And we were at a 60-year high in spending -- not surprising given the dimensions of the financial crisis we faced. But at the same time, we were at a 60-year low in revenue.

When you have record spending and record low revenue, you have record deficits and record additions to the debt. That is exactly what was happening to us. We have seen some improvement in the last few years. Spending is down as a share of GDP. Revenue is up a little bit. We still have a big chasm.

In the midst of all this comes Representative Ryan and his plan. I would say to those who might be attracted to his plan: Be careful what you wish for -- be careful what you wish for -- because, first of all, the Ryan plan does not balance the budget, if ever, until 2040, and it only balances in 2040 because of certain assumptions he told the Congressional Budget Office to make about his plan and the revenue contained in it.

I personally do not think it ever balances. I do not believe it ever balances. It is absolutely an unbalanced plan. All of the deficit reduction is on the spending side. He actually digs the revenue hole much deeper, extends all the Bush era tax cuts, and then adds hundreds of billions of dollars of more tax cuts, primarily to the most fortunate among us.

There is $1 trillion in tax cuts for the wealthiest. He gives those with an income of over $1 million an average tax cut of $265,000 a year. Somebody is sitting out there saying: How is that possible? A person earning $1 million a year probably does not pay much more than $265,000. How can they, on average, be getting a $265,000 tax cut? Remember, this is the average for everybody over $1 million, so this includes people making $1 billion a year. And there are a fortunate few who make $1 billion a year. So if you take everybody over $1 million, and you average the tax cut they get under the Ryan plan, it is over $265,000 a year.

He has $2.9 trillion in health care cuts. So first of all, he extends all the Bush era tax cuts. Then he adds hundreds of billions more of tax cuts for those who are the most fortunate. And to start to make up for it, he has $2.9 trillion in health care cuts -- not million, not billion: trillion. He repeals health care reform. He shifts Medicare to vouchers. And he block-grants Medicaid and cuts Medicaid drastically.

Who benefits from Medicaid? Well, low-income people, disabled people, but also a lot of middle-income people in this country benefit from Medicaid because their folks are in nursing homes and they have spent down their assets, and the only way they can stay in the nursing home is that Medicaid picks up the tab. There are hundreds of thousands of families in America, middle-class families, who have benefited from Medicaid because that is what has paid the nursing home bills for their relatives -- their mom, their dad, their grandpa, their grandma. That is the truth.

The Ryan budget also dramatically cuts the safety net for seniors, the children, the disabled. It increases the uninsured by more than 30 million people. It is going to increase the number of uninsured by 30 million. Well, if you are not uninsured, why should you care? I will tell you why you should care. Because if they are not paid for by insurance, they are going to be paid for by all the rest of us. Because the hard reality of how the health care system works in America is this: If you are in a car accident and you do not have insurance and you are taken to the hospital, you are treated. If you do not have insurance to pay for it, and you do not have resources to pay for it, guess who pays for it. All the rest of us pay for it.

That is why it is absolutely in our interest to have as many people insured as is possible. It is not just a nice thing to do; it is a smart thing to do. Because one of the things we have found out is that about a third of the people who do not have insurance can afford it. They can afford it. They just choose not to have it because they know if something drastic happens to them, all the rest of us are going to pay.

There are also large cuts in the Ryan budget for education, for energy, for infrastructure -- building roads, bridges, highways, and the rest. Those things undermine the engines of economic growth. So I do not think that is the way to go.

When we look at the Ryan budget plan on revenue, here is what we find. It provides $1 trillion in tax cuts for the wealthiest among us. It gives millionaires an average tax cut of more than $265,000 a year. It does not contribute one dime of revenue to deficit reduction. And the revenues reach 18.7 percent of GDP by 2022. Now why does that matter? Because the last four times we have balanced, the revenue of the country has been 19.6 percent, 19.7 percent, 19.8 percent, 20.6 percent. So, hey, if we are going to be serious about belling this cat, we are going to have to cut spending, we are going to have to reform the entitlements, we are also going to have to raise some revenue, hopefully not in a way that hurts economic growth, because we think we have found ways of doing it.

But the Ryan tax plan, I have to say, I do not think adds up. Why don't I believe it adds up? Well, let's look at what he proposes.

First of all, he says we should reduce individual tax rates to just two -- one at 10 percent and one at 25 percent. Right now, the top rate is 35 percent. If you reduce that rate to 25 percent, and you have only one other rate of 10 percent, that package costs $2.5 trillion over the next 10 years. So instead of filling in the hole, you are digging the hole deeper. Then he puts the top corporate rate at 25 percent. Again, that is a significant reduction from the top corporate rate today. That costs another $1 trillion. Then he repeals the alternative minimum tax. That costs another $670 billion. Then he repeals all the tax levies in the health care reform. That costs another $350 billion. Then he allows the stimulus provisions to expire from the Recovery Act, which raises $210 billion.

Before he starts filling in the hole, he has dug the hole deeper by almost $4 1/2 half trillion, and he says he is going to offset all of that with individual base broadening and corporate base broadening. We are spending about $1.2 trillion a year in tax expenditures. Over 10 years that is about $15 trillion with inflation.

So we could come up with this $4 1/2 trillion, but what would we have to do in order to do it? Almost every objective observer has said we would have to raise taxes on the middle class -- because he says this is going to be somehow, in the Romney plan, revenue neutral. I do not know that the Ryan plan ever claimed to be revenue neutral. But if we are going to pay for this, how are we going to do it, which of the exemptions and the exclusions? Are we going to reduce the mortgage interest exemption? Are we going to reduce the health care tax exclusion? Because those two affect middle-class people. Let's be honest. Let's be straight. So there is no way Congressman Ryan's plan does all the things he claims for it without raising taxes on the middle class.

When he gets to a revenue level of 18.7 percent and says that is the historic average, that is true. The problem with that is we have never balanced the budget, going back to 1969, with that amount of revenue. The five times we have balanced since 1969 -- that is 43 years ago -- revenues have been at 19.7, 19.9, 19.8, 20.6, 19.5. So just getting back to the historic average, I do not think it is going to be enough. If we are looking at what it has taken to actually balance the budget in our history, we can see we have to be very close to 20 percent.

By the way, these levels of revenue were before the baby boom generation, and the baby boom generation, that is not a forecast. That is not a prediction. Those people have been born. They are alive today. They are going to be eligible for Social Security and Medicare. If we are going to be honest with ourselves, honest with the American people, I do not think what Congressman Ryan is talking about adds up.

If we look at his budget on health care, we see $2.9 trillion in health care cuts. As I indicated, he repeals health care reform. I hear a lot -- I hear it in my State: Let's repeal health care reform. Why not? Because the Congressional Budget Office tells us if we repeal it we add over $1 trillion to the debt. We add over $1 trillion to the debt, we deny coverage to 30 million people who would otherwise have it.

His plan also ends the effort to promote quality over quantity of care, reopens the prescription drug doughnut hole that raises costs to seniors by $4,200, allows insurance companies to drop coverage when we get sick. It ends the provision allowing young adults to stay on their parents' plan until the age of 26. It shifts Medicare to vouchers in 2023 and includes, after that, an aggressive cap on payments that most analysts have said would dramatically increase what Medicare beneficiaries would have to pay for their own health care.

Currently, Medicare pays 75 percent of the cost. The beneficiary pays 25 percent. If the Ryan plan were adopted, the original Ryan plan -- he has subsequently put out other plans. But his original plan would have stood that on its head. He would have Medicare beneficiaries paying the substantial majority of the cost. Instead of Medicare beneficiaries paying 25 percent, he would have them paying 68 percent of the cost -- Medicare beneficiaries.

I have a brother who is gravely ill in the hospital, Medicare eligible. I can tell you, he is getting phenomenal care -- very costly. I would say it would break our family. If we had to pay 68 percent of the cost instead of 25 percent, it would break our family. We are a middle-class family. I am talking about the extended family.

These things have real consequences. Anybody who thinks these are just political statements and they do not affect people’s lives, oh, yes, they do. They have a profound effect on people's lives.

The Ryan plan block grants Medicaid, shifts the cost to seniors, children, disabled, and States. I do not think that is the path America has in mind. I like Paul Ryan. I agree with him that we are on an unsustainable course. I was on the Bowles-Simpson Commission with him.

But unlike him, I was one of the 11 who supported the recommendations of Bowles-Simpson. Of the 11 of us who did, 5 are Democrats, 5 Republicans, and 1 Independent. That is about as bipartisan as we can get. There were 18 Commissioners. We had to get 14 to get the recommendations to a vote in the Congress. We got 11. That is 60 percent of the membership who voted yes; five Democrats, five Republicans, one Independent.

Paul Ryan was part of Bowles-Simpson. He voted no because it was not just the way he wanted it. It was not just the way I wanted it either. I hated things on almost every page of that report. But as I told my staff, the only thing worse than being for it would be being against it because it would have gotten us back on track. It would have lowered our deficit and debt by $4 trillion and have done it with revenue and spending cuts and reform of entitlements, maybe not as much on any one of those areas as I would do, but it would have made a profound difference in the economic future of this country.

Perhaps the most striking thing to me in all the speeches at the Republican convention was the claim by Congressman Ryan and the attack on President Obama for supporting $716 billion in Medicare savings. Why was I so taken aback by that? Because I have read Congressman Ryan's own budget. His budget has precisely that same level of Medicare savings that he now politically attacks President Barack Obama for supporting.

Did you see what former President Clinton said? He said that takes real brass, to attack somebody for something you have done. Congressman Ryan, when you give a speech, make your speech before tens of millions of people listening and you attack the President for supporting $716 billion in Medicare savings and you have the exact same savings in your budget, shame on you. Shame on you.

The Catholic bishops reviewed the Ryan budget. Here is what they said. They said it fails the moral test. These are Catholic bishops in America. Look, they have issues with the President too. I understand that, but this is what they said about the Ryan budget. They said: It fails the moral test. The Nation's Catholic bishops reiterated their demand that the Federal budget protect the poor and said the GOP measure fails to meet these moral criteria. I think they got that right.

Here is what a former Reagan economic adviser said about the Ryan budget. This is Bruce Bartlett, former Reagan administration economic adviser. This is what he said about the Ryan budget. Again, this is a former President Reagan economic adviser. Here is what he said about the Ryan budget: “Distributionally, the Ryan plan is a monstrosity. The rich would receive huge tax cuts while the social safety net would be shredded to pay for them. Even as an opening bid to begin budget negotiations with the Democrats, the Ryan plan cannot be taken seriously. It is less of a wish list than a fairy tale utterly disconnected from the real world, backed up by make-believe numbers and unreasonable assumptions. Ryan's plan isn't even an act of courage; it's just pandering to the Tea Party. A real act of courage would have been for him to admit, as all serious budget analysts know, that revenues will have to rise well above 19 percent of GDP to stabilize the debt.”

Mr. Bartlett, I do not know the man. He is telling the truth. He is telling the truth, as painful as it is. He is telling the truth. When we go to the question of are we better off than we were 4 years ago, let's remember where we were 4 years ago. We were on the brink of financial collapse.

Republican policies led the United States to the brink of financial collapse. They cannot rewrite history. We know what happened. We tried their experiment. It did not work. Now things have improved, not as much as we would like, and there is much more work to be done. But I trust in the judgment of the American people. I do not think they have forgotten. I certainly have not forgotten. I will never forget where their policies took us in the fall of 2008. We were on the brink of financial collapse. Let's not repeat that failed experiment.

Chairman Conrad on the Daily Rundown (MSNBC)

Wed, 15 Aug 2012 03:00:00 EST

Transcript:

Todd: Kent Conrad, the North Dakota Democrat has made trimming debt and deficits his priority during his decades in Washington and he hopes to take a bipartisan crack one more time before heading home in December.

Conrad: I came here to do big things. You know, the whole reason I made that deficit and debt pledge was I really believed that debt is a threat, and at some point it can swamp a country. And you know, debt is helpful to a point, and it at a point it becomes a dangerous burden. And you know, we’re not into doing big things right now and I’ve been focused for five years, you know Senator Greg and I came up with this idea of a commission that turned into the Bowles-Simpson Commission. I served on the Bowles-Simpson Commission. I served on the Group of Six. I’ve spent hundreds of hours negotiating and while groups of us had reached an agreement, the broader body does not seem ready to act. I hope that changes before I leave here. But, I think that is one reason.

Todd: You say you want to do big things; big things are going to be forced upon the next Senate. Isn’t that fair to say?

Conrad: I very much hope that we do it before the next Senate.

Todd: Do you think it’s possible, December, post election?

Conrad: I do.

Todd: What’s the scenario that actually… creates an opening to do big things? Is it a Republican House, Obama reelection, 50/50 Democratic Senate, what is it?

Conrad: I think the best chance for this to happen is the President is re-elected, the Senate does not change hands, the House does not change hands, and you have all of these things facing us, the expiration of all the Bush tax cuts, the sequester and the additional $1.2 trillion of spending cuts, the end of the payroll tax holiday, the alternative minimum tax coming back in force. That all of these constellation events, the debt ceiling extension being required early next year, will bring this collective body to the realization that they need to act.

Todd: So your message to the country is if you want something done, don’t offer up a reward for delay, a political reward for delay?

Conrad: I think, especially if the presidency changes hands, there is almost certainly very little chance that the grand bargain can be struck. The greatest chance for the grand bargain to be struck is if the President is re-elected. This President, you know I was the second one to endorse him –

Todd: Right. Why did you pick him at the time? What stood out?

Conrad: Well he called me. I was in the Senate gym, and he said, “Hey are you going to come out and help your pal or are you just going to sit on the sidelines?” And, you know, we were pals from the Senate, not close but shared a sense of humor more than anything. So I said, “No, I’ll come and help you.” Why? Because I saw something special in him. He recognized that going to war in Iraq was a huge mistake which I believed deeply that it was. I thought it was a major mistake for this country. Iraq had nothing to do with 9/11, had nothing to do with the attack on the United States, and somehow that all got confused in the public mind. And, I really respected him for recognizing it to be a mistake, and for speaking up. That’s, I’d say, the biggest reason I endorsed him. But he was also somebody that was like-minded fiscally, recognized the deficits and debt are a long-term challenge. And some might say why has he allowed this to happen? And you have to put that in historical perspective. He inherited a colossal mess, he inherited a circumstance in which we were on the brink of a second depression and it took a tremendous effort to prevent us from going into a depression.

Todd: On to North Dakota Politics and the race to replace you, Heidi Heitcamp and Rick Berg, advice to whoever wins? I assume I know who you’re for.

Conrad: North Dakota expects you to have more than party loyalty. North Dakota wants people to come here and get results for the people of North Dakota. That has been the thing I have tried to be focused on like a laser, getting results. Not giving speeches, not being an ideologue, getting results. That’s what people send you to get done here.

Todd: Is that why you think you’re a red state Democrat that has essentially survived over the years?

Conrad: And thrived. Last time I was re-elected with almost 70% of the vote. So, yeh, I think it’s because I stayed very close to my constituency, and that I focused on getting results.

Todd: I think Republicans have proven that if they stick together it’s good politics. How do you think Democrats, if they are in the minority, will end up responding the same way because they say hey it worked for them?

Conrad: Well that’s what always happens around here. I’ve been here 26 years. Look, at some point, and I guess one of my frustrations about the place is at some point the country has got to come first, and we’re there in terms of the long-term challenges to America. This is a time both sides need to put aside the more intense partisan feelings and get a result for this country.

Chairman Conrad on Squawk on the Street (CNBC)

Mon, 13 Aug 2012 02:00:00 EST

Transcript

Harwood: Senator, let me ask you this threshold question about Paul Ryan. You’ve served with him, you’ve done the budgets with him. Does he meet the test of being ready to take over as President on a moment’s notice?

Conrad: Well, look, I like Paul. Paul is a serious person. But the policies that he would put in place I think would be a very serious problem for this country. If you think about it, he supported all the policies that brought us to the brink of financial collapse at the end of the Bush administration. So I think the policies that Paul has put out there, while he is a good person and a serious person, would really be a very serious problem for the United States.

Harwood: But in terms of demeanor, experience, knowledge, does he meet the Commander-in-Chief test which is the first test of any potential Vice President has to meet?

Conrad: Well he doesn’t have foreign policy experience. He doesn’t have experience obviously of being Commander-in-Chief, but no one does before they have that position. He doesn’t have a military background. Look, he certainly knows the budget of the United States. But his proposals are really pretty radical. I mean if you examine the proposals that Paul has put forward, for example, those who are the wealthiest among us would get a $265,000 tax cut a year under his plan. He doesn’t balance the budget for 30 years, if then. At the same time, he drastically cuts non-Medicare, non-Social Security funding; cuts it over 50 percent by 2030. So, I mean, this is radical stuff that he has proposed.

Harwood: Let me ask you, part of the indictment that Romney and Ryan are making of Obama and his party, your party, is that you haven’t passed a budget in three years. You’re the Chairman of the Senate Budget Committee, so that’s a shot at you. Respond to that charge of lack of leadership.

Conrad: Well they must not have examined what they vote on because last year we passed the Budget Control Act. It is true it wasn’t a resolution. It was something much stronger. It was a law. Anybody that has studied civics I think knows a law is stronger than a resolution. And that Budget Control Act, of course, cut spending $900 billion plus it said if a special committee doesn’t agree on reforming entitlements and revenue, there would be another $1.2 trillion of spending cuts for a total of over $2 trillion of spending cuts. That’s the biggest spending cut package in the history of the United States, so when they say this, they are, you know, playing a bit of a game with people. They’re saying we didn’t pass a resolution; they’re not admitting that, instead, we passed a law, something much stronger.

Harwood: You served on the Simpson-Bowles Commission with Paul Ryan, and again, part of the indictment that Mitt Romney and Paul Ryan are making is that this President hasn’t stood up to make tough choices. You voted for Simpson-Bowles, in fact, you introduced it as your budget resolution in committee. He voted against it. Tell me what the experience of serving with him taught you about his priorities on taxes, on debt and deficits, on spending, and how the American voter should interpret what he wants to do.

