Kent Conrad

Mr. CONRAD

Mr. CONRAD. After that, we will then probably close down the shop. We do not have any other speakers on our side, I say to my colleague.

Mr. CONRAD. I would be happy to.

Mr. CONRAD. Mr. President, I agree with much of what the Senator from Utah has indicated. There are basic fundamentals to the functioning of our economy. Right at the heart of the determination of how successful we are as an economy and the role the Federal Government plays is first on the monetary side with the Federal Reserve Board and on the fiscal policy side what we do with our spending and taxing decisions. The problem I have with the President's budget and the budget offered by the majority is it contemplates deep additions to the debt even at a time of economic strength leading into the retirement of the baby boom generation which will explode the cost of the Federal Government. When we overlay that with the President's tax proposals, it explodes the cost of revenue lost to the Federal Government at the very time the baby boomers retire, taking us right over a fiscal cliff. Those are not just my views. Those are the views of many who have studied the President's plan. That is why we have the Comptroller General of the United States warning us we are heading in a direction that is unsustainable. That is why we have the head of the Federal Reserve Board saying to us we are overcommitted and tough choices are going to have to be made. That is why responsible budget group after budget group has said to us you are overcommitted. You have massive deficits--the biggest we have ever had in dollar terms--and you are headed for even more trouble in the future.

