Kent Conrad

Mr. CONRAD

Mr. CONRAD. I would like to correct the record with respect to one thing the Senator from Pennsylvania said, I think inadvertently. The Budget Committee did report a budget last year. It did not come to the floor, but the Budget Committee did report a budget. The determination was made not to bring it to the floor. That determination was made because the Senate had a 10-year budget, the House had a 5-year budget. The Senate had used the more conservative OMB estimates. The House had used the more liberal OMB estimates. It was very clear there would not be a reconciliation between the two. I will be happy to yield in a moment. The Senator, the ranking member of the Budget Committee, and I determined that we would bring a 2-year budget to the Senate. We did that. That required 60 votes to pass because it was not a product of the committee. We got 59 votes for that 2-year budget in the Senate; it required 60 votes. The further facts are that we had all Democrats voting for it, we had 8 Republicans voting for it, including the ranking member of the Budget Committee, the ranking member of the Appropriations Committee, and others, but because we did not have 60 votes, it did not prevail. It should also be known that the Appropriations Committee, on a unanimous vote, adopted the spending recommendation contained in the budget resolution passed in the committee. They adopted it on a unanimous vote. Because of differences in the House, there was no final conclusion on most of the appropriations bills. They were held over to this year. And interestingly enough, the conclusion was a total that was within $2 billion of what we had proposed from the Budget Committee. So there was almost no difference--on over $700 billion of spending--almost no difference between what we proposed and what was ultimately passed in the early part of this year. I am happy to yield.

Mr. CONRAD. I say, Mr. President, in response to my colleague, I believe this budget really is a triumph of ideology. And it is a sad--a sad--commentary on this body that we pass something that is this disconnected from reality. At some point we are going to have to join together to try to dig out of this mess because this is going to damage the country in a profound way. I just hope that at some point reason returns. This is not a conservative document. There is nothing conservative about this. This is radical and reckless and dangerous, and it should be defeated. We should go back, and we should restrain spending, and we ought to restrain our appetite for tax cuts. We ought to have the courage to stand up and tell the American people what we all know is true: That when this Nation is already facing record budget deficits, and we are at war--the cost of which we cannot know--and on the brink of the retirement of the baby boom generation, we simply cannot do everything they would like us to do. We cannot have every spending program that they would like. We cannot have every tax cut that they would like and be responsible to the future. The result will be a weakened America, not a growth package. There may be a little bit more growth in the short term--not as much as if we had a more robust stimulus package--but, over time, the deadweight of those deficits and debt, because all of this is being borrowed--is all borrowed money--the deadweight of those deficits and debt suppresses economic growth, weakens our economy, reduces investment. If you do not have investment, you cannot grow. You cannot have investment unless there are savings that are available to invest. When the Federal Government runs deficits, that reduces the pool of societal savings that are available to invest. This is an economic package that simply cannot stand scrutiny. I am happy to yield.

Mr. CONRAD. I am happy to yield.