Conrad: It’s probably the thing that concerns me the most about Paul. Simpson-Bowles, there were 18 of us, evenly divided between Republicans and Democrats. Eleven of the 18 of us supported the plan to get our deficits and debt under control, but at the same time not risking this recovery. And of the 11 of us who supported it, five Democrats, five Republicans, one independent. But Paul was one of the seven who said no because he didn’t get just the way he wanted it. You know, unfortunately, that is so much of what is wrong with Washington. People who are ideologues who say if I don’t get it my way, then I’m not going to support it. So, here he had a chance to reduce the debt $4 trillion to get us back on track. Most independent observers said it was a balanced package with spending cuts, entitlement reform, and yes some additional revenue, but not by raising tax rates, and Paul Ryan said no, said no, walked away.

Harwood: Yet Paul Ryan supports much deeper spending cuts and a smaller government than you support. Doesn’t that make him a more aggressive deficit hawk than you are?

Conrad: No, that’s the curious thing about Paul. He is not really a deficit hawk. Again, his budget does not balance for about 30 years, and it’s doubtful that it balances then. What he is in favor of, clearly, is drastically cutting domestic spending, drastically cutting Medicare over time. In fact, really he turns Medicare upside down. Currently, a Medicare beneficiary pays 25 percent of their medical costs. Under the Ryan plan, the average beneficiary would pay 68 percent of their cost. So, instead of Medicare being there for people, basically he destroys Medicare in order to, as he says, save it.

Harwood: Two final things before I let you go. First of all, you told me last night before coming on air this morning, that you thought Ryan’s agenda was dangerous for the American economy. How is that?

Conrad: Because Paul endorsed all the policies that brought us to the brink of financial collapse. Can we forget that at the end of the Bush administration this economy was shrinking at a rate of nine percent? We were losing 800,000 jobs a month. Those are the economic policies that Paul Ryan supported. I can’t believe the American people have a short memory and have forgotten how we got into this deep, deep recession.

Harwood: And finally a question about the politics. Everyone is wondering how this is going to play, what it is going to do in Florida. You have a Senate race in North Dakota, and I was talking to one of the consultants on your side for your candidate, Heidi Heitkamp, said the Ryan budget is hurting the Republican candidate in the red state of North Dakota. How do you see voters in your state reacting to his proposal?

Conrad: Well he devastates agriculture, and agriculture is a key part of the economy in North Dakota. I mean really draconian cuts beyond anything we had seen proposed by anyone ever. Beyond that, his proposal to really shred Medicare will not sell well in a state that is increasingly aging. More than that, I really do hope people remember, how did we get here? During the Bush era, at the end of the Bush administration, we were on the brink of financial collapse. Paul Ryan and Mitt Romney supported the policies that put us in that position.

Harwood: You’re thinking that President Obama is closer to winning after this choice than Mitt Romney (inaudible)?

Conrad: I do. Look, I think the American people have common sense. Look, this President has not been perfect; none of us in public life are. But the fact is that he averted a depression. Let’s never forget that.

Harwood: Senator Kent Conrad, chairman of the Budget Committee, thanks very much for joining us.

Chairman Conrad Floor Speech on the Budget Control Act of 2011

Thu, 02 Aug 2012 02:00:00 EST

Transcript

Mr. CONRAD: Madam President, I come to the floor today to clear up some confusion with respect to the Budget Control Act of 2011. Some have suggested that the Budget Control Act indirectly authorized the Senate to use a fast-track process to modify the across-the-board cuts scheduled to go into effect next year due to failure of the Joint Select Committee on Deficit Reduction.

Madam President, if that claim were true, it would result in a fundamental change in Senate procedures and prerogatives. However, it is clear in looking at both the statutory language and Congress's intent in passing the Budget Control Act that this claim is completely without merit.

First, let's look at what the law actually says. The key provision at issue is section 258A of the Deficit Control Act of 1985. Section 258A would allow the majority leader to introduce a joint resolution to modify or provide an alternative to a sequestration order--and I quote--``issued under Section 254.'' That joint resolution could not be filibustered and would pass the Senate with a simple majority vote. The sequestration orders under section 254 were put in place two decades ago to enforce deficit targets and discretionary spending limits that have long since expired.

A sequestration order under the Budget Control Act is not an order issued under section 254. The Budget Control Act created a new sequestration process under a completely different section of the law: section 251A. Section 251A explicitly authorized a new set of Presidential sequestration orders in fiscal year 2013 for both discretionary and direct spending, and did so without any reference at all to the old section 258A procedures. The statutory language is clear, therefore, that these old procedures do not apply to sequestration under the Budget Control Act.

It is also clear that Congress never intended for section 258A procedures to apply. There was no discussion of this issue on the floor of either House. There was no discussion of this in the Budget Control Act negotiations between congressional Republicans and the White House, and there was no discussion of this among Democratic Senators. Moreover, the Budget Control Act and the Deficit Control Act of 1985 are completely separate budget enforcement mechanisms enacted 26 years apart and under entirely different circumstances.

Simply put, there is zero evidence of any congressional attempt to apply the 258A procedures to the Budget Control Act sequestration. In order to confirm this for the record, I would like to pose a parliamentary inquiry to the Presiding Officer.

Madam President, is it correct that section 258A of the Deficit Control Act of 1985 does not apply to the fiscal year 2013 sequestration?

The PRESIDING OFFICER: The Senator is correct.

Mr. CONRAD: I thank the Chair. I think it is an important decision to get affirmed publicly so that we might proceed and not be engaged in distractions.

I thank the Chair.

I yield the floor.

###

Chairman Conrad Floor Speech on Middle Class Tax Cuts

Tue, 24 Jul 2012 01:30:00 EST

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Charts Used During Floor Speech

Transcript

I have to respond to the Republican leader. What a fountain of misinformation. He repeats this canard that no budget action has been taken here for 4 years.

What about the Budget Control Act that was passed last year with more than 70 votes in the Senate? That was passed instead of a budget resolution. It was a law. Anybody who has had even a little bit of civics knows a law is stronger than a resolution.

Indeed, that law cut spending by $900 billion over 10 years and put in place this sequester we now face that cuts another $1.2 trillion over 10 years for a total spending cut of over $2 trillion. It was the biggest spending cut in the history of the United States, and the Republican leader acts as though he never heard of it; it never happened. Let's get real. We took action in the House and Senate, and it was signed into law by the President.

The last time our friends on the other side were in charge, their policies brought us to the brink of financial collapse. Have we forgotten that the economy was shrinking at a rate of 9 percent in the last quarter of the previous administration? In their last month in office we lost 800,000 jobs -- in 1 month. That was their record.

This administration has turned things around. We are no longer losing jobs; we are gaining them. The economy is no longer shrinking; it is growing. Maybe it is not as strong as we would like, but it has been a remarkable turnaround after the other side and their policies led us to the brink of financial collapse.

Let's talk about the legislation before us. It assures 98 percent of the American people are not going to have a tax increase, extends expiring provisions on income taxes, and income tax relief for everyone making below $250,000 a year. It includes incentives to promote work and support families, and it provides relief from the individual alternative minimum tax for 1 year, a tax that is increasingly affecting the middle class.

Our friends on the other side say: Whoa. Wait a minute. That means those making more than $250,000 will have a top rate of 39.6 percent. That is true. What happened the last time we had a top rate of 39.6 percent? That was during the Clinton administration. What was the economic record then? It was 39 straight quarters of economic growth from 1991 until 2000. It was the longest period of uninterrupted growth in this Nation's history. There were 24 million jobs created. That is what happened the last time we had a top rate of 39.6 percent.

Why is it important we begin doing something about these growing deficits and debt? It is because we are on an unsustainable course. This is one place where the Republican leader and I would agree. We are on an unsustainable course; we have been since the previous administration.

Have they forgotten that they tripled foreign holdings of U.S. debt during that administration, and doubled the debt? We are on an unsustainable course. We are headed for a debt that will be 200 percent of our GDP if we don't act.

This is a spending and revenue problem. This chart shows spending and revenue as a share of the economy over the last 60 years. Spending is the red line, and the green line is revenue. As we can see, we are at or near a 60-year high in spending. We are at or near a 60-year low on revenue. It is true we have a spending problem. It is also true we have a revenue problem. Revenue is at or near a 60-year low.

Our friends on the other side want to just have the historic average for revenue. The problem with that is it is not a useful benchmark. This is spending going back to 1972, 40 years. The red line shows spending. The green line is the historic average for revenue. We can see that if we just had the historic average for revenue, we never would have balanced the budget in a single year over 40 years. That is what the other side wants to do.

The fact is the five times we have balanced the budget since 1969 -- in 44 years -- the revenue was nearly 20 percent of GDP. It was 19.7 percent in 1969, 19.9 percent in 1998, 19.8 percent in 1999, 20.6 percent in 2000, and 19.5 percent in 2001. Facts are stubborn things.

Former Republican Budget Committee Chairman Judd Gregg said this about revenue: “We also know revenues are going to have to go up, if you're going to maintain a stable economy and a productive economy, because of the simple fact that you're going to have to have this huge generation that has to be paid for.”

It is the baby boom generation. That is not a forecast; that is not a projection. They have been born, they are alive today, and they are going to be eligible for Medicare and Social Security.

In 2010, we saw some wealthy people paying no Federal income tax -- nothing. People with incomes of $500,000 to $1 million in 2010, 14,000 paid nothing, zero. Those earning over $1 million in 2010 who paid nothing were 4,000. Is that fair? It is outrageous that 4,000 people earning over $1 million paid absolutely nothing and 14,000 earning between $500,000 and $1 million of income paid absolutely nothing and our friends want to defend that system. Shocking.

Here is what is happening to so-called tax expenditures. We are now spending more money through the Tax Code than through all the appropriated accounts. Who are the big winners? The top 1 percent in income, on average, get a benefit of $255,000 a year by the so-called credits, deductions, exclusions, and preferences that are shot through the Tax Code.

We have a little five-story building in the Cayman Islands that claims to be home to 18,000 companies. They all say they are doing business out of that little five-story building. Are they doing business out of that little building or are they doing monkey business out of that building? Eighteen thousand companies in a little five-story building in the Cayman Islands evading and avoiding the taxes due in the United States. Our friends on the other side say: No change. Shouldn't touch that. That is fair? I don't think so.

Let's get real. Let's get serious. Let's take on deficits and debt. Let's make certain everybody has a chance to contribute, including those who are at the top rungs who are now paying nothing.

Chairman Conrad Floor Speech on Budget and Economic Issues

Wed, 27 Jun 2012 04:30:00 EST

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Charts used during speech available as PDF at the bottom of speech text

Transcript

I come to the floor today to talk about the state of our economy, where we have come from, where we are headed, and the critical challenges facing our Nation. I want to go back and remind people of where we have come from. I think it is very important to put in context the circumstances we now confront.

First of all, the economic crisis of 2008 and 2009 was the worst recession since the Great Depression. By the way, this was not the creation of Barack Obama. He inherited this mess, and he has done quite a good job of getting us moving in a better direction, but more of that later.

In the fourth quarter of 2008 -- that is the last quarter before this President took office -- the economy was actually shrinking at a rate of almost 9 percent. In the first month of 2009, we lost 800,000 jobs. The housing market was in crisis, home building and sales were plummeting, we faced record foreclosures, and the financial market crisis was threatening global economic collapse.

In fact, I will never forget being called to a meeting in the Capitol in the fall of 2008, and I was the last one to arrive. It was the leaders of the House and the Senate, Republicans and Democrats, and there was the Chairman of the Federal Reserve and the Secretary of the Treasury in the Bush administration telling us they were going to take over AIG the next morning. They told us if they did not, there would be a financial collapse in this country within days. I have to say, that gets your attention. But those were the circumstances that were being confronted in late 2008.

Since that time, we have seen a dramatic improvement. Here is the economy in the fourth quarter of 2008 before President Obama took office, shrinking at a rate of almost 9 percent. In the subsequent quarters it continued to shrink until it began to get better in late 2009, frankly, because of the stimulus and TARP that helped start to turn our country around.

Since that time we have had consistent growth in the economy -- not as robust as we would like but nonetheless consistent growth. It was a rather remarkable turnaround given how serious the economic downturn was. We also see the same pattern with respect to the private sector jobs picture.

Again in January 2009, in one month alone we lost more than 800,000 jobs, and those were private sector jobs -- more than 800,000 jobs in a month. Again, in 2009 things began to turn and we got back to growing jobs. In fact, we have had over 4 1/2 million jobs in the private sector created since the turnaround began. Again, job growth was not as robust as we would like, but nonetheless it was quite a remarkable turnaround from where it was.

What we have seen in looking at previous crises is that economic recovery is shallower and takes much longer after a financial crisis. So we can't compare this to the garden variety of recessions we faced since World War II. I think we have had nine recessions since World War II, but this went far beyond a typical recession. This was enormous damage to the financial sector. In looking back, historically, here is what Dr. Reinhart of the Peter Peterson Institute for International Economics and Dr. Vincent Reinhart of the American Enterprise Institute have found in their research:

“Real per capita GDP growth rates are significantly lower during the decade following severe financial crises...In the ten-year window following severe financial crises, unemployment rates are significantly higher than in the decade that presided the crisis....”

That is the circumstance we are in. That is not the fault of President Obama. He inherited this mess. The fact is after a financial crisis, if we look back historically, it takes up to 10 years to recover. For those who say, well, the Federal Government response didn't work or that it hasn't made any difference, I don't think that is true. I don't think that will stand up to scrutiny.

Two of the most distinguished economists in the country, Alan Blinder, who was a former Vice Chairman of the Federal Reserve, and Mark Zandi, who was actually one of the economic advisers to the John McCain campaign, said:

“We find that its effects,” -- talking about the Federal Government's actions to deal with the crisis – “on real GDP, jobs, and inflation are huge, and probably averted what could have been called Great Depression 2.0.”

They went on to say:

“...When all is said and done, the financial and fiscal policies will have cost taxpayers a substantial sum, but not nearly as much as most had feared and not nearly as much as if policymakers had not acted at all. If the comprehensive policy responses saved the economy from another depression, as we estimate, they were well worth their cost.”

Here are two of the most distinguished economists in the country telling us that had we not taken the actions that the Federal Government did, we would have had a depression. They also looked at what would have happened without the Federal response on the jobs front.

Here is what they found running their econometric models. The green line is the response with the Federal response, the red line is what they estimate would have happened without the Federal response. We can see they find a difference of 8 million jobs. In other words, we have 8 million more jobs than we would have otherwise had had the Federal Government done nothing.

I just say this to my colleagues who say, well, the stimulus and TARP didn't work because we are not growing as rapidly as we would like. Let's think back. What was happening when those steps were taken? The economy wasn't growing; the economy was shrinking. We weren't getting more jobs; we were losing jobs at a record rate. So to those who say none of these Federal actions were successful, I say I don't think that is what the record shows.

I think what the record shows is they didn't accomplish all we would like, but they really led to quite a dramatic turnaround from the worst recession since the Great Depression. Here are the positive signs we see now that are facts. They are not projections; they are facts.

We have had 27 consecutive months of private sector job growth. We have had 11 consecutive quarters of real GDP growth. The unemployment rate is down from the 2009 peak. Manufacturing has expanded for 34 consecutive months. The U.S. auto manufacturers have returned to profitability. And State revenues are now showing signs of improvement.

So, again, this isn't political talk. These are facts, and facts matter. The facts demonstrate there has been quite a remarkable turnaround. Again, these aren't projections; these are facts. These are things that have occurred.

If we then compare the U.S. performance to other countries with which we compete, we can see the United States has done the best in terms of the comparisons here. Some developing nations have certainly done better than we have, but if we look at the developed world, the United States is doing the best. This chart shows our economic performance, the top line, which is far better than the Eurozone, all the European countries, which is the green line. Japan is the red line and we are doing much better than them. We are doing much better than the United Kingdom. If we look at how well we have done compared to the rest of the world, we are doing much better, at least in terms of the developed nations.

We know Europe has gone in a somewhat different direction. They have imposed austerity without regard to growth policies. Here is the headlines from the International Herald Tribune: "Austerity Is Strangling Europe." I pulled out a paragraph because I think it speaks very well of what has been the effect of the European strategy:

“…[T]he direction of European economic and financial policy must change, away from pure austerity toward growth. Greece, Ireland, Portugal, Italy and Spain have made substantial progress in stabilizing their finances. But the economic and political situation in these countries shows that austerity alone is not the way to resolve the crisis. On the contrary, there is a danger of half-strangling national economies with a strict policy of austerity... We would therefore be well advised to cushion harsh austerity measures with programs for growth.”

I believe there is a lesson in that for us as well. I am an unvarnished deficit hawk. I have been my entire career. I have called repeatedly for us to get our fiscal house in order. I believe it is imperative that we do that, but it is also imperative to recognize that we don't impose austerity on a weak and struggling economy. We would only make things worse. Getting back on a more sustainable financial path has to be done in a measured way. Absolutely, we need a long-term plan to take on our deficits and debt. I have made that speech 500 times. Absolutely, that has to be done. But that has to be done in a phased way, and the austerity should not be imposed until we are on a stronger growth path. I think economic history tells us that, and that is a lesson we need to learn.

What is holding back the U.S. economy from a stronger recovery? Well, we have identified these elements: No. 1, the European debt/financial crisis has thrown a cloud over global markets, and they are still our biggest trading partners. So a chilling of economic activity in Europe has had an adverse effect on our own economic performance.

No. 2, the Iran/Middle East situation has threatened to disrupt oil supplies. That creates uncertainty, because we know the Straits of Hormuz would close, prices would jump, economic activity would weaken, and we would be hurting. That has led companies, even though they have $2 trillion on their balance sheets, to be very cautious about expanding their investment and expanding their hiring.

Federal, State, and local government cutbacks have also created economic drag. I will go to that issue in a moment.

The political deadlock on fiscal issues here in Congress has also created uncertainty, and we face, of course, the threat from the fiscal cliff. The fiscal cliff is the fact that at the end of this year, all of the Bush tax cuts are going to expire, which means an automatic tax increase for virtually every American. We also face additional spending cuts, including $1.2 trillion from the so-called sequester, evenly shared between defense and nondefense. That would reduce demand. That would further reduce economic growth.