Mr. CONRAD. Every single time I have heard our friends on the other side claim the Democratic amendments to the Budget Resolution would have increased the deficit, it is absolutely false. Go back and read the amendments. The deficits would have been reduced under our amendments because we provided fully the offsets for each of those amendments. We can go down the list. In fact, I had an amendment to fund IDEA and completely paid for it. Senator Lautenberg had an amendment restoring the defense cuts. Members will recall, there were defense cuts last year. Senator Lautenberg fully funded defense and provided the money to do so. On homeland security, there were increases offered to better protect the country. It was fully paid for, plus an amount for deficit reduction. Every single amendment was fully paid for. Accumulate the totals, it is $687 billion of deficit reduction. Our friends on the other side talked about the record on deficit reduction. I am glad he did because here is what has happened to the deficits over time. We can see on this chart going back to 1969, the last time we had record deficits was in the administration of the previous President Bush. President Clinton came in 1992, and we can see the deficit went down each and every year until we were back in surplus. It was only when this new Republican President took office that we again went back into deficits and now have gone into record deficit territory, the biggest deficits in the history of the country. Here is what has happened to Federal spending. The Senator from Idaho wants to posture this as a question of spending, who is responsible for spending, and that spending is the reason we have deficits. No, we have deficits because we spend more than our income. Deficits are a function of spending and revenue, not just a factor of spending but a question of spending, the relationship between spending and revenue. This chart shows going back to 1981 spending as a share of our gross domestic product. Go to 1992 when a Democrat took control, and what happened to spending as a share of our gross domestic product? Spending went down each and every year from about 22 percent of gross domestic production to 18 percent of gross domestic production. Spending has now gone back up with our friends on the other side in charge of the White House. And I don't fault them for the increases; 91 percent of the increases in spending were for defense, homeland security, and responding to the attack on September 11. We all supported that increase in spending, as well we should have. We had to defend this country. However, I remind my colleagues, when Democrats were in charge in 1993, we put in place a 5-year deficit reduction plan without a single Republican vote, and we reduced spending each and every year of that 5- year plan. In 1997, we had a bipartisan plan. Thankfully, that was a nice moment in time. We had a bipartisan agreement. We continued to take spending down. Spending has now bumped up because of what has happened. Let's look on the revenue side. On the revenue side, again, President Clinton came in and revenue went up. It was that combination of spending going down under the Democratic plan, and revenue going up that got us back into balance, and stopping the use of Social Security for other purposes. That is the Democratic record on spending and revenue. We lowered spending. We raised revenue so that we balanced the budget, and stopped the raid on Social Security. Our friends on the other side have raised spending--and I don't fault them for that because it had to be done to respond to the attack on this country--but they also dramatically cut revenue. Here is what has happened to revenue. It has been shredded. We will have the lowest revenue this year as a percentage of GDP since 1950. It is that combination of increased spending and reduced revenue that has mushroomed the deficits. Let's be honest. I don't think the deficits we are facing at the moment are the basis for our strongest criticism of the President's proposals. Anyone who is honest would acknowledge once we had been attacked, once we had to increase defense spending, increase homeland security spending, the economy took a hit, we would expect budget deficits. Our criticism of the President and his preliminary is that he is suggesting deficits from now forward as far as the eye can see. He never wants to balance the spending and the revenue. Oh, he wants to keep the spending going. They say he is going to restrain spending. Please, the spending he is restraining in his budget is 17 percent of Federal spending. He is going to save about $7 or $8 billion when the operating deficit, this year, is $700 billion. That is a 1-percent solution the President has come with. He is solving 1 percent of the problem. Now, let's get serious. Let's be direct and honest with people. Talking about that restraining spending is going to solve the problem, and you come in here and save $7 billion, when you have a $700 billion problem, and suggesting you are solving the problem? That is not real. That is not serious. That is not credible. That does not stack up. What the President is proposing is increasing spending and cutting revenue, when we already have record budget deficits. And what does it do? It balloons the deficits and the debt at the worst possible time, right before the baby boomers retire. That is the President's plan: to put us deeper and deeper into the deficit ditch, to take every penny of Social Security surplus over the next 10 years--$2.4 trillion--every penny of which has to be paid back. The President has no plan to do it. The President says he is cutting the deficit in half over the next 5 years? The only way he is cutting the deficit in half is if he leaves out things, he leaves out that there is a war going on. He says there is no war cost past September 30. That is what his budget says: zero to fund this war past September 30; nothing for Iraq, nothing for Afghanistan, nothing for the war on terror. He says he is going to fully and aggressively prosecute the war on terror, but he has no money to do it. Zero is not the right answer. That is what is in the President's budget to fight the war in Iraq, to fight the war in Afghanistan, to fight the war on terror. The President has a big goose egg past September 30 of this year. And tax cuts? The President says: Do not worry. Do not worry, my budget will cut the deficit in half over the next 5 years. What he does not tell people is, beyond the 5-year window, the cost of his tax cuts explode. He also leaves out the