Mr. CONRAD. Mr. President, I would like to go back to the editorial, the opinion piece that was in the New York Times written by three of our former colleagues: Senator Kerrey, Senator Nunn, Senator Rudman-- Senator Rudman, a Republican who was on the Budget Committee. Senator Nunn and Senator Kerrey took great interest in budget affairs here in the Senate. Also, Pete Peterson, the former Secretary of Commerce, Republican; former Secretary of the Treasury Robert Rubin; and the former head of the Federal Reserve, Mr. Volcker; warning us that what we are about to do here is not fiscally responsible. They said in this article--and I want to read an extended version of this for my colleagues because I think it is critically important it be in the Record before we vote. They said: The fiscal outlook is much worse than official projections indicate. These projections assume that the tax cuts enacted in 2001 will expire at the end of 2010. They also assume that discretionary spending, the part of the budget that pays for national defense, domestic security, education and transportation, will shrink continuously as a share of the economy. Neither of these assumptions is realistic. Moreover, the official projections do not include the costs of war and reconstruction in Iraq. And they ignore the inevitable need to reform the alternative minimum tax, which is not indexed for inflation and will apply to some 40 million households within 10 years--up from two million today. Let me just say with respect to the alternative minimum tax, boy, have a lot of people got a surprise coming. They think they are going to get a tax cut under this plan. But there is this little thing nobody talks about called the alternative minimum tax that only applies to 2 million taxpayers today. By the end of this period of the budget, it is going to apply to 40 million taxpayers. It costs $600 billion to fix. Not a dime of it is in this budget. Under more realistic assumptions-- They go on to say in their opinion piece-- the deficit projections are cause for alarm. A recent study by Goldman Sachs includes this forecast: if the president's proposed new tax cuts are enacted, a Medicare prescription drug benefit is approved, [which he has also proposed], the A.M.T. is adjusted and appropriations grow modestly, the deficits over the next 10 years will total $4.2 trillion-- That is double the amount I have been talking about in my assessment of this budget this morning--twice as much as what I have been warning my colleagues about-- even if the Social Security surplus is included. It will be $4.2 trillion of deficits. In other words, if the Social Security trust funds are used to pay for other things, the deficit will be $4.2 trillion. If [the Social Security trust fund] is not included, the deficit would be $6.7 trillion. That is just over the next decade. Under these circumstances the ratio of publicly held debt to gross domestic product climbs within 10 years to near 50 percent, from 33 percent just two years ago. And all of this happens before the fiscal going gets tough. Looming at the end of the decade is a demographic transformation that threatens to swamp the budget and the economy with unfunded benefit promises, like Social Security and Medicare, of roughly $25 trillion in present value. Our children and grandchildren already face unthinkable payroll tax burdens that could go as high as 33 percent to pay for these promised benefits. They conclude: It is neither fiscally nor morally responsible to give ourselves tax cuts and leave future generations with an even higher tax burden. And yet tax cuts are the primary focus of this year's budget debate. Mr. President, in just a few hours we will vote on this budget. This will be a time of choice. This won't be a decision just for this year. This will put in place revenue hemorrhages and increased spending that will put us on a never ending escalator, going in just one direction-- straight down into deeper deficits, in deeper debt, right on the brink of the retirement of the baby boom generation. It will only escalate those trends, leaving us in a totally unsustainable position. The tax cut that we are voting on is not what has been advertised, $350 billion in the Senate--oh, no. The tax cut in this plan, in this budget resolution that is before us, is $1.3 trillion; $550 billion reconciled to the Finance Committee, $725 billion provided elsewhere in the resolution--a tax cut of $1.3 trillion, with an additional interest cost of some $300 billion, for a total reduction in revenue of $1.6 trillion just over the next decade, when we are already in record budget deficits. This is a proposal that borders on the preposterous. It borders on the absurd. I sometimes come to work thinking the Senate of the United States has become like Disneyland: It is all illusion here. It is totally detached from reality. It has all become the politics of sound bite. Substance has absolutely fallen by the wayside, and there is no serious concern where all this leads. But it is inevitable. This leads to massive deficits and debt that can only undermine the strength and security of this economy, that can only endanger the economic lives of the American people. This is profoundly wrong, and I urge my colleagues to think--to think, to pause. I know there is a rush to judgment here. We are on a Friday afternoon right before a 2-week break. Members want to leave. But what is going to be decided here has profound consequences for the future of our Nation; a $1.3 trillion tax cut--not paid for, not offset by spending reductions, but paid for by borrowed money and by looting the trust funds of Social Security and Medicare. That is what is about to happen here. Virtually every economist has told us, when you take tax cuts like this and, instead of paying for them with spending reductions, you borrow the money, you weaken the economic vitality of this Nation. You take money out of the societal savings, the pool of societal savings, thereby reducing the money that is available for investment, thereby weakening the economic strength of our Nation. That is exactly what our former distinguished colleagues are telling us. I repeat their concluding paragraph: Congress cannot simply conclude that deficits don't matter. Over the long term, deficits matter a great deal. They lower future economic growth by reducing the level of national savings that can be devoted to productive investments. They raise interest rates higher than they would be otherwise. They raise interest payments on the national debt. They reduce the fiscal flexibility to deal with unexpected developments [such as the terrorist threat on this country]. ``Terrorist threat on this country''--that is not part of their op- ed. I add that because we all now know the devastation that something unanticipated can cause to this country. If we forget these economic consequences, we risk creating an insupportable tax burden for the next generation. Now, I know, in politics, we often live for the next election and there is not too great a concern for the future. But, colleagues, I urge you to think carefully about the decision that is about to be made because it will have profound consequences for this Nation. I believe it will weaken our country, not strengthen it. I believe it will damage long-term economic growth, not improve it. Does that mean that on this side we are against any tax reduction? No. I would actually support more tax reduction in this year than the President proposes in order to give lift to the economy at a time of serious weakness. But, over the 10-year period, we simply cannot afford $1.3 trillion out of the revenue stream, when we are already in record deficit, and when we face the retirement of the baby boom generation, and we are at war, the cost of which is unknown. I know the other side must believe it has the votes to pass this budget. We have had no role in it. We were locked out of the conference committee. Oh, we were invited to the first meeting, and never invited back. So this is a budget that was constructed in a conference committee that excluded the minority. That is not the way the business of Congress is supposed to be done. There was not one member of the minority present when this scheme was hatched to come out here with a budget reconciliation number that suggests there is a different number in the Senate than in the House. In fact, both committees have been given an instruction of $550 billion for the reconciliation provision. But then, in a sleight of hand, the Finance Committee is told, there will be a supermajority point of order if you carry out the instruction you have been given. Never been done before. Never been done before. And when the package comes back from the conference committee, even though there never was a reconciliation, never was a working out or a meeting of the minds between the House and the Senate, the higher House number will still enjoy privileged protection on this floor. That is a total perversion of the reconciliation process. And, my colleagues, it may benefit you today, it may hurt you tomorrow, because what goes around comes around. And the real victim is fiscal responsibility. The real victims are going to be those who are asked to pick up the tab for what we are going to be spending; the real victims are going to be those who have to shoulder the burdens that we all know are coming. And we are telling them: We are taking our money while the getting is good, and we are sticking you with the tab. I guess that is the message that is going to come from this Senate today. I find it profoundly disappointing that is the way, apparently, the votes will fall, that it is OK to run up the tab, forget about the future, stick it to the kids. That is what this vote will be about.