Also, of course, the housing market continues to pose a threat, at least in many parts of the country. Certainly in Nevada, Arizona, Florida, and in parts of California, the housing market crisis still leaves an overhang.

I thought this article in the New York Times on Saturday, May 5, was very interesting. I think if we gave a quiz to the American people listening to the debates here, they would conclude that government has gotten bigger and bigger during the Obama administration, but that is not true. A previous President said "facts are stubborn things," and these are facts. If we take State, local, and Federal Government and we combine them, the government is getting smaller in the United States. In fact, again, I pulled out a paragraph:

“For the first time in 40 years, the government sector of the American economy has shrunk during the first three years of a presidential administration. Spending by the Federal Government, adjusted for inflation, has risen at a slow rate under President Obama. But that increase has been more than offset by a fall in spending by State and local governments, which have been squeezed by weak tax receipts. In the first quarter of this year, the real gross domestic product for the government -- including State and local governments as well as Federal -- was 2 percent lower than it was 3 years earlier, when Barack Obama took office, in early 2009.”

All the talk we hear on this floor about the exploding size of government is bloviation. It is bloviation. Let's get real. The government in the United States is shrinking. Facts are stubborn things.

This is what is happening to the U.S. Government workforce under this President. Obama took office in January of 2009. This chart shows millions of Federal, State, and local employees. We had more than 22.5 million Federal, State, and local employees. Look what has happened. Do we have more employees in government today than when President Obama took office, or do we have less? We have less, and we have a lot less. This chart shows very clearly the number of employees has gone down dramatically -- dramatically -- during the years of this administration. Facts are stubborn things.

What is underlying our current weakness? Well, before the Budget Committee, we had Dr. Joel Prakken, the chairman of Macroeconomic Advisers. This is the testimony he gave earlier this year:

“The number one problem that [small businesses] say they have to deal with right now is lack of demand.”

Are my colleagues paying attention? Can we pass a quiz? What is the problem? The problem is a lack of demand. Further tax increases or further spending cuts will only weaken demand in the short term. So we have to be paying attention to what we do here.

Some of our colleagues say, let's slash spending some more, make government even smaller. Guess what that will do to demand? It will weaken it. That will make the economic recovery even more tepid, even weaker. That is not the answer. Yes, it is absolutely the case over the longer term. We have to be aggressive at reducing spending and reforming entitlements and reforming the tax system. I have been part of virtually every effort here to do that. I was part of Bowles-Simpson and part of the group of six. I am actually actively engaged in that effort now. We have to be able to walk and chew gum at the same time.

What we need to understand is we need a two-step strategy: strengthen growth in the short term, and then pivot and deal with our deficits and debt over the longer term. We cannot get confused about this and think the answer is to impose immediate austerity now. We have already imposed a fair amount of austerity, which I will get into in a minute, with the budget cuts that were included in the Budget Control Act passed last year.

I want to repeat the testimony of Dr. Prakken:

“The number one problem that [small businesses] say they have to deal with right now is lack of demand. They do not say access to capital. They do not say burden of regulation… They say their order books are thin.”

I say to my colleagues, let's pay attention to what the problem is: weak demand. We have to take steps to strengthen demand in the short term while at the same time putting in place a longer term plan to get us back on track with our Nation's finances.

One reason we have a weak demand is we have made weak investments in infrastructure. Look at where we are compared to our global competitors. China is investing 9 percent of their GDP on infrastructure. Europe is spending 5 percent, and here we are at 2.4 percent. One of the reasons we have a weak recovery is we are not investing sufficiently in roads, bridges, airports, rail, and, as a result, our infrastructure across America is becoming second rate. That is about as clear as it can be.

I hear my colleagues say: Well, our problem is the Senate has not passed a budget in over 1,000 days. Sometimes I wonder if our colleagues pay very close attention to what they are voting on here, because last year, instead of a budget resolution we passed the Budget Control Act -- a law.

What is the difference between a resolution and a law? I think any high school student could tell us a resolution is weaker than a law. Yet our colleagues continue to come to the floor and complain and say we have not passed a resolution in more than 1,000 days. That is true. What we did do is pass a law called the Budget Control Act. We passed it last year with an overwhelming vote here in the U.S. Senate -- a bipartisan vote. It also passed in the House of Representatives and was signed into law by the President.

A budget resolution never even goes to the President. A budget resolution is purely a congressional document. So a law is stronger than any resolution, and it is true, we didn't pass a budget resolution last year, we passed a law called the Budget Control Act. That law, in part, said:

“…[T]he allocations, aggregates, and spending levels set in subsection (b)(1) shall apply in the Senate in the same manner as for a concurrent resolution on the budget...”

That is about as clear as it can be. The Budget Control Act says that the spending levels will apply in the same manner as a budget resolution.

So all these speeches that have been given -- oh, we have not had a budget resolution in a thousand days -- is not telling people the rest of the story. Instead of a budget resolution, we passed a budget law called the Budget Control Act.

What did that law do? One of the things it did was cut spending $900 billion over the next 10 years. I can tell you, it put in place 10 years of spending caps -- 10 years of spending caps. A typical budget resolution only deals with one year. The Budget Control Act -- the law we passed last year -- put in place 10 years of spending caps, saving $900 billion.

In addition, it said: We are going to create a special committee to deal with the entitlement programs and the tax system. We are going to say to that special committee: If you can come to an agreement, you will not face a filibuster. You will not face delays, you will be able to bring that proposal right to the floor of the Senate and get a vote.

They further said: But if you do not agree, there will be another $1.2 trillion of spending cuts imposed. Of course, we all know now the special committee could not agree. So that additional $1.2 trillion of spending cuts is now the law of the land, on top of the $900 billion of spending cuts that was in the Budget Control Act as well.

So let's do the math: $900 billion of discretionary savings in the Budget Control Act, plus this sequester -- the $1.2 trillion of additional spending cuts focused on defense and nondefense spending -- for a total of $2.1 trillion of spending cuts that were in the Budget Control Act passed last year that is now the law of the land. That is the biggest spending cut package in the history of the United States.

I think facts are stubborn things, and we need to remind our colleagues of what the facts are.

Here is another unfortunate fact: We are borrowing almost 40 cents of every $1 we spend. We can do that for a while. We cannot do it endlessly. We are borrowing almost 40 cents of every $1 we spend, so we have to deal with that.

What does it mean in terms of our debt? This is what is happening to our debt: Gross debt as a percentage of our gross domestic product under what is called the CBO alternative fiscal scenario -- that is their projection of what we might do here -- shows the gross debt of the United States is going to be 104 percent of our gross domestic product at the end of this year -- 104 percent of our gross domestic product. It shows, if we do not do anything, that is going to go up to 119 percent. Our gross debt will be 119 percent of the size of our economy by 2022 if we do not do anything.

That is not a path we should allow to be followed. Why not? Because the best economic analysis that has been done, by Reinhart and Rogoff, "Growth in a Time of Debt," found that once we get a gross debt of more than 90 percent of our GDP, our future economic prospects are diminished. It does not happen all at once. It is not like falling off a cliff when we get to gross debt that is 90 percent of our GDP. It is more like a long, slow decline in terms of our future economic prospects.

So here is what they concluded after studying 200 years' of economic history, 44 different countries:

“We examine the experience of 44 countries spanning up to two centuries of data on central government debt, inflation and growth. Our main finding is that across both advanced countries and emerging markets, high debt/GDP levels (90 percent and above),” -- again, this is gross debt. When we get to a gross debt of 90 percent or more – “are associated with notably lower growth outcomes.”

So this is not just about numbers on a page. This is about future economic prospects, future economic opportunity, future job prospects, that the future wealth of a nation is hurt when they get to a gross debt of more than 90 percent of their GDP.

The previous chart I showed is that we will be at 104 percent of GDP at the end of this year. So absolutely we have to focus on deficits and debt. But we should not lose sight of the fact that we cannot pivot and do that when the economy is weak or we will make the economy even weaker. So the initial steps we need to take are to strengthen growth. At the same time, we ought to put in place a plan that gets us back on track fiscally that deals with this debt problem for the longer term because this is not a matter of we get to this point and fall off the cliff. It does not work that way.

What is critically important is that we adopt the right economic policies now to strengthen the economy, to lift growth, but at the same time to put in place a longer term plan that deals with deficits and debt.

As shown on this chart here is where we are headed if we fail to act. This is according to the Congressional Budget Office. It is nonpartisan. We have gross debt that I was referencing before: 104 percent. Look at this and you will say: Gee, it is not 104 percent on this chart. That is because this is not gross debt. This is debt held by the public, which most economists like to talk about. I talk about the gross debt because gross debt includes what we owe to the trust funds, and the work of Reinhart and Rogoff focused on gross debt. So if we are going to compare ourselves to the research they did, we have to be talking about gross debt.

This is debt held by the public, and this is what CBO says is going to happen to debt held by the public if we fail to act: We are going to have a debt more than 200 percent of GDP. That is the track we are on. So, hey, we have to sober up. We need a plan that gets us back on track.

When we analyze how we got in this situation, what is critical is that we look at spending and revenue because it is that mismatch that leads to deficits. It is when we are spending more than we are taking in. It is when our outlays are greater than our revenues that we have deficits. It is the accumulation of deficits that is the debt. Right. The debt is adding up all the deficits over all these years.

The red line on this chart shows the spending of the United States. The green line shows the revenue. What jumps out at you is that spending is near a 60-year high. That is not surprising because we just had the biggest economic downturn since the Great Depression.

What happens when we have a strong economic downturn? The things we call the automatic stabilizers kick in to prevent us from going into a depression. What are the automatic stabilizers? Things such as unemployment insurance, things such as spending programs on food stamps, others things that are done to prevent going from a recession into a depression. Those things kicked in, and the result is -- and, of course, we had TARP and we had stimulus, which I have already demonstrated, I think, worked actually quite effectively. Without them, the best economists in the country tell us we would have been in a depression.

Spending is near a 60-year high. But look at revenue. Revenue is near a 60-year low. Low revenue, high spending, big deficits, big additions to debt. That is what is happening to us. We can see, the spending has come back somewhat now. Revenue has improved somewhat. So things are starting to get better, but we still have a big gap and a deficit of $1.2 trillion for this year -- staggering. That over time has to be addressed.

The Budget Control Act we passed last year -- the law our friends over there say: Oh, you have not passed a budget resolution for a thousand days. Wow. Did they forget they voted on a law called the Budget Control Act that cut spending by the biggest amount in the history of the United States?

Look what has happened to discretionary spending. Under the Budget Control Act, discretionary spending is going to go to a historic low. So all this talk about the runaway spending around here -- yes, spending went up when we had a deep economic decline in order to prevent that decline from becoming even worse and becoming a depression. But do you know what? We have already taken steps to rein that spending back in the future in the Budget Control Act. Look how it is going to do it. We saw, back in 1968, discretionary spending -- in Federal spending there are two kinds of spending. There is mandatory spending -- things such as Social Security, Medicare, that is mandatory spending. Then there is discretionary spending, such as education, law enforcement, parks. And back in 1968, 13.6 percent of budget outlays went to discretionary spending.

In 2012, even after this uptick, we are still far below where we were in 1968. Only 8.4 percent of budget outlays are going to discretionary spending. But look what happens under the Budget Control Act. Discretionary spending, as a share of the total budget, will drop to less than 5 percent. We have not been there going way back. That is a historic low.

So those who say, well, we have runaway spending, nothing has been done about it, they have not done their homework, and they, obviously, have not paid attention to the laws that have been passed. The Budget Control Act that passed last year is taking us to spending for discretionary programs that is a historic low.

Where is the spending going up? Well, it is those mandatory accounts. That is where the spending is going up. Of course, as shown on this chart, this is the picture on Social Security. Again, this goes back to 1972. Social Security was 3.3 percent of GDP. Here we are in 2012 and it is up to well over 5 percent of GDP. It is headed for over 6 percent of GDP as the baby boomers retire. That is not a projection. The baby boomers have been born. They are alive today. They are going to retire. I am a baby boomer. I see a number of others in front of me in the Chamber. That is not a projection. That is baked in the cake. So we know we have gone from Social Security being 3.3 percent of GDP in 1972 to being 6 percent of GDP. That is not because we have had increases in the program; it is because we have increases in the number of people who are eligible for the program.

The same is true in other mandatory parts of the budget.

Here is Medicare. Medicare, Medicaid, and other Federal health spending -- if we added it all up in 1972 -- was 1.1 percent of GDP. In 2050, we expect that to increase to 12.4 percent of GDP. So if we are looking for where the spending is really increasing, it is certainly not in the domestic accounts. That has gone down as a share of GDP.

For Social Security, we have seen an increase because of increased people eligible because of the baby boom generation. But the big place we have seen an explosion is in the health care accounts.

Now, that is not because of the law that was passed -- what some people call ObamaCare. That has nothing to do with this. This is long-term trends because of the increase in the cost of medicine and because of the baby boom generation.

That is where we see a large increase in Federal spending. We are seeing Medicare enrollment soaring. Back in 1970, there were 20 million people eligible for Medicare. In 2085, it is going to be 115 million. So a key reason we are seeing increases in costs in the so-called mandatory programs is a dramatic increase in the number of people who are eligible. That is no fault of the program. That is a demographic reality, and we have to cope with this reality.

If we are going to have a Medicare Program that gives an assurance that people in their senior years have medical treatment available to them, we have to deal with this reality of a dramatic increase in the number of people who are eligible for Medicare.

An aging population is the primary driver of Medicare, Medicaid, and Social Security cost growth -- an aging population. The world is changing. As a population, we have a much bigger group that is eligible for these programs -- Social Security, Medicare, Medicaid. It is absolutely essential that those programs be maintained in order for our seniors to have a comfortable retirement and in their aging years to have security.

That is the genius of Social Security and Medicare and Medicaid. They have transformed lives for people in their senior years. But we also have this reality to confront that because we have a growing number -- because of the baby boom generation the costs to the Federal Government are swelling. Again, it is not on discretionary spending. That part of the budget, as I have demonstrated, is going down as a share of the economy. It is in these areas where our budget is sensitive to the growing number of people eligible for Social Security, Medicare, and Medicaid.

Interestingly enough, the Medicare trustees say the health care reform law passed has reduced long-term Medicare costs. I hear people, especially our friends on the other side, say the law we have passed has increased these costs. That is not what the Medicare trustees have found. The Medicare trustees have said the "projected Medicare costs over 75 years are substantially lower than they otherwise would be because of provisions in the 'Affordable Care Act' or ACA.

Our colleagues say they want to repeal the Affordable Care Act. They are talking about making the situation worse, not according to Kent Conrad but according to the Medicare trustees. The Medicare trustees -- I wish to repeat this -- said the "projected Medicare costs over 75 years are substantially lower than they otherwise would be because of provisions in the… Affordable Care Act...."

So our colleagues who are lining up to say they want to repeal the Affordable Care Act are lining up to increase Medicare costs. By the way, they are lining up to increase the debt because the Congressional Budget Office has told us that in the first 10 years of the Affordable Care Act, it saves more than $100 billion in the deficit, but in the second 10 years, it saves well over $1 trillion on deficits and debt.

Let me repeat that. The Congressional Budget Office tells us the Affordable Care Act, which some of our colleagues are lining up to repeal, will reduce deficits and debt in the second 10 years by well over $1 trillion. So my friends who are lining up -- they want to repeal the Affordable Care Act -- they are lining up to increase Medicare costs. They are lining up to increase the debt of the United States, according to the Congressional Budget Office, which is nonpartisan.

This is what the Medicare Trustees project in terms of reduction in Medicare costs. The percent change in average per beneficiary cost from 2001 to 2011 was up 94 percent. From 2011 to 2021, they predict it will go up 37 percent, a dramatic slowing of the rise in costs because of the Affordable Care Act.

We also hear colleagues on the other side say the answer to this deficit and debt situation is to have further tax cuts that primarily benefit the wealthiest among us. Really? I have just shown a chart that showed our revenue is near a 60-year low. So does digging the hole deeper make much sense before we start to fill it in? I do not think so.

We hear our colleagues say: If we look in the last 40 years, revenue has been about 18 percent of GDP. That is true. But you know what, the five times we have balanced the budget since 1969 the revenue has not been at 18 percent of GDP. The revenue has been at 19.7 percent of GDP, 19.9 percent, 19.8 percent, 20.6 percent, 19.5 percent of GDP. So these friends who say they want to balance the budget, let's study their numbers. It does not add up. It does not add up.

They want to cut the revenue, which already is near a 60-year low -- cut it some more. They say: Sometimes it is going to get back toward historic average. That is not going to cut it, because we can see the times we have balanced the budget, the revenue has not been at 18 percent of GDP -- right now, it is at less than 16 percent -- revenue has been about 20 percent of GDP.

I do not know what could be more clear; that we need tax reform in this country. The Tax Code is out of date. It is inefficient. It is hurting U.S. global competitiveness. Complexity imposes a significant burden on individuals and businesses. The expiring provisions create uncertainty and confusion. We are hemorrhaging revenue to the tax gap, the tax havens, to abusive tax shelters.

I have shown on this floor many times a picture of a little five-story house called Ugland House. Ugland House -- I am going to put it up in just one minute -- claims to be the home to 18,000 companies. They all say they are doing business out of this little five-story building. Really? Is that what they are doing? We will talk about that in a moment.

But we are hemorrhaging revenue to the tax gap, the tax havens, to abusive tax shelters. We need to restore fairness. The current system is contributing to growing income inequality. I do not know how anybody can deny this. We have seen a dramatic growth in income inequality in our country.

One of the reasons is we have a Tax Code which favors those at the very top, at least some of them. Very interesting because not all people at the top pay a lot of taxes. Some people at the top and some companies pay nothing, even though they are highly profitable. That is not fair. It is not right. It is hurting the country.

Our long-term fiscal imbalance must be addressed. Revenue must be part of the solution. Martin Feldstein, a distinguished conservative economist -- nobody ever accused Martin Feldstein of being a liberal -- said this:

“Cutting tax expenditures is really the best way to reduce government spending....[E]liminating tax expenditures does not increase marginal tax rates or reduce the reward for saving, investment or risk-taking. It would also increase the overall economic efficiency by removing incentives that distort private spending decisions. And eliminating or consolidating the large number of overlapping tax-based subsidies would also greatly simplify tax filing. In short, cutting tax expenditures is not at all like other ways of raising revenue.”