alternative minimum tax. It affects 3 million people now, the old millionaire's tax that is now becoming a middle- class tax trap. The President deals with that crisis for 1 year, does nothing for the next 4 years--a problem that is growing geometrically. It is going to affect 40 million people by the end of this budget period. The President does nothing past the first year. The President's budget adds $3 trillion to the national debt in the next 5 years. This is the President who told us he was going to have maximum paydown of the debt, and he is increasing the debt by $3 trillion over just the next 5 years, and all of it at the worst possible time--right before the baby boomers retire. I have shown chart after chart today showing the long-term implications of the President's plan. The long-term implications are to dig this deficit hole deeper and deeper and deeper as you go out into future years. The cost of his tax cuts explode at the very time the trust funds of Social Security and Medicare go cash negative. He is putting us in a situation that will require the most agonizing of decisions in the future. No, our chief complaint against the President's budget is not the deficits being run now, although they are of record proportion. Our chief criticism of the President's budget is he has us on a course to balloon the deficits and the debt in future years, right before the baby boomers retire, compelling a future Congress and future President to make tough choices. On the question of the tax choices the President has made, when I hear it said, ``Oh, really, the wealthy in the country are paying more,'' please, the wealthy in the country are paying more? I do not know how anybody can stand on the floor of the Senate and seriously assert the wealthy are paying more. I have just shown that those earning over $1 million a year, under the President's proposal, in 2006, are going to get a $140,000 tax cut, on average, in that year. The wealthy are paying more? Who are we kidding? In 2005, the top 1 percent, those earning over $337,000, are going to get a $45 billion tax cut. That is the cost of the tax cut going to the wealthiest 1 percent. The cost of the tax cut for those earning over $1 million a year, in 2005, is $27 billion. The President chose a set of tax policies that overwhelmingly go to the wealthiest among us. I put up a chart earlier that showed the top 1 percent--those earning over $337,000--get 33 percent of the benefit of the tax cut in 2005--33 percent, the top 1 percent. The President said this is all to get the economy moving. Look, I believe it was important to have tax reductions to get the economy moving. Of course, it is not just the tax reductions, it is also the spending. About half the stimulus in the last 3 years has been spending; about half of it has been tax cuts. Both of those were warranted. The problem is, the tax cut mix the President chose did not give us the biggest bang for the buck at creating jobs or growing the economy. And that is not just my view, that is the Congressional Budget Office's view. They were asked to look at all of the tax cut proposals and tell us what kind of bang for the buck you would get. Interestingly enough, the tax cut on personal capital gains, they said, would give you a small bang for the buck--small--yet that was singled out as one of the important areas for tax reduction. The same is true on the dividend tax reduction that our colleague mentioned. He said that was a centerpiece. Well, it was a centerpiece in terms of what it cost. It was not a centerpiece in terms of what most economists would tell you is bang for the buck at getting economic growth and job creation. I believe that is a fundamental reason we are in the circumstance of today. Yes, we should have stimulated the economy. Yes, we should have had tax cuts. Yes, we should have had increased Government spending to give a lift to the economy. But the tax cuts should have been geared to primarily the middle class. They are the folks who spend the money. Instead, this tax cut proposal has gone primarily to the wealthiest among us, those who are the most likely to save the money rather than spend it. However laudatory it is to save money, the thing that stimulates the economy, at least in the short term, is to spend it. This is a bad set of choices. In addition to that, going forward, the President's proposal will dig us into a deeper and deeper deficit ditch, creating a circumstance, when the baby boomers start to retire, that will become more and more difficult and require tough choices. What is going to be needed is not just tax increases, no. We need more revenue. The first place we ought to look is not tax increases but closing the tax gap, the difference between what people owe and what they pay because we know the vast majority of people pay what they owe. But we have a small group of people and companies who do not. We now know that is costing us $255 billion a year. That is not a tax cut. That is somebody cheating on their taxes, cheating all the rest of us, cheating the ability of this country to meet its requirements of national defense and homeland security. That is the first place we ought to go to begin to close this gap. Yes, we are going to have to be tough on the spending side, too. It is going to take both. We are going to have to restrain the growth of spending, and we are going to have to get more revenue. It is as clear as it can be. Anybody who tells you something other than that is not being straight. I hope before we are done we will have a healthy debate on the priorities of the country. I believe one of our top priorities is to get our fiscal house in order. Now that we have economic recovery underway, we have to move back to fiscal balance. We have to reduce these deficits that are at record levels, and not just by make believe. The President says he is cutting the deficit in half in the next 5 years. He says the deficit is only going to be $237 billion in that fifth year. But when we total up the things we know are going to be the costs, including the war and fixing the alternative minimum tax and the money that he is taking from Social Security and Medicare that has to be paid back, what we see in that fifth year is not $237 billion being added to the national debt; it is $600 billion. It is $600 billion the next year and $600 billion the next year and $600 billion the next year. What we see happening is, right before the baby boomers retire, an explosion of the national debt under this President's plan. That cannot be the answer. I yield the floor.

Mr. CONRAD. Mr. President, my colleague keeps referring to pet projects. We on our side do not believe it is a pet project to educate the children of this country. We on our side do not believe putting cops on the street is a pet project. We do not believe funding our firefighters is a pet project. But I am very glad the Senator has talked about the record on debt. Here is the Republican record on debt. When the President took office, the projection for the publicly held debt was $36 billion. In the President's 2002 budget, that increased to $1.2 trillion. After his tax cut passed, that increased to $1.6 trillion. In the President's 2003 budget, the debt went up to $3.3 trillion. In the President's 2004 budget, it went up to $5 trillion; with the Senate GOP budget for next year, $5.5 trillion. If our friends want to have a debate about who is responsible for the growth of the debt, it is squarely on their shoulders. Their budgets have passed. They have shredded this deficit and debt. They can say they are interested in fiscal responsibility. They have not walked the walk and they have not voted the votes. I wish our colleague had not had to leave because he has come back with this old canard that I heard again in the committee saying that we offered amendments that added to the debt last year, or would have if only the Republicans had not defeated them. The problem with that argument is it is not true. Here is what happened. Democratic amendments on the Budget Resolution were all paid for last year, and more than paid for, so that we would actually reduce the deficits, reduce the growth of debt. If you took all of the amendments we offered, they did not increase the deficit. No, no. Let's go to the record. What actually happened? Our amendments on the Budget Resolution would have reduced the deficit by $687 billion. I am so glad the Senator brought this up because I have a list of every Democratic amendment to the Budget Resolution, that I will print in the Record, offered last year, what the cost was, and what the offset was. If any Member wants the opportunity to go back and check the record, here is their chance. What they will find is on every amendment, Democrats paid for their amendments, and Democrats also included deficit reduction. At the end of the day, if all of our amendments would have been adopted, we would have reduced the deficit by $687 billion. In addition, our friends on the other side are trying to rewrite history. They are trying to act as though our amendments last year were a package. They were not a package. They also want to act as though they were amendments for 10 years. Half of them were not. Half of them were 1-year amendments. In each and every case, we not only paid for our amendments on the Budget Resolution, we had additional deficit reduction. For example, Senator Biden offered an amendment to fund the COPS Program, $1 billion in cost, and he provided $2 billion of offset. He paid for the amendment, plus he provided $1 billion of deficit reduction. I ask unanimous consent to have this printed in the Record so hopefully our colleagues will not keep repeating these false claims they have made in the past.

Mr. CONRAD. The top 1 percent earns over $337,000. That costs $45 billion. But he does not have the money, he says, to fund No Child Left Behind.