In this case, I think Martin Feldstein has it about right. One way we can raise additional revenue is to reform the current tax system, making our system more competitive and at the same time raising additional revenue that can be used to help reduce the deficit, along with reform of entitlement programs, along with additional spending restraint.

These tax expenditures go overwhelmingly to the top 1 percent. Here is the increase in after-tax income from tax expenditures. We can see the middle quintile. They get $3,200 a year of value. But look at the top 1 percent. The top 1 percent get over a quarter million dollars a year in benefits from tax expenditures. Overwhelmingly, those tax expenditures that are now costing us $1.2 trillion a year are going to the wealthiest among us.

I have nothing against wealth or people who succeed -- all for it. I am for there being a fair distribution of the burden of raising the revenue necessary to support the country, and this is not fair. It is not fair when the top 1 percent get a quarter million dollars in value every year from these tax expenditures. That gets almost no attention.

This is the picture I was talking about. This is a little building in the Cayman Islands, a five-story building called Ugland House. Now, 18,857 companies call this building home. Truly. That is the most efficient building in the world. Can you imagine all these companies doing business out of that little building, 18,857 companies? Are they truly doing business out of that little building? The only business they are doing out of there is monkey business, and the monkey business they are doing is to avoid the taxes they legitimately owe in this country. That is what is going on in this building in the Cayman Islands, the avoidance of taxes, legitimate taxes in this country.

There is a reason there are some very large companies that even though they are hugely profitable pay absolutely nothing in taxes. That is not right. That is not fair. It should be stopped. Our colleagues on the other side, they do not want to stop it. They are against it. In fact, they have taken a pledge that they will not increase tax revenues by closing down this kind of tax dodge. They have taken a pledge not to do anything about it. Virtually every Republican has taken a pledge that this would be a tax increase to shut down this kind of tax dodge. That is not right.

When we look at the longer term deficit and debt problem -- I have tried to be clear -- what we need to do is a two-step approach. The first step, we need more economic growth. We need things to support this economic recovery. We need more investment certainly in infrastructure where we are falling badly behind. But we also need a comprehensive long-term plan to get us back on track, to face up to these deficits and debt. What is the best way to do that? Here is what the American people say: We need a balanced approach.

Some people say cut spending. That is where 17 percent of the American people are. Some say increase taxes. That is where 8 percent of the American people are. But 62 percent of the American people say we have to do some of both. We have to cut spending. We have to raise revenue. We ought to have a balanced plan.

So that is what the American people are telling us. Interestingly enough, that is what the President's fiscal commission concluded, the Bowles-Simpson Commission. I was a member of it. There were 18 members, and 11 supported the recommendations of the commission -- five Democrats, five Republicans, and one Independent. That is as bipartisan as you can get. We took that balanced approach. We reformed the revenue system to have a more fair tax system and shut down abusive tax havens and loopholes but also had further savings on the spending side of the equation.

On this chart is an overview of the budget plan I developed based on the Fiscal Commission's plan: $5.4 trillion in deficit reduction over 10 years; lowers deficit to 1.4 percent of GDP in 2022, which is around 10 percent of GDP; stabilizes gross debt by 2015; reduces discretionary spending to 4.8 percent of GDP by 2022, which has already been done; builds on health care reform savings; calls for Social Security reform, with the savings to be used only to extend the life of Social Security itself.

Social Security was not part of the deficit reduction plan because Social Security has not been a contributor to building the deficit and debt. We also know Social Security is in trouble. Its solvency is in question. We recommended that any changes to Social Security be purely for the purpose of extending the life of Social Security itself given the incredibly important role it plays in our country.

We also included fundamental tax reform to raise revenue and to go after these tax havens, these abusive tax shelters, and, yes, to ask the wealthiest among us, some of whom -- not all -- have gotten away with paying very little, to pay their fair share.

This is what would happen to the deficit as a percentage of GDP under that plan. You can see on this chart that it would be reduced dramatically -- from 7.6 percent of GDP this year to 1.4 percent of GDP by 2021, really dramatic reductions as a percentage of GDP by 2016.

This chart is what would happen to the debt. Instead of it continuing to grow to more than 119 percent of GDP by 2022, that debt would be at 93 percent of GDP by 2022. In the near term, debt would go up some more, absolutely, because we have to deal with this economic weakness, but over the full 10 years of the plan, the debt would be brought under control and be brought down somewhat.

Those are the elements of the plan. I say to my colleagues that we have to find a way to come together. It is important to the country that we do. I am retiring at the end of this year, but I hope we can find a way to reform the tax system and make it more fair, reform entitlements in recognition that the baby boom generation is upon us. They are going to retire, and they are putting stress on these programs. These programs are critically important to life in America -- certainly the lives of our senior citizens.

And we are going to have to do more about the discretionary accounts because, as I have indicated, they have already been hit repeatedly, and we are headed for a share of our budget going to the discretionary accounts that are a record low. I personally don't believe going back and cutting them more, beyond what has already been done in the Budget Control Act passed last year, is a winning strategy.

I think this is an important and defining moment in this country's history. These are problems that are real. Certainly, to the millions of people who are without a job, we have an absolute obligation to do everything we can to strengthen this economy. We also have an absolute obligation to take on this debt threat because that hangs over the country as well.

We can do this. We have done it before. In the Clinton administration, we got back to balanced budgets and strong economic growth, with the creation of more than 20 million jobs, and a country that was prospering and doing better than any competitor on the face of the globe. We can do it. I believe we will.

###

Chairman Conrad Speaking on Confronting The Looming Fiscal Crisis

Tue, 19 Jun 2012 04:30:00 EST

Statement by Senator Kent Conrad (D-ND) at Senate Finance Committee Hearing on Confronting the Looming Fiscal Crisis

Thank you, Mr. Chairman. Thanks for holding this hearing. Thanks to our witnesses, Senator Domenici, with whom I served for many years on the Budget Committee, and I have deep respect for, and Alice Rivlin, who is a legend. And we appreciate the extraordinary work you've done.

I think, frankly, you've got it about right. I served on Bowles?Simpson. In many ways, I think your work product is actually somewhat superior to ours. And I say that because while there are a lot of similarities, you did take on fundamental reform of Medicare.

And my own conclusion is, we're going to have to do it. How we do it, that's critically important. We don't need to throw the baby out with the bathwater. We don't need to shred Medicare in order to save it, but we do need to change some of the elements of how it functions in light of healthcare inflation, and this gigantic growth in the baby boom generation.

These are undeniable facts. The growth of the baby boom generation is not a projection. These people have been born. They're alive today. They're going to be eligible for Social Security and Medicare, and the trustees have told us we're headed for the cliff.

So, I mean, any prudent person I think would say we're going to have to make some changes. And part of it is going to have to be done on the revenue side as well because as you point out in your chart, in addition to the chart Senator Domenici referenced that shows Medicare as being the driver on the cost side, you also show on the revenue side that trying to do this with the ordinary level of revenue that we've had, 18 percent of GDP, is not going to be enough in this context.

And that the times we've balanced the budget, we haven't been at 18 percent of GDP on revenue, we've been at 20 percent of GDP. Your chart shows that very clearly.

I think one other thing that is so important, and it's not been said here today, Director Rivlin, you've indicated that your plan calls for a $2.6 trillion revenue increase. But that is compared to current policy. If we would compare your plan to current law, it's actually a tax cut. And it's a tax cut ?? my calculation is about $1.6 trillion.

So, when we use these words, and words matter a lot, and we say there's going to be more revenue, compared to what? Compared to current policy, it's more revenue. Compared to current law, it's less revenue. Isn't that the case?

Former Senator Pete Domenici: Yes it is. Yes it is the case.

Alice Rivlin: Yes, absolutely.

Senator Conrad: And you're talking about a revenue level in 2022 of 20.6 percent of GDP. Is that correct?

Alice Rivlin: I think so.

Senator Conrad: And that's exactly what the revenue level the country was in the year 2000.

Former Senator Pete Domenici: That's right.

Senator Conrad: That's exactly what it was. And we balanced the budget, and we quit taking Social Security money to finance the general operations of government. So, I think you've got it about right with respect to the revenue side of the equation, I think you are headed in the right direction on entitlement reform.

I've got a little bit of time here left. I'd like to go to the question, one of the great vulnerabilities, obviously, of the Medicare reform that you're proposing is this question of cherry picking. How do we prevent cherry picking by those that offer insurance coverage?

Alice Rivlin: You enforce the rule that they can't do it. You have a regulated ?? you have a regulated exchange with rules. If they're going to offer their wares on the exchange, they have to take all commerce and at the same price, and they have to offer what Medicare offers.

And there are, certainly, ways of throwing off the exchange anybody who does not abide by those rules. In the early days of Medicare advantage, there was a lot of cherry picking. But even in Medicare advantage, the CMS has managed to get rid of that.

Senator Conrad: Can I just say in conclusion Mr. Chairman, to me, it is one of the biggest challenges we confront in Medicare reform is dealing with this risk of cherry picking. And you're quite right. You do it through regulation, but I think we all know there are geniuses in this country at getting around rules. And that's going to be, I think, one of the biggest tests.

Chairman Conrad's Recent Appearances on MSNBC

Tue, 22 May 2012 04:30:00 EST

Chairman Conrad on Andrea Mitchell Reports - 5/22/12

Chairman Conrad on NOW With Alex Wagner - 5/17/12

Chairman Conrad's Statements During Debate on Republican Budgets

Wed, 16 May 2012 08:00:00 EST

Chairman Conrad's Opening Statement During Floor Debate on Republican Budgets

Chairman Conrad's Additional Comments During Floor Debate on Republican Budget Resolutions

Wed, 16 May 2012 07:30:00 EST

Charts Used During Closing Statement on Republican Budget Resolutions
C harts Used During Floor Statement on Paul Budget Resolution
Charts Used During Floor Statement on Toomey Budget Resolution
Charts Used During Floor Statement on Lee Budget Resolution

Video of Remarks on Budget Control Act
Video of Remarks on Paul Budget
Video of Closing Statement
Video of Remarks Before the Vote on the Sessions Budget
Video of Remarks Before the Vote on the Ryan Budget
Video of Remarks Before the Vote on the Toomey Budget
Video of Remarks Before the Vote on the Paul Budget
Video of Remarks Before the Vote on the Lee Budget

Statements on Budget Control Act:

I wish to go back to the point my colleagues have made. It is fascinating to me. You did not hear them talk for one moment about the substance of their proposals -- not a moment. Did you notice that? I wonder why that would be? I think I know. It is because their proposals would take us right back to the failed policies that brought this country to the brink of economic collapse.

That is what happened the last time they were in charge. They controlled both bodies from 2001 until 2006, the White House until 2008. So none of those policies they put in place when they controlled both Chambers could be changed.

And where were we at the end of 2008? Where were we? We were losing 800,000 jobs a month and the economy was shrinking at a rate of 9 percent. And the proposals they have, the substantive proposals they are making here today, take us right back to those same failed policies.

It is no wonder you did not hear them saying one word about the budget proposals on which we are going to be voting because they are the same failed policies that put this country in the ditch. Instead, what you hear them say is that we on our side have no budget. Fascinating.

Well, let me just put up again what we passed last year in law called the Budget Control Act. Let me again read from that law. It says: “[T]he allocations, aggregates, and levels,” –
spending levels – “in subsection...shall apply in the Senate in the same manner as for a concurrent resolution on the budget for fiscal year 2012.”

In the next clause, it makes the exact same statement for 2013, that the Budget Control Act that was passed last year will serve in the same manner as a budget resolution.

Earlier this year, pursuant to that law, I gave the appropriators, which I am required to do under the law, what they could spend, and here it is. I have this chart being blown up.

Agriculture, Nutrition and Forestry, $13,397 million; Armed Services,
$146,698 million; Banking, Housing, and Urban Affairs, $22,167 million; Commerce, Science, and Transportation, $15,016 million; Energy and Natural Resources, $5,276 million. It sounds kind of like a budget, does it not? Doesn't that sound kind of like a budget?

Well, guess what, it is a budget. It is in the Budget Control Act that we passed last year instead of a budget resolution.

Again, anybody who has taken high school civics knows a budget law is stronger than any budget resolution. Why would that be the case? Because a budget resolution is purely a congressional document. It never goes to the President for his signature. A budget law, by definition, has to be signed by the President. So last year, instead of a budget resolution, we passed a budget law called the Budget Control Act.

Pursuant to that law, I gave the appropriators -- earlier this year, before the deadline -- their allocations, and I was just reading from them. Finance, $1,337 billion; Foreign Relations,
$28,640 million; Homeland Security, $102,276 million; the Judiciary Committee, $18,545 million; Rules and Administration, $41 million.

It sounds a lot like a budget doesn't it? Because that is exactly what it provided. It provided the spending limit this year and for next year. That is in the Budget Control Act we passed in the Senate last year on a strong bipartisan vote, passed the House of Representatives, and signed into law by the President of the United States.

So when we hear over and over that there is no budget, no spending limits for this year, it is just not so. There are spending limits for this year. There are spending limits for next year. They are included in the Budget Control Act, which is a law. It was passed. It was signed by the President. That Budget Control Act limited spending for the next 10 years -- put spending caps in place. Budget resolutions rarely have spending caps for more than one year. The Budget Control Act had 10 years of caps, saving $900 billion. That is the law.
......

Just to respond to my friend, the ranking member of the committee -- and I have a lot of respect for the ranking member. The truth is on the larger issue we are not all that far apart. The larger issue is, as a nation, we are on an unsustainable course. This is as clear as it can be, and we have to deal with it. We have a difference with respect to what we have right now. I believe we do have a budget in place for this year and next year. The place where I would agree with the gentleman is we don't have the longer term plan.

The problem is, Are we really going to get all sides to get off their fixed positions right before a national election? That is a matter of judgment. I don't believe that it is going to happen.

I was part of the Simpson-Bowles Commission. In fact, Senator Gregg and I were the ones who got the Commission appointed, and he and I were two of the 11 -- five Democrats, five Republicans, one Independent -- who voted in favor of the long-term plan that Bowles-Simpson put before the American people that would have reduced the debt from what it would otherwise be by more than $4 trillion. Depending on what baseline you use, even more than that. That is the minimum we need to do.

I actually tried to convince the Commission to do $5.6 trillion. That was my proposal to the Commission, a $5.6 trillion package of deficit reduction and debt reduction. Why did I pick that? We could balance the budget in 10 years if we did.

But I do want to go back to this question about whether we have a budget right now, for this year. I say, with respect, I believe it is very clear we do. The Budget Control Act -- not a budget resolution but a law -- said very clearly the allocations, aggregates, and levels of spending shall apply in the Senate in the same manner as for a concurrent resolution on the budget for fiscal year 2012. That identical language follows for 2013.

So pursuant to the Budget Control Act, in April I provided to the appropriators and the authorizers these budget allocations for appropriations: For security discretionary budget authority for 2013, $546 billion; for nonsecurity discretionary budget authority, $501 billion. That is a total, on budget, of $1,040,000,000,954; mandatory spending, $815 billion, $671 billion, for a total of $1,862,671,000,000.

Then to the authorizing committees, I went through some of these numbers previously. The Agriculture, Nutrition, and Forestry, $13,397 million; on entitlements for that same committee, $124,580 million; on Armed Services, $146,698 million; on Banking, Housing, and Urban Affairs, $22,167 million.

Again, I could go through every committee, but there it is. The appropriations spending limits have been provided to the appropriators. The authorizing committees have been given their designations. So for this year and next, it is clear we have spending limits put in place. What we don't have is the longer term plan. That is where I would agree with the gentleman.

The question is, is there any prospect of the two sides coming together, getting off their fixed positions right now? I doubt that very much.

Statement on Paul Budget Resolution:

Let me say Senator Paul is sincere. One place I agree with him is that the country has to face up to our deficit and debt situation.

As I indicated earlier, I was part of the Simpson-Bowles commission. We agreed to, and voted on, significant reforms, spending cuts, but we also used some additional revenue to have a balanced plan. I believe that has to be the test for any of the proposals that are made here. As I see the proposals coming from our Republican colleague, they flunk that test because they are not balanced. There is nothing on the revenue side. In fact, in all of their plans, there are deep additional tax cuts aimed at the wealthiest among us. None of the Republican plans have less than a $150,000 tax cut, on average, for people with earnings of over $1 million a year.

Senator Paul’s plan is truly radical. He didn't mention a lot of the elements, but his plan includes massive tax cuts for the wealthiest among us. He scraps the entire tax system and goes to a 17-percent flat tax. That is a massive tax cut for those of us who have higher income -- massive tax cut. I can tell you it would be a massive tax cut for my family.

He also cuts discretionary spending, education, and energy, by huge amounts. I will go into that in a bit. He cuts health care by almost $4 trillion.

He replaces the current progressive system with a 17-percent flat tax. He eliminates the estate tax -- eliminates it. He eliminates taxes on capital gains and dividends -- eliminates them. My goodness, think about what that would mean. People such as Warren Buffett would pay almost nothing in taxes. The richest people among us would pay almost nothing in taxes, because he eliminates taxes on capital gains and dividends.

But he is not so generous when it comes to lower income people. He raises taxes on lower income people by ending the earned-income tax credit and the child tax credit. He eliminates it.

Perhaps most stunning, his answer to saving Social Security is to cut the benefits 39 percent. The plan does not include a dime of revenue for Social Security. That is what Senator Paul has before this body. Really? Is that what we should do? Massive tax cuts for the wealthiest among us and make up for it by cutting Social Security benefits 39 percent. That is the Paul plan. He increases the retirement age three times faster than the Fiscal Commission plan and he shifts to something he calls "progressive indexing" for those earning above $33,000, which cuts their benefits even deeper over time.

I respect his desire to do something about deficits and debt, but the answer is not massive tax cuts. Eliminate the estate tax? Eliminate capital gains taxation? No taxes -- wow. Warren Buffett should send him a thank-you letter.

And cut Social Security 39 percent?

I can go into the other details. He cuts energy dramatically. He cuts education. We will go into the specifics of the massive cuts so we can have more tax cuts for the wealthiest among us, trillions of dollars, and then cut Social Security 39 percent. That is breathtaking.

We will see how many colleagues are going to stand up and support that in a vote later today.

Statement at Close of Debate:

The place we agree is we have a long-term problem for this country that we must address. I attempted to lay before the Budget Committee, and did lay before the Budget Committee, the Bowles-Simpson plan. It is the one plan that has had bipartisan support. I hope before the year is over that we can go back to it because I think it holds the greatest potential.

A key difference Senator Sessions and I have is whether we have a budget for this year and next. I believe it is clear we do. The Budget Control Act that passed last year says that the allocations and spending levels set "shall apply in the Senate in the same manner as for a concurrent resolution on the budget." That is for both 2012 and 2013.

I believe our Republican friends want to focus on that because they do not want to focus on the specifics of their budget plans. Recall, the last time they were in charge, when they controlled everything -- the House and the Senate and the White House -- the Republican policies led us to the brink of financial collapse. The proposals they are advancing today are a return to those failed policies.

Remember what happened when they were in charge. We were losing 800,000 jobs a month and the economy was shrinking at a rate of almost 9 percent a year. That is why they do not want to focus on the substance of their plans.

Let’s focus on the substance for a moment. Every Republican budget ends Medicare as we know it. One Republican budget cuts Social Security benefits by 39 percent. Every Republican budget cuts taxes for millionaires by at least $150,000 a year. And every Republican budget protects offshore tax havens.

I have shown on the floor many times a picture of this little building in the Cayman Islands that claims to be the home of 18,857 companies. It is not their home. They are not doing business out of this little five-story business in the Cayman Islands. They are doing monkey business. The monkey business they are doing is avoiding the taxes they owe. Every Republican budget protects this scam. That should not be allowed to continue.

I hope my colleagues reject these proposals. I hope we will vote no, and then get onto the serious business of a bipartisan plan to get America back on track, the Simpson-Bowles plan that I presented to the Budget Committee.

Statement Before Vote on Session’s Budget Resolution Claiming to Represent President Obama’s Budget:

This is the President’s budget. This is what Senator Sessions has presented as being the President's budget. Do you see a difference? This is what Senator Sessions describes as the President's budget. This is the President's budget. I think it is readily apparent, there is a big difference between the President's budget, which I hold in my hands, and what Senator Sessions has presented as being the President's budget. This is not the President's budget, so of course we are not going to support it. It is not what the President proposed.

Statement Before Vote on House Republican Budget Resolution:

This budget plan, the House Republican plan, ends Medicare as we know it. All the while, it provides $1 trillion of additional tax cuts to the wealthiest among us. It gives millionaires, on average, an additional tax cut of $150,000 a year. In addition, it cuts health care by $3 trillion and increases the number of uninsured in our country by 30 million people.

I urge my colleagues to reject this budget proposal.

Statement Before Vote on Toomey Budget Resolution:

This is another unbalanced plan. There is very little in the way of revenue to reduce deficits and debt but deep spending cuts in priorities such as education and energy. In fact, this proposal cuts discretionary spending $1 trillion below the Budget Control Act, which cut $900 billion. In addition, this cuts $3 trillion in health care by ending Medicare as we know it and by block-granting Medicaid, holding hostage those who are the most vulnerable among us, children and the disabled.

I urge my colleagues to resist this proposal.

Statement Before Vote on Paul Budget Resolution:

This plan has massive tax cuts for the wealthiest among us. This plan cuts discretionary spending $2 trillion below the Budget Control Act that cut $900 billion. This plan ends Medicare in 2 years. This plan repeals health care reform. Thirty million more people would be uninsured.

Perhaps most stunningly, this plan cuts Social Security benefits 39 percent. One can say it balances, but it balances at an extraordinary cost. And the cost is borne by those least able to bear the cost. I urge my colleagues to reject this plan.

Statement Before Vote on Lee Budget Resolution:

This budget proposal has the most serious mistakes I have seen in 26 years of dealing with budgets in this Chamber. This budget starts with an $8 trillion mistake on the size of the deficit.

I have put up the calculation. This budget has Federal revenues of $27.5 trillion, budget outlays of $37.2 trillion, for a difference of $9.750 trillion. But it claims deficits of $1.750 trillion. That is an $8 trillion mistake.

No. 2, it has a $5.7 trillion mistake with respect to budget authority. If we add up the individual budget function totals, they are $5.7 trillion less than the aggregate budget authority totals in what is being offered by the Senator.

No. 3, this requires some committees to cut more spending than they have available to them in their resources. For example, the HELP Committee is instructed to save $2.7 trillion, and they only have $510 billion available to them to cut.

This budget is shot full of basic fundamental mistakes. It should not even be considered as a budget on the floor.

Chairman Conrad's Opening Statement During Floor Debate on Republican Budgets

Wed, 16 May 2012 07:00:00 EST

Related Materials: Chart Used During Speech

Transcript

This is a consequential discussion today. It is a question of the future economic policy of the United States. That is what we are talking about here today.

I just heard the Republican leader say there is no budget. I don't know how to say this, but sometimes I wonder if colleagues pay attention to what they are voting on here. Last year in August, we did not pass a budget resolution; instead, we passed a budget law.

Anybody who has had 10th grade civics knows a law is stronger than any resolution. A resolution is purely a congressional document. It never goes to the President for his signature. A law has to pass both bodies and be signed by the President. Last year, instead of a budget resolution, we did a budget law called the Budget Control Act.

The Budget Control Act set the budget for the next two years, for this year and next. More than that, it set 10 years of spending caps, saving $900 billion. In addition, the Budget Control Act gave a special committee the authority to reform the tax system and the entitlement system of the country, and it said: If you come to an agreement, special committee, your action cannot be filibustered. You have to go right to the floor for a vote. And if you do not agree, there will be an additional $1.2 trillion of spending cuts put in place.

The special committee did not agree, so that additional $1.2 trillion of spending cuts is now the law, in addition to the $900 billion of spending cuts. That is a total spending cut package of more than $2 trillion. That is the biggest spending cut package in the history of the United States. For our colleagues to say there are no spending limits in place -- really? What is the Budget Control Act, then? It is a law passed overwhelmingly in the Senate. It passed in the House. It was signed by the President of the United States.

Why are they engaged in this diversion? I think I know why. Because the last time our colleagues on the other side were in control, when they had it all, the House, the Senate, the White House -- from 2001 to 2006 they had both Houses of Congress, until 2008 they had the White House, so of course nothing could be changed in terms of the policies they put in place until we had a new President. And what happened when they had total control and their policies were in place?

Republican policies led the United States to the brink of financial collapse. That is what happened. Do you know what they want to do now? They want to go back to those failed policies and do it all over again.

We cannot let them do that. That would be a disaster for this country. It would be a disaster for the world's economy. I do not know what could be more clear than when their policies were in place they brought this Nation to the brink of financial collapse. I remember those days.

I remember being called to a special meeting in this building with the leaders of the House and the Senate and the head of the Treasury Department under President Bush and the Chairman of the Federal Reserve, who told us if they did not take certain actions the next day there would be a financial collapse in the United States within days. I was in the room when the rescue for the major financial institutions in this country was designed and we were told, late on a Saturday night, if we did not reach agreement by the next day the Asian markets would open Sunday night and they would collapse and our markets would open the next Monday and they would collapse.

Barack Obama was not the President; George W. Bush was the President. The Republican economic policies had been put in place in 2001, in 2002, in 2003, and those policies were still in place when we came close to collapse. We do not forget.

Let's go back to what happened with the private sector jobs picture. At the end of the Bush administration we were losing 800,000 jobs a month. Now we are gaining 130,000 in the last month. In the months before that, immediately preceding, we were gaining about 200,000 jobs a month. We have had a gain, now that the economy has started to turn around under this President, of 4 million jobs created in the private sector.

There it is. The red line is the results of the last time the Republicans controlled the policy here -- job losses every month. Finally, under this President things have begun to turn around. Instead of losing jobs we are gaining jobs.

And the same is true on economic growth. On economic growth the record is very clear. In the last quarter of the Bush administration the economy was shrinking at a rate of almost 9 percent. You can see it there, that long red bar -- the economy in the last quarter of the Bush administration shrinking at a rate of almost 9 percent. But that, too, has turned around under this new President and we are now averaging economic growth of about 3 percent -- a dramatic improvement.

But our Republican friends are not satisfied. They want to take us back. They want to take us back to those failed policies that had the economy shrinking at a rate of 9 percent, had us losing 800,000 jobs a month. We are not going to support that. We are going to oppose that. One thing the Republican leader got right is we are going to be voting against going back to those failed policies that put this economy in the ditch, that put us on the brink of financial collapse.

He is absolutely right. We are going to oppose that.

Our policies have begun to turn things in the right direction. Here are the positive signs for the U.S. economy: 26 consecutive months of private sector job growth; 11 consecutive quarters of real GDP growth; unemployment rate down; manufacturing has expanded for 33 consecutive months; consumer confidence is showing signs of improvement -- in fact, the last consumer confidence reading is at a 4-year high; U.S. auto manufacturers that were on the brink of bankruptcy under the Bush administration policies, the Republican policies, are now returning to profitability; and State revenues are showing signs of improvement.

One way we can reality-test is how is our economy doing compared to our major competitors. How are we doing compared to the Europeans? How are we doing compared to Japan? How are we doing compared to the United Kingdom? On every one of those tests the United States comes out on top. Our economy is performing better than the European zone
-- all the European countries combined. We are doing better than Japan. We are doing better than the United Kingdom. This chart shows the story. Our economic growth is the best, compared to our major competitors.

If there is any doubt that Republican policies had us on the brink of financial collapse, we can look to the study that was done by Alan Blinder, the former Deputy Chairman of the Federal Reserve, and Mark Zandi, who advised the McCain campaign on economic policy. The two of them did an analysis of the Federal actions taken to deal with the fiscal crisis and the financial crisis. Here is what they conclude: “We find that its effects on real GDP, jobs and inflation are huge, and probably averted what could have been called Great Depression 2.0.”

When our friends attack the President and say he did not lead -- really? He averted a depression. He prevented a financial collapse, because that is exactly where we were headed when the Republicans were in control. Zandi and Blinder went on to write: “When all is said and done, the financial and fiscal policies will have cost taxpayers a substantial sum, but not nearly as much as most had feared and not nearly as much as if policymakers had not acted at all. If the comprehensive policy responses saved the economy from another depression, as we estimate, they were well worth their cost.”

That is exactly right. But what do our colleagues on the other side want to do? They want to take us to extreme austerity. They want to slam on the brakes, even while this economy is in a fragile recovery.

We do not have to wonder what would happen if we adopted the policies they are presenting here on the floor of the Senate today. We do not have to imagine it; we can just look across to Europe because they are pursuing the policies that our colleagues on the other side advocate here today. What is happening? We have kind of an experiment going on because what our Republican friends are pushing for is being done in Europe. What are they experiencing?

Here is a column from the former German Chancellor Gerhard Schroeder, "Austerity is strangling Europe." He writes, “[T]he direction of European economic and financial policy must change, away from pure austerity toward growth. Greece, Ireland, Portugal, Italy and Spain have made substantial progress in stabilizing their finances. But the economic and political situation in these countries shows that austerity alone is not the way to resolve the crisis.”

Do we have a problem with debt? Absolutely. Do we need to deal with it? Absolutely. I was part of the Bowles-Simpson commission. I was part of the group of six. I have spent hundreds of hours negotiating with colleagues on both sides to get a result. But the answer is not extreme austerity right now. Almost every economic analyst says if you do that you will slam this country right back into recession.

Again, we do not have to look very far to find out if that is true, because Great Britain has tried that approach. What have they experienced? Here is an article from the Wall Street Journal on April 26: "U.K. Slips Back Into Recession."

That is exactly the formula that is being presented by our colleagues on the other side of the aisle today. Let's slam on the brakes. We are going to put this thing right back in recession. Hey, they had their chance. They ran the economic policy of this country for eight years under the Bush administration, and sure enough they had this country on the brink of financial collapse.
Now they want to return to those same failed policies. What a mistake that would be.

We have heard the Republican leader say there is no budget; we have no budget. As I indicated in the beginning of my remarks, we do have a budget law that was passed last year. It is called the Budget Control Act. Let me read from the Budget Control Act because maybe my colleagues missed it when they were voting on it. Here is what it says in two places: “The allocations, aggregates, and levels,” – referring to spending levels – “set in subsection (b)(1) shall apply in the Senate in the same manner as for a concurrent resolution on the budget for fiscal year 2012.”

Is that confusing? It says “in the same manner as for a concurrent resolution on the budget for fiscal year 2012.” The identical language is repeated for 2013: “The allocations, aggregates, and levels set in subsection (b)(2) shall apply in the Senate in the same manner as for a concurrent resolution on the budget for fiscal year 2013.”

That is about as clear as it can be. I might add, the Budget Control Act, as I indicated earlier, is stronger than any resolution because a resolution is purely a congressional document. It never goes to the President for his signature. So the Budget Control Act that set the budget for 2012 and 2013 has the force of law, unlike a budget resolution that is not signed by the President.
The Budget Control Act also sets spending limits not just for two years, but for 10 years. It caps spending for 10 years, saving $900 billion. It also provided the full enforcement mechanisms, including a deeming resolution that allowed budget points of order to be enforced for the appropriations bills that come in 2012 and 2013.

The Budget Control Act did something else. It created a supercommittee, a reconciliation-like procedure to address entitlement reform and tax reform backed up by a $1.2 trillion so-called sequester. "Sequester" is just a fancy word for more spending cuts.

The Budget Control Act that is the law said if the special committee didn't reform the tax system, didn't reform the entitlement system, that there would be another $1.2 trillion of spending cuts imposed on top of the $900 billion. We all know the special committee didn't reach an agreement, so that additional $1.2 trillion of spending cuts is in place. That is a total of $2 trillion in spending cuts. That is the biggest spending cut package in the history of the United States.

For our friends on the other side to say there are no spending limits in place is just wrong. It is just wrong.

We do have a problem. We have a big problem. This chart talks about the spending and revenue of the country over the last 60 years and tells us why we have a problem. The red line shows the spending in the United States over that period. The green line shows the revenues. We can see on the chart there is a big gap between the spending and the revenue, and that is why we have deficits.

Our friends on the other side like to refer to one part of the equation. They just like to talk about spending. But the reality is deficits are created by the gap between the revenue and the spending. We can see on this chart we are at or near a 60-year high on spending. We have come off the 60-year high a little bit, and we are at or near a 60-year low on revenue. We have to work both sides of the equation. Again, we are at or near a 60-year high on the spending, and we are at or near a 60-year low on revenue.

So what is to be done about it? The public says we ought to have a balanced plan: 62 percent say the best way to reduce the Federal budget deficit is a combination of additional revenue and spending cuts. Eight percent say we ought to just increase taxes. Seventeen percent say just cut programs.

I was part of the so-called Bowles-Simpson Commission. There were 18 of us; 11 of the 18 supported the conclusions that called for that kind of approach -- additional revenue but also additional spending cuts. That is what the American people say we ought to do, but that is not what our friends on the other side are proposing. They propose additional tax cuts, to dig the hole deeper before we start filling it in.

Then they say: In addition to that, we will have Draconian spending cuts because if we are going to have more tax cuts that primarily go to the wealthiest among us, and we are trying to reduce the deficit, that means we have to have even more spending cuts.

Let me just say that the budgets our Republican friends are going to be offering today have something in common. Every one of them ends Medicare as we know it. Every Republican budget offered today ends Medicare as we know it.

One of the Republican budgets being offered today cuts Social Security by 39 percent. That is their answer.

If we are going to have more tax cuts for the wealthiest among us -- and many of them are not paying their fair share of taxes -- and if we are going to give them additional tax cuts, trillions of dollars in some cases in these budgets they are presenting today, then how are we going to make it up? Their answer is end Medicare as we know it, and that is in every one of their budgets.

One of them has gone so far as to say: Let's cut Social Security benefits 39 percent. We will be voting on that later today, and we will see who stands behind that proposal.

Every Republican budget cuts taxes for millionaires by at least $150,000 a year. Are you listening? Every Republican budget being offered today cuts taxes for millionaires by at least $150,000 a year on average.

Every Republican budget being offered today protects offshore tax havens. What are offshore tax havens? This is a picture of a building down in the Cayman Islands. It is the Ugland House. It is a little five-story building down in the Cayman Islands. That building claims to be the home of 18,857 companies, and they all say they are doing business out of that little building down in the Cayman Islands – 18,857 companies. They are not doing business out of that building. They are doing monkey business out of that building, and the monkey business they are doing is avoiding the taxes they owe in the United States. Every Republican budget protects those offshore tax havens.

The first House Republican budget plan we will be voting on today is totally unbalanced. There is no revenue. In fact, it is a lot more tax cuts, $1 trillion of additional tax cuts for the wealthiest in our country. They do cut some things other than taxes; they cut health care by almost $3 trillion. They shift Medicare to a voucher system which will end Medicare as we know it. They block-grant for Medicaid, going right after the most vulnerable in our society: children, the disabled, and those who have the least. They cut the safety net for seniors, children, the disabled, which will increase the number of uninsured by more than 30 million. They have large cuts to education, energy, and infrastructure. Cutting education doesn't make a whole lot of sense to me. Talk about eating your seed corn, that is it.

After our House Republican colleagues put out their budget, the Catholic bishops said this in the Washington Post: “Bishops say Ryan budget fails moral test.” The House Republican budget authored by Mr. Ryan fails the moral test. It certainly does.

This plan cuts discretionary spending $1 trillion beyond what the Budget Control Act did. If you look at priorities, it kind of leaps out at you. Health care is cut by almost
$3 trillion. It goes from $12.7 trillion to $9.9 trillion.

Then we go to the question of education, where the United States is already lagging. In fact, the United States ranks 25th out of 34 OECD countries in math. We are 25th in math. In science we are 17th out of 34. So we are 25th out of 34 in math, and we are 17th out of 34 in science. The budget from the House Republicans says to cut education by 25 percent; cut it from $77 billion to $58 billion. That is a 25-percent cut in education under the House Republican plan.