Mr. CONRAD. As part of my presentation earlier, I showed this tradeoff very directly. If we look at 2005, the cost of the tax cuts for those who are in the top 1 percent, those who earn over $337,000 a year, for the 1 year it is $45 billion. The amount the President is shorting No Child Left Behind for that same year is $9 billion. In fact, this is the chart. Ask and ye shall receive. This kind of reveals the President's priorities. Mr. President, $45 billion is the cost of the Bush tax cut for those making over $337,000 in 2005.

Mr. CONRAD. Will the Senator yield?

Mr. CONRAD. The chart says ``smallest share of the population at work since 1994.'' That is really stunning. My colleague, the chairman of the committee, talked about having more people at work than ever before. That is one way of looking at it. Another way of looking at it is, what is the share of our population at work. Of course, more people are at work; we have a much larger population than we have had before but jobs have not grown. If you look at the percentage of the people who are at work, we are at the lowest we have been in 10 years--the smallest share of the population at work since 1994. I have another chart that shows the duration of unemployment, which is the highest in over 20 years. That is, when people become unemployed, they are taking the longest they have taken in 20 years to find a new job. Something is not right here. Anybody who comes out on the floor and asserts everything is fine, the economy is growing, jobs are being produced--no, no, no, things are not fine. There is something very seriously wrong in this recovery. I just had a gentleman, I said on the floor earlier, in business who told me, ``Senator, there is something very different from what we have seen in different recoveries.'' He is in the machine tool business. He said, ``We should see our order books filling up, and they are not.'' He said, ``I suspect that the jobs being created are in China, Mexico, and India, and not here.'' That goes right to the heart of the point the Senator was making.

Mr. CONRAD. I was reading the New Yorker magazine last night and they had two guys talking. One said: I have quit looking for work; I understand that will help the economy. Well, it will help the economy because they quit counting him. That is the point the Senator is making. The Senator wasn't on the floor when I showed this chart. I would like the Senator to see this because it really makes a point he is making. This looks at the last nine recessions since World War II, what happened in terms of job production. The Senator was making the point we are now 35 months into this recession, and that is right here, this line, which shows the job recovery this time compared to the last 9 recessions. You can see, in every recession since World War II, 17 months after the peak of the business cycle, job recovery started in a very healthy way. This time, it has not happened. We are 35, 36 months past the peak of the business cycle. Now we see we are 5.4 million jobs short of the typical recovery. If that isn't a warning sign to all of us that something is wrong here, something is not working here--after every recession since World War II we saw a healthy job recovery beginning 17 months after the business cycle peak. Now we are at 36, 37 months past the business cycle peak and we still are not seeing job recovery.

Mr. CONRAD. Will the Senator yield on that point?

Mr. CONRAD. The tax cut for that year alone, 2006. Under the President's plan, the tax cut for those earning over $1 million a year is $140,000. The average middle-class individuals, those who are in the middle 20 percent of the income spectrum--you break it down into five 20-percent groupings--the middle 20 percent, they get about $560 of tax benefit in that year. The person earning over $1 million gets $140,000. If you were going to put it on a graph and have the two related--the tax cut for those in the middle 20 percent and those earning over $1 million a year--the chart would have to be 35 feet tall to make a comparison between what the wealthiest get and what the middle class get. Maybe that is part of the reason this JOBS program is not working, because it has been so tilted to the highest end that we are not getting money into the hands of middle-income people who would be more likely to spend it, thereby spurring the economy.

Mr. CONRAD. I was looking at this same data, looking at the President's claim that they are going to create 2.6 million new jobs, and looking at where we are since they made that prediction. It is quite stunning. In February, of these new jobs that were created, some 20,000, as the Senator indicated, not a single one was in the private sector, not one. The whole assertion by the President, on his tax cut plans, has been, if you cut these taxes, you will get more jobs. He was not saying more jobs in Government; he was saying more jobs in the private sector. Yet the only new jobs we got in February were in Government. They were Government jobs. There was not a single new job in the private sector. So if the President's plan is working, I do not see the evidence for it. The evidence is, it is failing, and it is failing by a big margin. I believe one of the reasons maybe it is failing is that the tax cuts he chose were tax cuts that were geared to the highest income people, overwhelmingly. The Senator might be interested to know, I put up a chart that showed, for 2006, the average tax cut going to somebody earning over $1 million a year is $140,000.

Mr. CONRAD. Will the Senator yield on that point?