We have all seen gasoline prices rising. We are thankful they have been easing back in recent days. But, nonetheless, on May 14 gasoline averaged $3.75 a gallon. What is the Republican answer to rising gasoline prices? Well, let's cut those energy programs that are designed to reduce our dependence on foreign energy. Let's cut them 60 percent. That is what the House Republican plan does. It cuts programs to reduce our dependence on foreign energy from $4.7 billion a year to $2 billion. That is a 60-percent cut in programs to reduce our dependence on foreign energy.

If anybody has driven on the highways of America, we all know we have work to do there. If we look at spending on infrastructure in our country versus our major competitors, we can see China is spending 9 percent of its GDP on infrastructure: roads, bridges, airports, and rail. Europe spends 5 percent, and the United States spends 2.4 percent on infrastructure. We ought to do better than that.

So what is the Republican answer? On transportation funding, they cut it 34 percent. They cut it 34 percent.

I think we understand the direction our Republican colleagues want to take this country, and it is full speed in reverse. They want to go back to the failed policies that put this country on the brink of financial collapse the last time they were in charge.

We will hear our colleagues on the Republican side say we can't raise any revenue. We can't raise any revenue, even though revenue is at or near a 60-year low right now. If we look historically at what it has taken to balance the budget, the last five times we balanced the budget, revenue was at 19.5 percent to 20.6 percent of GDP. Under the Republican plan, it never gets above 18.7 percent. So I don't think they are very serious about balancing the budget.

Former Senate Budget Committee Chairman Judd Gregg said this about the need for more revenue: “[W]e also know revenues are going to have to go up, if you're going to maintain a stable economy and a productive economy, because of the simple fact that you're going to have this huge generation that has to be paid for.” That is the baby boom generation.

Former Senate Budget Committee Chairman Pete Domenici also said we need more revenue. He said: “[A] complete deficit reduction plan -- one that can gain support from Republicans and Democrats -- will need to combine comprehensive spending cuts with structural entitlement reform and new revenues...[A]dditional revenues will be needed if we are serious about controlling our debt.”

One of the issues that has become more and more clear in recent months is that income disparity is widening in America. This shows, since 1979, what has happened to the top 1 percent in terms of their income and what has happened to the middle quintile and the lowest quintile. Everybody else has been pretty much stagnant since 1979. The top 1 percent has gone up like a rocket.

I have nothing to be critical about in terms of people doing well. We want everyone to succeed, but not just part of the population. The hard reality is that since 1995, the effective tax rate for the wealthiest 400 taxpayers in this country has been cut from about 30 percent to 18 percent. That is not fair. The Republican plan is to give them more tax cuts. In fact, the House Republican plan on revenue provides an additional $1 trillion in tax cuts for the wealthiest among us by giving millionaires an average tax cut of more than $150,000 a year. It does not contribute one dime of revenue to deficit reduction.

I want to end where I began. The last time our colleagues on the other side were in charge, when they controlled everything here from 2001 to 2006 and the White House until 2008, their Republican policies led the United States to the brink of financial collapse.

The proposals they are making here today are to take us right back to those failed policies. We shouldn't let them do that. That would be a mistake for our country and it would be a mistake for the world.

###

Conrad Floor Speech on the Fiscal Commission Budget Plan

Thu, 19 Apr 2012 05:00:00 EST

Related Materials

Chart Used During Speech

Transcript

I rise today to discuss what I did in the Budget Committee yesterday, why I did it, and where we are headed.

I have heard people say repeatedly that the Senate has now gone for some 1,000 days since passing a budget resolution. What they are not telling people is that last year, instead of a budget resolution, the Senate and the House and the President signed a budget control law.

The occupant of the chair knows very well, being a former attorney general, that a resolution is purely a congressional document. It never goes to the President for his signature. The Budget Control Act we passed last year, while it is true it is not a resolution, it was a law signed by the President of the United States, and that law -- the Budget Control Act -- said we are going to set the budget for this year and next, but beyond that we are also going to put in place 10 years of spending caps, saving $900 billion.

On the question of whether the Budget Control Act represents or takes the place of a budget resolution for this year and next, let me read from the text because I think it makes it abundantly clear. It says: “The allocations, aggregates, and levels set in the Budget Control Act shall apply in the Senate in the same manner as for a concurrent resolution on the budget.”

That is pretty clear. This law, the Budget Control Act law, is to serve in the same manner as a budget resolution for 2012 and 2013, and it sets out the spending limits for those years. But it even goes further and sets spending caps for 10 years -- something that, in my time here, has never been done in a budget resolution. Never in a budget resolution, while I have been here, has there been the setting of 10 years of spending caps, but that is what was done in the Budget Control Act last year.

But that law went even further than that. It also created a special committee and empowered that committee to come up with a proposal to reform the entitlement programs -- Social Security and Medicare -- and reform the tax system of the United States, and it told that special committee that if it came to an agreement, that legislation could come to the floor without fear of filibuster -- without fear of filibuster. Extraordinary powers were granted in that Budget Control Act to reform Social Security and Medicare and the tax system as well.

That special committee did not agree, and the Budget Control Act said: If you don't agree, there are consequences, and the consequences are another $1.2 trillion of spending cuts on top of the $900 billion of spending restraint that was in the underlying act.

So the special committee didn't agree, and now we have the prospect of a sequester imposing another $1.2 trillion of spending cuts on top of the $900 billion of spending cuts in the underlying act, for a total of over $2 trillion of spending cuts. That is the biggest spending cut package, as far as I know, in the history of the United States. Yet the other side suggests repeatedly that nothing has been done to set spending limits when they know full well what the Budget Control Act, passed last year, does. Yes, it wasn't a resolution; it was a law. Boy, that is sort of civics 101, that a law is stronger than a resolution.

I said several days ago I would go to markup in the Budget Committee and I would lay out a long-term plan because while it is true that we have in place for the next 2 years a budget under the Budget Control Act, what we don't have is an overall long-term plan. The Budget Control Act limits discretionary spending for the next 10 years, but we also need a program that outlines what we are going to do about entitlement programs -- Medicare, Social Security -- and what we are going to do to reform our tax system, which is badly broken.

So several days ago I said I would lay before the Budget Committee the Bowles-Simpson plan, which is the only bipartisan plan that has emerged. It was supported by 11 of the 18 Commissioners. I was proud to be one of five Democrats, five Republicans, and one Independent.

Eleven of the 18 voted to support that Bowles-Simpson package. Unfortunately, it took a super supermajority for that plan to come to the floor of the House and the Senate; it required 14 of the 18 members to agree. Eleven of 18 did, which is more than 60 percent. Even in Washington, usually 60 percent carries the day, but it didn't with respect to the Bowles-Simpson recommendations.

So I said several days ago I would put before the body the Bowles-Simpson plan. I did not suggest we would complete action on it at the beginning of the markup. Why? Because we already have in place the spending limitations for this year and next. What we don't have is a longer term plan. We don't need that longer term plan right at this moment, but we need it before the end of the year because at the end of the year all of the Bush-era tax cuts are going to expire, and at the end of this year we are going to face that sequester I mentioned that is in the Budget Control Act law that we passed last year instead of a budget resolution.

Why do we need this longer term plan? Well, because we are borrowing about 40 cents of every dollar we spend, and that is unsustainable. It has to change. I have warned repeatedly of where we are headed if we don't change course.

And here is where we are headed. This chart shows the gross debt of the United States if we stay on the trajectory we are on. We can see we are here in 2012. At the end of this year, the gross debt of the United States will be 104 percent of our gross domestic product, headed for 119 percent on our current trajectory. That shouldn't be permitted to happen, and under the plan I laid before our colleagues yesterday, it won't happen.

If we look at the underlying cause of these deficits and debt, we can see it is the relationship between spending and revenue. The red line is the spending line, the green line is the revenue line of the United States looking back to 1950, and what one sees is that spending is at or near a 60-year high. Actually, we have fallen back somewhat from the 60-year high we reached 2 years ago. Revenue is at or near a 60-year low. Actually, we can see it bumped up to a 70-year low back in 2010. But still we see a very wide gap between revenue and spending. As a result, there is a very large deficit -- a deficit of $1.2 trillion.

Now, I could have gone before the Budget Committee yesterday and laid out another partisan plan, because that is what is happening. Congressman Ryan, to his credit, laid out a plan, and in the House they passed his plan. I give him credit for laying out a plan. I think the plan is a very bad plan for the country and completely lacks balance. It is all done on the spending side of the equation, which leads him to truly Draconian cuts -- dramatic changes in Medicare, for example, dramatic changes in Medicaid, dramatic changes in the whole structure of services the government provides people in this country. And the American people don't want a plan that is just a partisan plan. They do not want a plan that lacks balance. They do not want a plan that is just on one side of the ledger.

As I showed in the previous chart, we have a problem on both sides of the ledger -- on revenue and on spending. We have to work on both sides of the ledger. And the American people believe that as well. When asked in the Pew Research Center poll last year in November, "What is the best way to reduce the Federal budget deficit?" 17 percent said just cut major programs -- only 17 percent, 1-7. On increasing taxes, 8 percent said just increase taxes. And 62 percent said a combination of both. I think the American people have it right. They are pretty smart. They are pretty smart.

In 2010 we had the Bowles-Simpson Commission, the so-called fiscal commission. Eighteen of us were named to serve. It was created by the President after a legislative attempt, led by Senator Gregg of New Hampshire, a Republican, and myself, failed here. We got a majority but we didn't get a supermajority. So our attempt to form a commission legislatively was thwarted. President Obama showed leadership and named a Presidential commission in order to take on the subject, and in December of 2010 that commission reported their conclusion, with 11 of the 18 of us agreeing to the recommendations.

Here are the principles and values the fiscal commission used to guide their efforts: that it is a patriotic duty to make America better; that we shouldn't do anything that would disrupt the economic recovery; that we ought to cut and invest to promote economic growth and keep America competitive; that we ought to protect the truly disadvantaged; that we ought to cut spending we cannot afford, with no exceptions; that we ought to demand productivity and effectiveness from Washington; that we ought to reform and simplify the Tax Code; that we shouldn't make promises we can't keep; and that the problem of deficits and debt are real and the solution will be painful.

Let's be honest. When you are borrowing 40 cents of every dollar you spend, you are not going to solve this in a way that doesn't affect anyone. All of us are going to have to participate in the solution.

The last principle that was used to guide the commission was that we should do things to make America sound over the long run.

So what does the fiscal commission plan I laid out do? It puts in place $5.4 trillion in deficit reduction over 10 years, including savings that have already been enacted in the Budget Control Act.

It lowers the deficit from 7.6 percent of GDP in 2012 to 2.5 percent in 2015 and down to 1.4 percent in 2022. So because of the reductions in deficits, it stabilizes the debt and begins to bring it down. In fact, it stabilizes the gross debt by 2015 and lowers it to 93 percent of GDP by 2022.

Remember my previous slide? Here is the quiz. What did it say the debt would become by 2022 if we don't do anything as a share of GDP? It said it would become 119 percent if we didn't act. Under the proposal I laid before the Budget Committee yesterday, it would bring down the debt to 93 percent of GDP -- the gross debt to 93 percent of GDP by 2022 instead of 119 percent if we fail to act.

The plan I laid out reduces overall spending to 21.9 percent of GDP by 2022, discretionary spending to 4.8 percent of GDP by 2022, a record low -- a record low. In fact, this overall spending level is lower than the average spending level during the Reagan administration.

Our colleagues on the other side are always eager to embrace Ronald Reagan's policies. The proposal I laid out yesterday has a lower average spending as a share of our national income than did President Reagan during the entire period of his Presidency.

The plan I laid out also builds on health care reform with additional health care savings and fully funds the doc fix. What is the doc fix? That is the measure to prevent the doctors who treat Medicare patients from taking a cut of more than 20 percent.

The plan also calls for Social Security reform that ensures the 75-year solvency of Social Security, with the savings only to extend solvency, not for deficit reduction. In other words, Social Security reform, those savings are not used for deficit reduction. They are only used to extend the solvency of the program itself. The plan I laid out includes fundamental tax reform; makes the Tax Code simpler, fairer, more efficient, while raising more revenue to reduce our deficit and debt.

This chart shows the deficit as a percentage of GDP under the Fiscal Commission Budget Plan I laid before our colleagues yesterday. We can see, it takes the deficit from 7.6 percent of GDP this year -- which is down, by the way, substantially from 10 percent, which is where it has been -- down to 1.4 percent in 2022. The Fiscal Commission Budget Plan reduces the deficits below the 3-percent-of-GDP level that is considered sustainable by economists, and it does that by 2015.

Again, the gross debt under the plan I put before colleagues that comes from the fiscal commission work, the Bowles-Simpson plan that was concluded and recommended in 2010, would take the gross debt down to 93 percent of GDP from the 104 percent it is now and, as I indicated earlier, an even more dramatic improvement compared to what the debt would be if we failed to act.

As I indicated, the spending level under the Fiscal Commission Budget Plan is about 21.8 percent of GDP. During the Reagan administration, spending was 22.1 percent of GDP. So we have lower overall spending as a share of the national income than was the case during the Reagan administration. In fact, discretionary spending goes to an all-time low of 4.8 percent by the end of the 10-year plan.

We can see, discretionary spending -- that is distinct from mandatory spending. Mandatory spending are things such as Social Security and Medicare. Discretionary spending are things such as defense and national parks and law enforcement and education. We can see, discretionary spending as a share of our national income is dropping very sharply under this plan.

What is happening on the other side of the spending ledger is the 800-pound gorilla, which is health care. That is the thing that threatens to swamp the boat around here because we can see what is happening. Back in 1972 Medicare, Medicaid, and other Federal health spending was about 1 percent of our gross domestic product. If we don't take further steps by 2050, it is going to be 13 percent of our gross domestic product, from 1 percent to 13 percent. Right now in this country, 18 percent of our GDP is going to health care. One in every six dollars in our whole economy is going to health care -- more than $1 in every $6. So that is something we have to focus on like a laser, and in the fiscal commission plan, we do focus on it like a laser. It doesn't open the health care reform debate that we just concluded, but it does provide an option to phase out the tax exclusion for health care that economists tell us would be one of the most effective things we could do to change the direction of health care expenditure.

It fully offsets the cost of the so-called doc fix, so our doctors treating Medicare patients don't face this huge cut that is currently in the law. We have additional savings proposals with Medicare beneficiary cost sharing, payments to health care providers being reformed, eliminating State gaming of the Medicaid tax, and providing the Medicaid drug rebate for those who are duly eligible in Medicare. This would save hundreds of billions of dollars.

While the fiscal commission did make a recommendation on Social Security, those numbers are not included in the proposal I put before our colleagues yesterday because I am precluded from doing so by the law. The Congressional Budget Act of 1974 prohibits the inclusion of Social Security in deficit totals of a budget resolution. So I did lay out the proposal from the fiscal commission on reforming Social Security; but I could not include it in the numbers because I am precluded from doing so by the law.

Here are the recommendations from the fiscal commission that I included in my proposal to our colleagues but that are not in the numbers for the reason I have given: calls for Social Security reforms to make it solvent, not for deficit reduction; restores 75-year solvency and puts it on a stable path beyond 75 years; strengthens the safety net by enhancing the minimum benefit for low-wage workers and by giving an actual bump up in benefits for the oldest seniors and the long-time disabled. One of the things we know, people who live a long time run out of their benefits. So in the fiscal commission we proposed to actually give them a little bump up after they have been in retirement for an extended period of time.

We also provided a hardship exemption for those who are unable to work past the age of 62. One of the things we know is a person can take early retirement at age 62 -- and we are going to have to increase the retirement age of Social Security over time, over a very long time, by the way. In this proposal, we increase the retirement age to 69 over decades.

We have to increase also the maximum level of wages that are taxed for Social Security because the traditional standard is no longer being followed. We are not taxing 90 percent of wages. That doesn't mean the tax is 90 percent, by the way. It means 90 percent of wages is being subjected to the tax. What has been happening over years is we have been getting a reduced amount of taxable wages to apply the Social Security tax to. That is one of the reasons we have a shortfall over time.

Under this plan, we raise the retirement age -- but only very gradually -- reaching 69 by 2075. This is 2012. So we don't raise the retirement age to 69 until 2075. That is 63 years from now. But make no mistake, that is important because people are living longer. In fact, people are living much longer.

We also have a need for tax reform. The Tax Code is out of date, it is inefficient, and it is hurting U.S. competitiveness. The complexity imposes significant burden on individuals and businesses. The expiring provisions create uncertainty and confusion. We are hemorrhaging revenue to the tax gap, to tax havens, to abusive tax shelters.

Many times on this floor I have shown a picture of a little building down in the Cayman Islands called Ugland House. Ugland House claims to be the home to 18,000 corporations. A little 5-story building down in the Cayman Islands claims to be the home to 18,000 companies. Are all those companies doing business out of that little five-story building? No. The only business they are doing down there is monkey business, and the monkey business they are doing is ducking their taxes here and shoving the burden onto all the rest of us who pay our taxes. That is not right.

We have to go after these tax havens, these abusive tax shelters, and we can do it. We need to restore fairness. The current system is contributing to growing income inequality, and our long-term fiscal imbalance, the deficits and debt we talked about, must be addressed.

The CBO Director, Mr. Elmendorf, talked about the economic benefits of tax reform in a hearing before the Budget Committee. He said: “I think analysts would widely agree that reform of the Tax Code that broadened the base and brought down rates would be a positive force for economic growth, both in the short term and over a longer period.”

Tax reform has to be part of the agenda of this Congress. Here is what is happening to income disparity in America. Look at what is happening. The top 1 percent -- and I am all for the top 1 percent doing well. I want everyone to do well in America, but look what is happening. Since 1979, the top 1 percent, their incomes have gone up almost 300 percent. Look at what has happened to those in the middle and those at the bottom. Their incomes have stagnated. They have been about stable -- gone up a little bit but not very much. The top 1 percent has gone up like a rocket.