Mr. CONRAD. Yes. If you look at this chart, it goes back to the point the Senator was making about choices. This is all about choices. The choices the President has made are, yes, to have tax cuts in a time of economic weakness. That we could all understand and even support. We would choose a different package of tax relief than he chose. We would have targeted, clearly, more to the middle class because that would have given us more of an economic boost than diverting so much of it to the highest income in the country. However, the President is digging a very deep hole. More and more debt. More and more deficits. Deficits that explode right beyond the budget window, right at the time the baby boom generation retires. What happens? A future Congress and a future administration will have to make very tough choices, which I outlined earlier in my presentation. Very deep cuts in spending, very large tax increases, or some combination to fill in these holes. That is where I fault the President for taking us on a course that is reckless and fundamentally not conservative. This is a course that is reckless. The Senator is right, we are talking about choices. These are the choices that are made in the budget.

Mr. CONRAD. That is those earning over $1 million.

Mr. CONRAD. I am happy to yield.

Mr. CONRAD. Chairman Greenspan now says we have to cut these benefits because we are overcommitted, because we have, in part, taken the money, the President has taken the money under his plan from Social Security to finance income tax cuts that have gone overwhelmingly to the wealthiest of the people among us. That is the reality we confront. Interestingly enough, they say, you have the shortfall in Social Security which is $3.8 trillion over the next 75 years. That is absolutely true. We have a shortfall in Social Security of $3.8 trillion over 75 years. Interestingly enough, the cost of the President's tax cuts over that same period is three times as much: $12.1 trillion.

Mr. CONRAD. Yes. I knew we were going to get into this debate at some point so I asked my staff to see if we could put together some charts and try to explain what is happening. It is the part of this discussion that has received almost no attention, and the Senator is exactly right. Here is what is happening. We have a dramatic increase in people eligible for Social Security. This chart shows the number of Social Security beneficiaries exploding with retirement of the baby boom generation. This is the increase in people eligible. We will see in short order a doubling of the people eligible for Social Security. The President told us repeatedly: None of the Social Security surplus will be used to fund other spending initiatives or tax relief. He broke that promise. He said: Every dollar of Social Security and Medicare tax revenue will be reserved for Social Security and Medicare. He broke that promise. Then he said: We're going to keep the promise of Social Security and keep the government from raiding the Social Security surplus. He said that in a radio address in March of 2001. Then he said in 2002: None of the Social Security surplus will be used to fund other spending initiatives or tax relief. I went back and I said, let's add up how much money the President in his budget is taking from the Social Security trust fund. He is borrowing $2.4 trillion. Compare that to the income tax cuts of the same period, $2.5 trillion. Amazing how close these things are. In effect, what he is doing is taking money from Social Security, raised by payroll taxes paid overwhelmingly by middle-income people. He is using it to fund tax cuts that are income tax cuts for overwhelmingly the wealthiest, and 33 percent of the benefit goes to the top 1 percent, those earning over $337,000. We have the spectacle of people, through their payroll taxes, funding an income tax reduction that goes primarily to the wealthiest among us and then creating a circumstance in which the Chairman of the Federal Reserve comes in and says, Oops, we are overcommitted; we now have to cut Social Security benefits. That is really kind of a stunning policy if one thinks about it, if you think about who is adversely affected when you talk about cutting Social Security benefits. Two-thirds of retirees rely on Social Security for more than half of their income; 31 percent get at least 90 percent of their income from Social Security; 50 percent to 89 percent of their income is 33 percent.

Mr. CONRAD. That is exactly what it shows. It shows he would only need to reduce the tax cut to the wealthiest 1 percent by 20 percent in order to fund No Child Left Behind. I said earlier I am in this category. We are very fortunate. My wife and I are in this category. I asked myself, would I be willing to give up 20 percent of my tax reduction to fund No Child Left Behind? I would, because it is the future. Chairman Greenspan has said if we are looking ahead to the competitive position of our country, the absolute key is education. Our people have to be the best educated and the best trained if they are going to succeed in this highly competitive global environment. This is about choices. The President is saying it is more important to have all of this $45 billion tax cut for those earning over $337,000 than to take even one-fifth of it to provide for better education in the country. I do not think that is the right priority. I think the Senator is correct.

Mr. CONRAD. The Congressional Budget Office tells us that the 10-year effect of the war in Iraq, the war in Afghanistan, the war on terror is $280 billion. But the President's budget has nothing for it. That is part of the reason I have said this budget doesn't reveal to the American people our true financial condition. You have the exploding cost of the tax cuts beyond a 5-year window, you have the cost of fixing the alternative minimum tax to prevent it from sucking in more and more middle-class taxpayers, you have the cost of the war that is not in the President's budget, then the biggest one of all, the President is going to take over the next 10 years $2.4 trillion from Social Security. He is borrowing it from Social Security with no plan to pay it back. If you were running any other enterprise, if you were running a private company, you could not take the retirement funds of your employees and use it to pay the other expenses of the enterprise. You would be in violation of Federal law if you did that. That is what this chart shows under the President's budget and under the chairman's mark. Here is a chart that shows it very well. This is what is entirely hidden from people's view with respect to what is happening to our fiscal condition. This shows the Social Security surpluses by year. You can see the surpluses are exploding. The reason for that is to get ready for the retirement of the baby boom generation. But what our friends on the other side of the aisle are doing with their plans is taking all of this money and using it to pay for tax cuts and other expenditures now, leaving the cupboard bare for the future. How are they going to pay back this money?

Mr. CONRAD. Mr. President, I thank Senator Domenici, former chairman and very distinguished member of the committee, and someone to whom we all look for wisdom on budget issues. Let me pick up on the last point he made, the pay-go provision. What the Senator is talking about are rules that we used to have that were allowed to lapse in 2002 which required if you wanted to add spending or cut taxes, that was fine, but you had to pay for it. You had to pay for it. I think that budget discipline that was lost is unfortunate. We ought to renew those budget disciplines as quickly as possible. I think it is fine to say there are certain taxes we should cut. In fact, I have indicated publicly that I will vote to extend the 10-percent bracket. I will vote to extend the marriage penalty relief. I will vote to extend the expansion of the child care credit. I will vote to extend the small business expensing. I personally believe--and I think Senator Allard and I may agree--those are provisions that we ought to continue. There may be some more that Senator Allard wants to continue that I would not without paying for it. But I would say on any spending that is new and any tax cuts that are new, we ought to pay for them. This deficit ditch is so deep now that I think we ought to impose that discipline on ourselves. We did it before. It helped. I don't think it solved the problem, but it certainly made a contribution. It provided a discipline on both the spending side and the taxing side that was important. That doesn't mean you can't, on an emergency basis, spend more or tax less. It requires a supermajority vote. It requires 60 votes to break that discipline. I think it helped us immeasurably. I think it saved hundreds of billions of dollars. I was on this floor last year with Senator Nickles siding with him in stopping some spending by raising budget points of order that apply on the spending side of the ledger. I think it is very important that we reintroduce those disciplines as soon as possible. Let me talk a little about this budget. I talked earlier about the President's budget. I also want to talk a little about this budget and why I think it is deficient. The first thing that concerns me is it adds $2.86 trillion to the debt over the next 5 years. I think one of the things that is being missed in these discussions is something that is flying right below the radar. It is the amount of money that is being taken out of Social Security to pay for other things, money that has to be paid back but that gets lost in this discussion of deficits. The reason for that is they are talking about what is called the unified deficit. That is when you put all the money in the pot and you treat it all the same. All the Social Security revenue goes into the pot along with the income tax revenue and every other kind of revenue. All the spending comes out of that pot. The problem with that approach is at this moment in time, Social Security funds are running big surpluses in preparation, supposedly, for the retirement of the baby boom generation. But we are not using that money to pay down the debt or prepay the liability. We are taking that money and using it to fund tax cuts and other expenditures of Government, and those Social Security surpluses are growing dramatically, by the end of this 5-year budget the Social Security fund surplus just for the fiscal year 2009, is going to be up over $235 billion. I think it is hiding, basically from all of us, and from the American people, our true fiscal condition. Let me make this point. If we take the chairman's mark--I have high regard for the chairman. I respect him. I have found that he is somebody I can trust. I also like him. This does not have anything to do with personalities. This has to do with the fiscal situation we face as a country. Under the chairman's mark, the total debt of our country at the end of this year is going to be $7.4 trillion. But this year, $612 billion will be added. Next year, we will have $8 trillion of debt. The next year, $569 billion is being added to the debt; the next year, $553 billion; the next year, $563 billion; the next year, $564 billion. Do you notice a certain sameness as to how much is being added to the debt every year? Yet at the same time, the chairman and other Members have said it is cutting the deficits in half. And both statements are true. The deficit--which is calculated on a unified basis with all funds going into the pot, all revenue and all spending coming out of that same pot--is being reduced in half over 3 years by the chairman's mark. The problem is the increases in the debt are not being cut in half. The increases in the debt are virtually unchanged. The debt is increasing this year by $612 billion under the chairman's mark. By the third year it is going to increase by $563 billion. The debt increases are not being reduced by this plan in any significant way. As a result, for the 5 years, the debt is being increased by $2.860 trillion. This is, in many ways, the good times because the baby boomers have not started to retire yet. They start to retire in 2008. When we couple the increased expenses which flow from the baby boomers retiring with the reduced revenue by making the tax cuts permanent--and, by the way, that cost explodes right outside this 5-year budget window--what we see is under any growth scenario, any reasonable growth scenario, this debt problem, this deficit problem, is going to get much more serious in this next 10-year period. It is not getting better. Those who say, gee, with some more growth this will all work out--no, it does not work out. That is what the Comptroller General of the United States is warning us about, that is what the International Monetary Fund is warning us about, that is what budget group after budget group is warning us about. We cannot grow our way out of the deficits that are coming because we are stacking up debt at the time that is most favorable. We are stacking up debt when we have the trust funds throwing off huge cash surpluses. What is going to happen when those trust funds go cash negative? Instead of $160 billion of Social Security surplus, which will happen this year, instead of $235 billion of Social Security surplus which will happen in the fifth year, when those trust funds go cash negative, then what happens, and the baby boomers have retired and the full cost of the President's tax cuts have been phased in? Then these deficits look like child's play. Then we have a real chasm which has to be dealt with. As I see it, the chairman's budget simply does not do the job. When we look at the chairman's mark and we put back in the war costs CBO says will be there, and we look at addressing the alternative minimum tax, here is what we see the operating deficits looking like over the next 5 years. They are enormous. The operating deficits are enormous. We see very little reduction in them under the chairman's mark. There is $638 billion going down in 2009 to $520 billion, and I don't believe that is an accurate reflection. I believe by the time we get to the fifth year we will add another $600 billion to the debt, based on my own analysis. Our colleagues on the other side have talked about this proposal reducing the deficit. Actually, this proposal does not reduce the deficit. The deficit is going down on a unified basis, not counting the money that is being taken from Social Security, if we do nothing. The deficit is going down if we do nothing. But if we adjust the baseline for the one-time expenditures that were made last year, when we had a supplemental appropriations bill for over $85 billion last year--that is in the so-called baseline going forward--if