One of the reasons is the Tax Code of the United States has dramatically reduced for the wealthiest in our country the tax burden they shoulder. They will show us, oh, their taxes have gone way up. Sure, they have because their incomes have gone way up. What has gone down -- what has gone way down is the effective tax rate they pay. The top 400 families, the wealthiest 400 families in America, have had their effective tax rate almost cut in half since 1995.

Again, I am not one who is against success. I come from a family who has succeeded. I come from a family who has done well, and I am deeply appreciative. I am grateful for the opportunity this country has provided to my family. But do you know what. What is fair is fair. What is fair is fair. We have to ask everybody to help pull this wagon out of the ditch. We are in the ditch, and let's get serious about getting out.

If we broaden the base of our tax system, the people who will be most affected are the wealthiest among us because look what happens. Here is the increase in aftertax income, on average, from tax expenditures in this country; that is, the loopholes, the deductions, the credits, the exclusions that are in the current Tax Code. The average benefit for the top 1 percent is $219,000 a year. The middle quintile, their benefit is $3,000. If we reform tax expenditures, which we should do, that will put some additional burden on those who are the wealthiest among us.

By the way, not everybody who is doing well is treated the same way under this Tax Code. There are many people who are doing well who are paying a tax rate that is very close to the top rate of 35 percent. There are others who are paying at a level one-half as much; the same income but paying much less in taxes. Why? Because they have set up their affairs in a way that they especially benefit from the credits, the exclusions, the deductions, and all the rest of the tax gimmicks that riddle the current Tax Code.

Here is what one of the most conservative economists in the country said about reducing tax expenditures. This is Martin Feldstein, professor of economics at Harvard, Chairman of the Council of Economic Advisers under President Reagan. This is what he said about cutting tax expenditures: “Cutting tax expenditures is really the best way to reduce government spending.... [E]liminating tax expenditures does not increase marginal tax rates or reduce the reward for saving, investment or risk-taking. It would also increase overall economic efficiency by removing incentives that distort private spending decisions. And eliminating or consolidating the large number of overlapping tax-based subsidies would also greatly simplify tax filing. In short, cutting tax expenditures is not at all like other ways of raising revenue.” That, from one of the most conservative economists in the country.

Our colleagues on the other side say wait a minute, we should not have revenues more than 18 percent of gross domestic product because that is, on average, what it has been over the last 30 or 40 years. The problem with their analysis is the last five times we have balanced the budget the revenue has not been 18 percent of GDP. The last five times we have balanced the budget, revenue has been at 19.7, in 1969; 19.9, in 1998; 19.8 percent of GDP in 1999; 20.6 percent of GDP in 2000; and 19.5 percent of GDP in 2001. If people want to be serious about balancing the budget, we are going to have to have a revenue level, based on what we see historically, that is more than 18 percent of GDP.

The fiscal commission plan I laid before colleagues yesterday, the so-called Bowles-Simpson plan, does this with respect to tax reform. It eliminates or scales back those tax expenditures we were discussing but lowers tax rates. You can lower tax rates and get more money if you broaden the base, if you reduce some of these tax expenditures that frankly go disproportionately to the wealthiest among us and have grown like Topsy in the Tax Code.

We can promote economic growth and improve America's global competitiveness, we can make the Tax Code more competitive, we can have what was included in the fiscal commission, an option, a reform plan that calls for three rates for individuals: 12 percent, 22 percent, and 28 percent. The top rate now is 35 percent. A corporate rate of 28 percent. The corporate rate now is 35 percent.

The fiscal commission plan called for capital gains and dividends to be taxed as ordinary income. Instead of having a differential for capital gains and dividends, they were taxed at ordinary rates. But the fiscal commission also said if you want to have a differential, you have to pay for it by buying up the top rate. For those who believe strongly you need to have a differential for cap gains and perhaps dividends, you can do that, but then you have to have a higher top rate than 28 percent.

The fiscal commission plan reforms the mortgage interest and charitable deductions, it preserves the child tax credit and earned-income tax credit, and completely repeals the alternative minimum tax.

Under this plan, revenues grow to 20.5 percent of GDP by 2022. In fact, the revenue under the fiscal commission plan during the 10 years of the plan averages 19.7 percent. That is right at the level that has been required the last five times we have balanced the budget. That is very close to the revenue level during the Clinton administration, the last time we did balance the budget. By the way, that was a Democratic President.

Some say that is a big tax increase you are talking about, Senator. No, it is not a big tax increase. It is additional revenue of $2.4 trillion compared to roughly current policy, what is happening right now. But compared to current law it is actually a $1.8 trillion tax cut because all of the tax cuts that were put in place in the Bush administration are about to expire. So if you compare it to that law, this proposal represents a $1.8 trillion tax cut. It is more revenue than we would get under current policy but less revenue than we would get under current law.

The fiscal commission plan I laid before colleagues yesterday, the so-called Bowles-Simpson plan, also had certain process changes to tighten things up around here, to become more disciplined. It set discretionary spending caps through 2022 enforced by a 60-vote point of order and sequester; firewalls between security and nonsecurity spending so money could not be diverted between the two; a separate cap for war funding with annual limits proposed by the President; more rigorous emergency designation procedures and annual budgeting for disasters; a fail-safe to pressure Congress to maintain a stable debt-to-GDP ratio starting in 2015; more accurate inflation adjustments for indexed programs -- that is the so-called chained CPI, a more accurate measurement for inflation adjustment; and a process to ensure more reliable and timely extended unemployment insurance benefits.

I have heard from my colleagues repeatedly that the President showed no leadership. I don't believe that. I think the President showed extraordinary leadership. He averted a depression -- and make no mistake, that is where we were headed when he came into office. When he came into office here is what was happening. We were losing 800,000 jobs a month in the private sector. That is what he walked into. He did not create the conditions that led to losing 800,000 jobs a month, he inherited that.

Look at the progress that has been made. Since 24 months ago we have seen jobs in the private sector on the positive side of the ledger -- 4 million jobs created. That is after he was in a situation in which we were losing 800,000 jobs a month. In the last 4 months we have been averaging 200,000 jobs created. That is pretty good leadership. That is a dramatic turnaround.

The same is true of economic growth. When he came into office the economy was shrinking at a rate of almost 9 percent. Now it is growing at a rate of about 3 percent. That is pretty good leadership. That is a dramatic change from what he inherited.

When I hear that the President did not show leadership -- oh, yes? I would say he showed pretty good leadership. He stopped the hemorrhaging. He got us going back in the right direction. It is not everything we hoped for, but my goodness, what a remarkable turnaround. Two of the most distinguished economists in this country said if we had not taken the actions that were taken by the Federal Government at the end of the Bush administration and during this administration, we would be in a depression.

We are not in a depression. In fact we are growing. We are growing modestly but we are growing. We are creating jobs in the private sector. The private sector is growing. It added 4 million jobs since this President got things turning around. This President named the fiscal commission. There would not be a Bowles-Simpson commission had the President not appointed it. The Bowles-Simpson commission plan is what I put before our colleagues yesterday.

Some have criticized me to say: You didn't vote on it. That is right. We are not going to vote on it until we believe there is the best possible chance to actually get results. If you go back to the Bowles-Simpson commission approach, what you saw is they did not time the vote until after the 2010 election. What I am saying to colleagues is I think we ought to follow their good example. That is because the truth is, people are not likely -- all sides are unlikely to get off their fixed position right before a national election.

Let me end as I began. We have a budget for this year and next. It is contained in the Budget Control Act, a law that was passed last year. When my colleagues say there was no budget resolution passed, what they are not telling you is instead of a budget resolution, we passed a budget control law. A law is stronger than any resolution. A resolution is purely a congressional document and never goes to the President for his signature. The Budget Control Act passed the House and the Senate and was signed by the President of the United States.

It says in part: “The allocations, aggregates and levels of spending set in this act shall apply in the Senate in the same manner as for a concurrent resolution on the budget.”

What could be more clear? This law is in place of a budget resolution. It is stronger than any resolution because it is a law.

Next time somebody tells you there has been no budget resolution for 1000 days, ask them, but did they pass a law that set spending limits? That set the budget for this year and next? That set 10 years of spending caps that saved $900 billion, that gave a special committee the ability to change Social Security and Medicare and the tax system of the United States and not face a filibuster? And if they did not succeed, there would be another $1.2 trillion of cuts? And because they did not agree, that additional $1.2 trillion of cuts is now in law and will begin to be imposed at the beginning of next year?

That is a total of more than $2 trillion of spending cuts in the Budget Control Act passed by the Congress, signed by the President, and in force today. That is the biggest spending cut package in the history of the country.

If anybody suggests to you no spending limits have been put in place, ask them: What about the Budget Control Act? Didn't you vote on that? Because it passed the House. The Republican-controlled House, they passed it. It passed the Senate and it was signed by the President of the United States. It is the law. A law is stronger than any resolution.

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Chairman Conrad's Opening Statement at Markup of Fiscal Commission Budget Plan

Wed, 18 Apr 2012 02:30:00 EST

Opening Statement

Listen to audio of this statement (This is a large file and may take a minute to load)

The Markup will come to order. I want to welcome everyone to the Senate Budget Committee today. The Committee meets today to begin consideration of the Concurrent Resolution on the Budget for Fiscal Year 2013. I will have a statement. Then I will recognize the Ranking Member for his statement. Then the Chair will recognize other Members of the Committee, in seniority order, alternating between the sides, as members of different parties are available. And Members will be recognized for statements of five to seven minutes. Amendments will not be in order today. The Mark will not be before us, as is the tradition of this Committee, until the end of our opening statements today.

I did break from tradition, by providing the Ranking Member yesterday, roughly 24 hours in advance – I think it was a little less than that as it turned out – the Mark that I will be releasing later today, so that hopefully Members will have a better idea of what they are talking about with respect to their opening statements. So, we did break from tradition by giving the Ranking Member the Mark yesterday.

As I announced yesterday, I am going to lay down as my Chairman’s Mark the bipartisan Fiscal Commission plan, also known as the Bowles-Simpson plan. It is a plan which I believe represents the best blueprint from which to build a bipartisan deficit reduction agreement.

What I am proposing is not partisan. I am trying to break from ‘business as usual,’ that has gone on for too long. I am hoping that my Senate colleagues will be open to finding a path forward that can bring us together before we face the expiration of all the tax cuts from the Bush era and before we face the imposition of the sequester. The only way this can happen is if we find some way to come together. And I know it is difficult.

I want to emphasize that we already have a budget in place for this year and next. So we are in a different position than we usually are with respect to a budget resolution.

Last year, instead of a budget resolution, Congress passed the Budget Control Act, which is an actual law. It states very clearly that the Budget Control Act “shall apply in the Senate in the same manner as for a concurrent resolution on the budget” for fiscal years 2012 and 2013. So we have spending limits in place for 2012 and 2013.

The Budget Control Act also provided for 10 years of spending caps, providing $900 billion in savings over that period. And it created a Special Committee to reform Medicare and Social Security and the tax system. And the Budget Control Act said that if the Special Committee did not succeed, there would be another $1.2 trillion of spending cuts imposed at the beginning of next year, the so-called sequester.

Because the Special Committee did not reach an agreement, those additional cuts are now in the law. So a total of more than $2 trillion of spending cuts was provided by the Budget Control Act. That is the biggest package of spending cuts that I could find in the history of our country. And all of those cuts are now in law.

And a law is much stronger than a budget resolution. As all of us know here, a budget resolution is purely a Congressional document. It never goes to the President for his signature. A law, like the Budget Control Act, is passed not only in the House and Senate, but is signed by the President. So it is the law.

What we do not have is – and the reason why I think it is important that we find a way to negotiate a long-term budget agreement – is that we don’t have a long-term budget plan. That is what we must now work to achieve.

The Fiscal Commission Budget Plan, which I am presenting today, provides a comprehensive and balanced deficit reduction framework to build upon. It is not perfect, but it does represent a middle-ground. It brings the deficit down from what it would otherwise be, and it brings the debt down from what it would otherwise be. And it does so in a responsible, fair, and balanced way. It protects the most vulnerable. It phases in changes to avoid harming the economy. And it includes savings from across the budget, including from entitlement reform and from tax reform that raises revenue while lowering rates.

I recognize adjustments will have to be made to that plan, because what I am putting before the body is the original Bowles-Simpson plan. Obviously, things have happened in the last two years, for instance the Budget Control Act. So, we know adjustments will have to be made. That is going to take time. And those adjustments will have to be negotiated, and those negotiations, I think, will have to take place before we get to the end of this year when will face the expiration of all of the Bush tax cuts and the imposition of the sequester.

I intend to give Members of the Committee an extended period to evaluate my Mark. And as they review this plan, I hope to hear back from Members on how they think we can maximize our chances of successfully reaching a bipartisan agreement.

There is nothing I would want more than to reach agreement on a long-term plan right now. And it could be that outside events, such as a crisis overseas, will drive us to come together sooner than we might otherwise. I would certainly be open to reaching conclusion sooner, if that is possible. But I am a realist, and I recognize the chances of that are slim.

Many have suggested we will not be able to reach conclusion until after the election. It may be that both sides will find it difficult to move off their fixed position before a national election. I wish that weren’t the case, but it probably is the case. By we are going to have powerful motivating factors pushing us toward resolution – the expiration, as I have indicated, of all of the Bush era tax cuts and the potential imposition of the sequester.

Let’s remember that the original Fiscal Commission panel was structured to have a vote after the 2010 election. It was structured that way for a reason. Senator Gregg and I believed it was critically important to have the vote and the votes when there was the greatest prospect of actually getting a result. And we concluded the best chance right after an election.

That is what I am hoping to replicate now. By presenting the Fiscal Commission plan as a budget resolution, I would hope we could be ready with a bipartisan plan later this year. It is going to take an enormous amount of work. All those who served on the Commission, all those who served on the Special Committee, all of those who served on the Group of Six, what is now the Group of Eight, I think know, these things can not be done in a matter of weeks. The ground has to be plowed now.

We are borrowing almost 40 cents of every dollar we spend. That is the hard reality we face as we meet here today. That is not sustainable.

Gross federal debt is expected to reach 104 percent of our Gross Domestic Product this year, and then continue rising to 119 percent of GDP by 2022. Many economists regard anything above the 90 percent threshold as the danger zone. And the long-term debt outlook is even more dire.

The reality is that we face both a spending and a revenue problem. Spending is near its highest level as a share of the economy in more than 60 years. And revenue is at or near a 60 year low as a share of our national income. Both sides of the ledger, I believe, are part of the problem and will have to be part of the solution.

We also know that the American people support a balanced approach to deficit reduction. In a Pew Research Center poll conducted in November, people were asked, “What is the best way to reduce the federal budget deficit?” Seventeen percent supported cutting major programs only. Eight percent supported increasing taxes only. And 62 percent said we should do a combination of both.

The Fiscal Commission Budget Plan does just that. It cuts spending and it raises revenue through tax reform. It does exactly what the American people are asking us to do. It is the kind of plan, I believe the American people, when fully briefed on it, will support.

The Guiding Principles and Values of the plan, as they were outlined in the original Fiscal Commission Report, were as follows:

We all have a patriotic duty to make America better off tomorrow than it is today.
That we shouldn’t disrupt the fragile economic recovery.
That we should cut and invest to promote economic growth and keep America competitive.
That we should protect the truly disadvantaged.
That we should cut spending we cannot afford – no exceptions.
We should demand productivity and effectiveness from Washington.
That we should reform and simplify the tax code.
That we shouldn’t make promises we can’t keep.
That the problem is real, and the solution will be painful.
And we should keep America sound over the long run.

Here is an overview of the Fiscal Commission Budget Plan that I am putting before the body today. It includes $5.4 trillion of deficit reduction over 10 years, including savings from last year’s Budget Control Act. It lowers the deficit from 7.6 percent of GDP in 2012 to 2.5 percent in 2015 and 1.4 percent in 2022. So it takes the deficit down well below the 3 percent of GDP level that is widely viewed as sustainable. It stabilizes gross debt by 2015 and then lowers it to 93 percent of GDP by 2022 – putting debt on a clearly downward trajectory. It reduces overall spending to 21.9 percent of GDP by 2022. And it reduces discretionary spending to an historic low of 4.8 percent of GDP by 2022. It builds on health care reform, but adds additional health savings. And it fully offsets the “Doc fix,” preventing a dramatic drop in Medicare payments to physicians who treat Medicare patients. It calls for Social Security reform that ensures the 75-year sustainable solvency of Social Security. And it calls for Social Security savings to be used only to extend the program’s solvency, not for deficit reduction. Finally, it includes fundamental tax reform – tax reform that will make the tax code simpler, fairer, and more efficient, while raising additional revenue.

This next chart shows the deficit trajectory under the plan. As I noted, it brings the deficit down to 1.4 percent of GDP by the end of the decade, well below the 3 percent level that is viewed as sustainable.

It stabilizes the debt, as I indicated, by 2015, and begins to bring it down steadily after that.

Over the ten years of the plan, spending averages 21.8 percent of GDP, which is actually below the level we experienced during the Reagan Administration.

The plan brings discretionary spending – those funds appropriated by Congress each year – down from 8.4 percent of GDP in 2012 to an historic low of 4.8 percent of GDP by 2022.

But I think we all acknowledge that health care spending is the 800 pound gorilla. Although the health care reform law adopted in 2010 made progress in changing health care incentives and bending the cost curve, rising health costs remain the single largest factor contributing to the nation’s long-term fiscal imbalance.

In 1972, Medicare, Medicaid, and other federal health spending totaled 1.1 percent of GDP. By 2050, that federal health spending could grow to more than 13 percent of GDP. And we can see that Medicare represents the fastest growing portion of that spending. Of course, it is important to remember that rising health care costs are a problem in the private sector as well. This is not just a Medicare- or Medicaid-related problem.

Like the original Fiscal Commission plan, the plan I am presenting today does not re-open the health care reform debate. Instead, it builds on health care reform by providing additional health savings. It provides an option to phase out the tax exclusion for health care – a step the Congressional Budget Office has said would be one of the most significant steps we could take to bend the cost curve on health care spending. As I noted before, it fully offsets the cost of a “Doc fix. To offset these costs, it includes savings proposals, such as: Medicare beneficiary cost-sharing; reforming payments to health care providers; eliminating state gaming of the Medicaid tax; and extending the Medicaid drug rebate to “dual” eligibles in Medicare Part D.