we take that out, which the chairman has done--and, by the way, I commend him for doing that because otherwise we build in spending that should not repeat itself. It is one-time spending that should not be added to the base. The chairman has taken it out of the base. He is absolutely right to do so. Once we have done that and then we look at what is happening with the deficits under the chairman's proposal, what we see is it increases the deficit by $177 billion over the next 5 years. He is adding $177 billion to the deficit over the next 5 years. That is a mistake. We have record deficits now. We have the baby boomers coming. They will retire. We should not be adding to the deficit by the policy decisions we make here. We ought to be reducing it. The chairman says the deficit in the fifth year under his plan will be $202 billion. That is only true if we leave out certain things. Number one, he is leaving out additional war costs in that fifth year. The Congressional Budget Office says residual war costs in the fifth year will be $30 billion. He leaves out the alternative minimum tax fix, that costs $55 billion in the fifth year. He leaves out the $22 billion he will borrow from the Medicare trust fund that year which he has to pay back. He is leaving out the $235 billion he is borrowing from the Social Security trust fund in that fifth year. In that year alone, he will borrow $235 billion from Social Security. He will borrow another $22 billion from Medicare trust funds so he is borrowing $257 billion in that year and that is being stacked on the debt. So instead of adding $202 billion to the debt in that fifth year, he is adding at least $545 billion to the debt. That is my own conclusion. What is wrong with, for example, this budget in terms of revealing our full fiscal condition? One of the first problems we have is the war costs. The President has zero for war costs past September 30th. The chairman has put in a reserve fund of $30 billion which is certainly more forthcoming than the President's plan. But the chairman does not include it in his actual budget so he does not add to the deficit calculations by that $30 billion. He just says it is in a reserve fund. It may be spent, but we are not counting on it. That is not a budget. It is not a budget when you say we may spend this money, and if we do, we will find someplace to get it. I guess we will have to borrow it because he is not providing the funding for it. He is not adding it to the deficit totals for that year. He is not budgeting for it. The Congressional Budget Office says for the 10 years from 2005 to 2014, the residual war cost is $280 billion. We are not facing up to the real costs we all know are coming. Then we look at priorities. In 2005, the tax cuts going to the top 1 percent cost $45 billion, those earning over $337,000. If we were to keep the promise of No Child Left Behind in that year according to the chairman's budgets--this is a different number compared to the Bush budget because this budget before the Senate, the chairman's mark, is somewhat more generous in dealing with No Child Left Behind than the President's budget--but looking at this budget, he is $8.6 billion short of meeting the amount committed to No Child Left Behind. That is less than 20 percent of the money that is going in the tax cut to the wealthiest 1 percent. The same is true as we look at other priorities. Veterans medical funding. If we were to increase veterans medical care funding to meet the 2004 service levels, it would cost $521 million. Instead, we are giving $45 billion of tax cuts to the wealthiest 1 percent. This is a question of priorities. What is more important? They are saying it is 90 times as important. We will spend 90 times as much providing a tax cut to the wealthiest 1 percent than to restore medical care funding to the 2004 service levels in 2005. If we took a poll of those who are the wealthiest 1 percent in this country and they were asked, Would you be willing to give up 1\1/3\ percent of your tax cut so we could match the medical care funding of our veterans in 2005 with what we did in 2004, there would be a resounding yes, I would give up 1 percent of my tax cut in order to provide decent medical care for our Nation's veterans. The COPS program. It would take $700 million to restore the cuts being made in the COPS program. COPS program is the program that has put 100,000 police officers on the street. It costs $700 million to restore those cuts that are in this chairman's mark. Again, I compare it to the $45 billion being provided in tax cuts to the wealthiest 1 percent. Does it make sense to cut the COPS program, reduce the number of police on the street, when we are threatened by terrorist activity in this country? I do not think that makes sense. I do not think those are the right priorities for the country. We look at the firefighters in the same way. It would cost $246 million to restore the cuts to the firefighters that are included in this budget. Again, if one looks at a comparison of the tax cuts provided to the wealthiest 1 percent--those earning over $337,000--it costs $45 billion for that same year. If you asked the people who are in this category: Gee, would you be willing to give up one-half of 1 percent of your tax cut so we do not cut the firefighters, I think overwhelmingly people in that category would say, yes, that is a priority that we fund the firefighters at last year's levels and not cut them, not cut them dramatically. This is a debate about choices. It is about choices of what is the future course for our Nation. I believe the deficits and debt that are contained in these budgets are simply too large and we need to take aggressive action to deal with them, and this is all happening at the worst possible time, right before the baby boomers retire. But I am not focused on this year's deficit. That concerns me, but that is not the focus of my concern. I am much more worried about where this is all headed under the President's plan. I am much more worried about where this is all headed under the chairman's plan than the immediate deficits. One would expect deficits at a time we have been attacked. One would expect it at a time we have been recovering in the economy. The problem with the President's plan, the problem with the chairman's plan, is they never plan to get out of deficit. Instead, they keep adding to the debt, and by hundreds of billions of dollars a year, not just this year, but next year, and the next year, and the next year, and the next year--every year by over $500 billion of added debt, and every year thereafter, taking every penny of Social Security surplus, borrowing it, using it to fund tax cuts and other expenditures, with no plan to pay it back. No, this does not add up. This does not add up. This does not come close to adding up. It has enormous implications for our long-term economic strength. Now I understand this is an election year and things are unlikely to be changed very dramatically this year. I have had probably a dozen of my colleague say to me, what we need is a big plan for next year. I wish we could take more aggressive action this year, but I am realistic and know it is probably true that our best opportunity to deal with this problem in a fundamental way will come next year, and that is when we need to be prepared to act in a serious way and quit just hoping against hope that somehow this all goes away. It is not going away. It is not going away under the chairman's plan. He is adding $500 billion to the debt every year of this plan. It is not going away under the President's plan. He is adding even more. The President adds $3 trillion to the debt over the next 5 years--$3 trillion. This plan is a little bit better. It adds $2.860 trillion to the debt. None of this is sustainable, especially in light of the retirement of the baby boom generation, which starts in 2008, and of the cost of the President's tax cuts that absolutely explode beyond the 5 years of this budget plan. I thank the Chair and yield the floor.

Mr. CONRAD. Yes. It is hard to believe, but it is true. The President is telling us he has put nothing in the budget because he says it is hard to estimate how much it will be. I have said to these representatives, the thing we know is the right answer is not zero. That is the thing we know for sure. Zero is not the right answer.

Mr. CONRAD. Yes.

Mr. CONRAD. The reason for that is, as the Senator knows, more and more people are getting sucked into this alternative minimum tax designed to catch millionaires. Now it is going to be catching middle- class people. In fact, there was an excellent article in the Washington Post this weekend by a young journalist whose family just got sucked into the alternative minimum tax. It cost his family over $2,000 in this year alone to get sucked into this alternative minimum tax problem. Our friends on the other side are saying they have tax cuts for the middle class which they want to continue. I support continuing those middle-class tax cuts. But they are not dealing with the alternative minimum tax that used to be the millionaires' tax and rapidly becoming a middle-class tax trap. They only deal with that for 1 year. They have tax increases, as well, built into this budget that are very disguised. It is going to affect millions and millions and millions of people.