While the Fiscal Commission Budget Plan calls for the same Social Security reforms as the original Fiscal Commission plan, it does not include in its numbers the savings from those Social Security proposals. That is because, as everyone on this Committee knows, the Congressional Budget Act of 1974 – the law that established the budget process – prohibits the inclusion of Social Security in the deficit totals of a budget resolution. So Social Security reforms will have to be considered separately.

However, the Fiscal Commission Budget Plan does include a policy statement that supports the original Fiscal Commission recommendations regarding Social Security. It calls for Social Security reform that reforms Social Security to make it solvent, not for deficit reduction. All the savings from reforming Social Security go to extending the solvency of Social Security, not for deficit reduction. It restores the 75-year solvency of Social Security and puts it on stable path beyond 75 years. It strengthens the safety net with an enhanced minimum benefit for low-wage workers, a bump up in benefits for our oldest seniors and long-time disabled, and a hardship exemption for those unable to work past 62 – all of these were part of the original Bowles- Simpson proposal, and I’ve carried them through to this proposal. It gradually increases the maximum level of wages taxed for Social Security; and raises the retirement age, but only very gradually – reaching age 69 by 2075.

With respect to the enhanced minimum benefit provision, I received a commitment during the Fiscal Commission discussions that it be better targeted to protect low-income beneficiaries. And I am committed to seeing that provision improved.

The Fiscal Commission Budget Plan also includes the kind of fundamental tax reform that was included in Bowles-Simpson. The need for tax reform could not be more clear. The state of the tax code is simply indefensible. It is out of date, inefficient, and hurting the competitive position of our country. As everyone who has been filing taxes in recent days knows, the complexity of the tax code imposes a significant burden on those required to file returns. Expiring provisions create uncertainty and confusion. The tax code is also hemorrhaging revenue from the tax gap, tax havens, and abusive tax shelters. We also need to restore fairness to the tax code. The current system is contributing to the growing income inequality in the country. And finally, we need tax reform to help address the long-term fiscal imbalance. Revenue is part of the problem and must be part of the solution.

Adopting comprehensive tax reform will spur economic growth and allow us to compete better in the global marketplace. Here is how our CBO Director, Mr. Elmendorf, described the economic benefit of tax reform in his testimony before this Committee. And I quote him: “I think analysts would widely agree that reform of the tax code that broadened the base and brought down rates would be a positive force for economic growth, both in the short term and over a longer period.”

Tax reform can also help address the growing income inequality in the country. In recent years, we have seen that gap grow. Since 1979, the real after-tax household income for the top one percent has grown about 275 percent. Over the same time period, the income for the middle quintile has grown about 35 percent.

Our tax system, I believe, is contributing to this income inequality. It is not the only factor, there are many others, globalization and others. But I think we have to acknowledge, the tax system is part of it. Tax expenditures – the countless preferences, credits, deductions, and exclusions that have been added to the code over the years – are disproportionately benefitting those at the very top.

In 2011, the top one percent of taxpayers received an increase in after-tax income of almost $220,000 from tax expenditures. In comparison, the middle quintile received about $3,200 from tax expenditures.

By scaling back some tax expenditures – and by the way, tax expenditures are now more than all of the appropriated accounts – by scaling some of them back we can simplify the tax code, vastly improve the economy’s efficiency and competitiveness, and help restore fairness.

Here is how conservative economist Martin Feldstein, Chairman of the Council of Economic Advisers under President Reagan, described the benefit of reducing tax expenditures in an oped in the Wall Street Journal. And I quote from Martin Feldstein: “Cutting tax expenditures is really the best way to reduce government spending....” Let me just repeat that. “Cutting tax expenditures is really the best way to reduce government spending.... [E]liminating tax expenditures does not increase marginal tax rates or reduce the reward for saving, investment or risk-taking. It would also increase overall economic efficiency by removing incentives that distort private spending decisions. And eliminating or consolidating the large number of overlapping tax-based subsidies would also greatly simplify tax filing. In short, cutting tax expenditures is not at all like other ways of raising revenue.”

We also know that we need more revenue. Some of my Republican colleagues have argued that revenue should not exceed 18 percent of GDP, the average over the last several decades. But on the five occasions when the budget was in surplus since 1969, revenues have ranged between 19.5 percent and 20.6 percent of GDP. And we will likely need an somewhat higher revenue level in the future, because the country faces an unprecedented demographic situation with the retirement of the baby boom generation.

The Fiscal Commission Budget Plan includes the kind of fundamental tax reform that I believe needs to be adopted. It eliminates or scales back tax expenditures, and lowers tax rates. It promotes economic growth and improves America’s global competitiveness. It makes the tax code more progressive.

Notably, the Commission’s report included an “illustrative” tax reform plan that demonstrates how eliminating or scaling back tax expenditures can simplify the code while lowering rates. Instead of six brackets, it includes just three – 12 percent, 22 percent, and 28 percent. The corporate rate would also be reduced from 35 percent to 28 percent. Capital gains and dividends would be taxed as ordinary income. That is part of the original Bowles-Simpson plan. Although a differential could be maintained if it were bought up with a higher top rate. The mortgage interest and charitable deductions would be reformed, better targeting these tax benefits. The Child Tax Credit and Earned Income Tax Credit would be preserved to help working families. And the Alternative Minimum Tax would be repealed.

Overall, the Fiscal Commission Budget Plan would increase revenue to 20.5 percent of GDP by 2022.

Over the ten years, revenue under the plan would average 19.7 percent of GDP, roughly the same level seen during the Clinton Administration, when we experienced the longest period of uninterrupted economic growth in the nation’s history, and 24 million jobs were created.

In dollar terms, compared to the alternative baseline provided in the plan, it includes $2.4 trillion in new revenue over the ten years. Compared to a current law baseline, it represents a $1.8 trillion tax cut. So, compared to the alternative baseline, it represents an increase in revenue of $2.4 trillion. Compared to current law, it represents a tax cut of $1.8 trillion.

Like the original Fiscal Commission proposal, the plan includes a number of process changes to improve budget procedures and help enforce fiscal discipline. These include: discretionary spending caps through 2022 enforced by a 60-vote point of order and sequester; firewalls between Security and Non-Security funding through 2015; a separate cap for war funding with annual limits proposed by the President; a more rigorous emergency designation procedure and annual budgeting for disasters. Let me just say with respect to a more rigorous emergency designation procedure, Senator Crapo has done an enormous amount of work on trying to close down the emergency designation loophole that has been so abused in the past. Some of those provisions are provided here; all of which were in Bowles-Simpson. A failsafe to pressure Congress to maintain a stable debt-to- GDP ratio starting in 2015; more accurate inflation adjustments for indexed programs; and a process to ensure more reliable and timely extended unemployment benefits.

So that is the plan. It is comprehensive. It is balanced. It is fair. And it represents the best blueprint we have from which to build a bipartisan agreement.

But I recognize it is not perfect. And I recognize adjustments will have to be made before anything like this can hope to be adopted. Those adjustments will have to be negotiated, and those negotiations will take time. Those of us who were involved in the Commission certainly know that.

I intend to give Members time to evaluate my Chairman’s Mark. And then I hope to hear back on how you think we can best maximize our chance of getting a result. How can we best maximize the chance of actually getting a result?

We are facing a fiscal train wreck at the end of this year. The expiration of all of the Bush era tax cuts, the sequester. I don’t think anybody thinks that would be a good place to go.

It is time to move off of our fixed positions. I understand that is probably unlikely right before an election, but before the end of the year, we are going to have to find a way to come together.

This Fiscal Commission Budget Plan represents, I believe, a blueprint to begin that conversation.

Additional Remarks

Listen to audio of these remarks (This is a large file and may take a minute to load)

I thank all of my colleagues today.

Let me indicate my own view, because everyone else has expressed themselves on this question. When I hear colleagues say there’s been no budget put in place for 1,000 days, I just don’t think that is correct. I really don’t.

We passed last year the Budget Control Act. The Budget Control Act is not a resolution. The Budget Control Act is a law.

A resolution is purely a Congressional document. It never goes to the President for his signature. The Budget Control Act passed both Houses of the Congress and went to the President for his signature.

The Budget Control Act not only set the budget for this year and next. And I just read the language from the Budget Control Act: “...the allocations, aggregates and levels...shall apply in the Senate in the same manner as for a concurrent resolution on the budget for fiscal year 2012.”

That exact same language is repeated in the next paragraph for 2013. The Budget Control Act law “shall apply in the Senate in the same manner as for a concurrent resolution on the budget.”

To suggest we have not put in place spending limits or spending restraint, I think is misleading to people who are listening. I believe it is very clear in the Budget Control Act that we passed a law that put in place spending limits, not only for two years, but quite extraordinarily, spending caps for 10 years. I have been here 26 years. I have never seen a budget resolution put in place spending caps for more than three years. The Budget Control Act put in place spending caps for 10 years.

In addition, the Budget Control Act created a Special Committee with the obligation to come up with a plan for reforming Social Security, Medicare and the tax system, and told them if you are able to agree, you will be able to bring that proposal to the floor of the Senate and not face a filibuster, be able to pass reforms to those programs on a simple majority vote. And it further said if you can’t agree, there will have to be an additional $1.2 trillion of cuts put in place in the so-called sequester.

Because the Special Committee did not agree, the $900 billion of savings under the Budget Control Act are law, as are the additional $1.2 trillion of spending cuts created by the fact that the Special Committee could not agree on reforming Medicare, Social Security and our tax system. That is a total package of over $2 trillion of spending cuts. That is more than any package of spending cuts or spending restraint in the history of our country.

Where I do agree is that we don’t have a long-term plan. We do have a budget for this year, and next. Spending restrictions in place for those two years. But what we don’t have is a long-term plan. That’s why I spent a lot of time trying to figure out what I would take before this Committee.

At the end of the day, I decided to do what I deeply believe. And I deeply believe Bowles-Simpson, however imperfect it is, and there are lots of things there that I strenuously disagree with. I told my staff, I’ll never forget the morning of the vote on Bowles-Simpson, the only thing worse than being for this is being against it. Because at least it gets our debt under control and begins to bring it down. And it does it in some kind of balanced way. I would be the first to acknowledge we have got to make adjustments to it, because things have happened in the interval.

I would say this also to you, and I say this with sincerity. I don’t believe that this is going to get resolved, I don’t believe that all parties are going to get out of their fixed positions, before an election. I wish we could. I wish we would. I don’t see any evidence in my 26 years that that is going to happen.

In fact, budget resolutions have not been done for a decade – no matter who was in charge of the Senate – in an election year. The only time it has happened was when I last became Chairman – in 2008, I was able to get, in an election year, a budget resolution. That’s one reason I insisted that in the Budget Control Act we did put in place spending limitations for the next two years, and the enforcement mechanisms, and spending caps for the next 10.

I tell you I believe as deeply as anybody in this Committee that we have got an obligation and a responsibility – Senator Johnson, you said it well, a responsibility, a deep responsibility – to get this country back on track. I am willing to work with anyone in these coming months to figure out what adjustments would need to be made to the Mark I have laid down. I will dedicate myself to trying to find a way to come together so at the end of this year, before we face the expiration of all the tax cuts that are in place, and before we face the sequester that I do believe would cut too much on national defense, that we find an alternative. I am absolutely committed to trying.

With that, the Committee will stand in recess. We’ll distribute the Mark. I thank all Members for participating.

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Materials:

Charts used in the description of the Fiscal Commission Budget Plan

Chairman Conrad's Floor Speech on FY 2013 Spending Levels and the Budget Control Act

Tue, 20 Mar 2012 04:30:00 EST

Related Materials

Chart Used During Speech

Transcript

Mr. President, the Budget Control Act of 2011, which was signed into law by the President last August, set in place budget enforcement measures in the Senate for budget years 2012 and 2013, as well as established caps for 10 years to address discretionary spending and established the so-called supercommittee to address entitlement spending and revenues.

Specifically, to provide continued enforcement in the Senate for 2012 and budget year 2013, section 106(b)(2) requires the chairman of the Budget Committee to file not later than April 15, 2012: (1) allocations for fiscal years 2012 and 2013 for the Committee on Appropriations; (2) allocations for fiscal years 2012, 2013, 2013 through 2017, and 2013 through 2022 for committees other than the Committee on Appropriations; (3) aggregate spending levels for fiscal years 2012 and 2013; (4) aggregate revenue levels for fiscal years 2012, 2013, 2013 through 2017, and 2013 through 2022; and (5) aggregate levels of outlays and revenue for fiscal years 2012, 2013, 2013 through 2017, and 2013 through 2022 for Social Security.

In the case of the Committee on Appropriations, the allocations for 2012 and 2013 shall be set consistent with the discretionary spending limits set forth in the Budget Control Act. Consequently, the initial allocation matches the discretionary levels set in the Budget Control Act and will be revised to reflect adjustments to those levels as authorized by the Budget Control Act.

In the case of allocations for committees other than the Committee on Appropriations and the revenue and Social Security aggregates, the levels shall be set consistent with the Congressional Budget Office's March 2012 baseline. In the case of the spending aggregates for 2012 and 2013, the levels shall be set consistent with the Congressional Budget Office's March 2012 baseline and the discretionary spending limits set forth in the Budget Control Act.

In addition, section 106(c)(2) requires the chairman of the Budget Committee to reset the Senate pay-as-you-go scorecard to zero for all fiscal years and to notify the Senate of this action.

Mr. President, I wish to inform my colleagues that this morning I filed the budget deeming resolution for 2013 pursuant to the Budget Control Act passed last year. This resolution sets forth the spending limits for fiscal year 2013 at the levels agreed to by Democrats and Republicans in last summer's Budget Control Act. It allows the appropriations committees to now proceed with their work in drafting bills for next year, and it ensures the Senate will have the tools to enforce the spending limits we agreed to on a bipartisan basis.

I want to emphasize for my colleagues that we do have a budget. Those who continue to claim we do not have a budget are either unaware of what they voted on last year or are seeking to deliberately mislead the public. The Budget Control Act was passed by the House of Representatives, it was passed by the Senate, and signed into law by the President. It is the law of the land, and it established the key components of the budget for 2012 and 2013.

Here is the language from the Budget Control Act itself. It is very clear the Budget Control Act is intended to serve as the budget for 2012 and 2013. It states:

For the purpose of enforcing the Congressional Budget Act of 1974 through April 15, 2012 ..... the allocations, aggregates, and levels set in subsection (b)(1) shall apply in the Senate in the same manner as for a concurrent resolution on the budget for fiscal year 2012.

It goes on to use that exact same language for fiscal year 2013.

In many ways, the Budget Control Act was even more extensive than a traditional budget. It has the force of law, unlike a budget resolution that is not signed by the President. I think most Members here know a budget resolution is purely a congressional document. The Budget Control Act is actually the law.

No. 2, the Budget Control Act set discretionary spending caps for 10 years instead of the 1 year normally set in a budget resolution.

No. 3, it provided enforcement mechanisms, including 2 years of deeming resolutions which allow budget points of order to be enforced. And No. 4, it created a reconciliation-like supercommittee process to address entitlement and tax reforms, and it backed up that process with a $1.2 trillion sequester.

So these claims that we do not have a budget can now be put to rest. By filing the deeming resolution provided for in the Budget Control Act this morning, the budget levels have been set for next year.

Last week, we received CBO's updated budget estimates, which allowed me to complete work on the budget deeming resolution for 2013. The filing of this deeming resolution was required under the Budget Control Act. I filed a similar resolution for 2012 back in September. The Budget Control Act is crystal clear that the spending limits in the resolution should be set at the levels agreed to in the Budget Control Act.

Again, here is the language taken directly from the law. It states:

Not later than April 15, 2012, the Chairman of the Committee on the Budget shall file ..... for the Committee on Appropriations, committee allocations for fiscal years 2012 and 2013 consistent with the discretionary spending limits set forth in this Act.

It doesn't say at a level below the limits set forth in this Act, it says at a level consistent with the limits set forth in this Act.

Let's remember what these limits mean. Under the Budget Control Act spending caps, discretionary spending is cut by about $900 billion below the CBO baseline over the next 10 years, and that is not including the sequester cuts. That is just the results of the Budget Control Act spending limits.

Let me make clear, our House Republican friends now seem to be walking away from these levels, even though they agreed to them last year. Let's look at what they said last summer. Here is what House Budget Committee Chairman Ryan said on the House floor on August 1:

What the Budget Control Act has done is it has brought our two parties together. So I would just like to reflect for a moment that we have a bipartisan compromise here. That doesn't happen all that often around here; so I think that's worth noting. That's a good thing. And what are we doing? We are actually cutting spending while we do this. That's cultural. That's significant. That's a big step in the right direction. We are getting two-thirds of the cuts we wanted in our budget, and, as far as I am concerned, 66 percent in the right direction is a whole lot better than going in the wrong direction.

So last summer our House Republican colleagues were pleased to be getting 66 percent of what they wanted. They made an agreement. They shook on it. They ought to keep the agreement they made.

It seems that our House Republican friends are on their own, because at least so far the Senate Republican leadership has agreed we should keep to the spending limits we took on last year. Here is what Senate Minority Leader McConnell said on the floor last month:

We have negotiated the top line for the discretionary spending for this coming fiscal year. ..... We already have that number. ..... There is no good reason for this institution not to move forward with an appropriations process that avoids what we have done so frequently under both parties for years and years: either continuing resolutions or omnibus appropriations. ..... I hope we can join together and do the basic work of government this year and do it in a timely fashion.

I hope so too. I hope our House Republican colleagues are listening. We still must come together on a budget plan that addresses the long-term fiscal imbalances we confront, but the short-term budget is in place and it is in law. It was included in the Budget Control Act that everyone agreed to last summer. It provided for about $900 billion in discretionary spending cuts.

The Senate is now poised to proceed with its business. I have filed the budget deeming resolution for 2013, and we will be moving forward with appropriations bills at the levels we all agreed to. I believe House Republicans should do the same. If they fail to do so, they will once again threaten to shut down the government and needlessly imperil the economic recovery.

Mr. President, I thank my colleagues for this time, and I yield the floor.