Mr. CONRAD. I yield whatever time he may consume to the Senator from Maryland.

Mr. CONRAD. I believe that is correct. I say to the Presiding Officer in response to my colleague, I really do not know what could be more clear. We do not need to just look at economists' projections. We can look at our own history. We had this attempt in the 1980s to pursue the economic policy that is now being attempted. It did not end happily. It exploded the deficits and debt of the country. It quadrupled the national debt. Then in the nineties, we took a different approach, the approach of balancing budgets, of investment in technology, of bringing down Federal spending, of raising revenue to balance budgets. What it kicked off was the longest economic expansion in our Nation's history. We turned deficits into surpluses, and we had the lowest unemployment rate in 30 years, the lowest inflation rate in 30 years, and the strongest period of business investment in our Nation's history. That is a real-world example of two competing views of how to strengthen the economy. Now we are going back to the failed policy of the eighties and doing it at the worst possible time. Then there was time, before the baby boomers started to retire. Now there is no time. The mistakes that are made now will be paid for by increased debt, by reduced benefits, by increased taxes. That is where we are headed. And I would quote again our most distinguished colleagues warning us: Congress cannot simply conclude that deficits do not matter. Over the long-term, deficits matter a great deal. They lower future economic growth by reducing the level of national savings that can be devoted to productive investments. That is the argument I have been making this morning. They raise interest rates higher than they would be otherwise. They raise interest payments on the national debt. They reduce the fiscal flexibility to deal with unexpected developments. If we forget these economic consequences, we risk creating an unsupportable tax burden for the next generation. I guess we are in this mode now where we live for the moment. I guess we do not worry or care about what we do now, how it affects the future. But we ought to. The lessons are clear. The warning signs are there. Every Senator is going to be responsible for their vote. Every Senator can be held accountable in the future for what they did to either strengthen this country or to weaken it. Every Senator is going to have a very clear choice in a few hours: Do they support a budget that plunges us deeper into deficits and debt, or do they say it is time to pull back? This is the economic record on job creation of administrations going back to President Eisenhower. Every one of them created jobs. This is the first one to lose private sector jobs in 50 years. If we look to public opinion, the American people are saying: On the home front, Americans strongly agreed with the past week's Senate action to slash the President's proposed tax cut. Two in three respondents--Republicans, Democrats and independents alike-- favored the Senate plan to reduce Bush's $726 billion tax cut by more than half to help pay for the war, shore up Social Security and reduce the deficit. That is two-thirds of the American people sending us a message. I do not think we should do budgets based on polling, but I do think we ought to do it based on common sense, and common sense ought to tell us that exploding deficits and debt when we are at war, exploding deficits and debt when the baby boom generation is about to retire, exploding deficits and debt when we know it will harm long-term economic growth, is truly a fool's errand, and we will live to rue the day we made shortsighted decisions. I yield the floor.

Mr. CONRAD. I will be happy to yield.

Mr. CONRAD. Mr. President, I say to my colleague, what this means is not just numbers on a page, not just deficits, whether people care about deficits or not, they matter a lot to the functioning of the economy. They matter a lot to the ability of the United States to keep its obligations. The implication of all this is much more direct. This is going to compel at a future time, according to the former Congressional Budget Office Director, massive cuts in benefits of Social Security and Medicare, massive tax increases, and massive debt. That can be the only outcome because none of this adds up in any serious way. For those who say deficits do not matter, Chairman Greenspan of the Federal Reserve believes deficits matter. This is what he said in testimony before the Banking Committee, where my colleague is the ranking member: There is no question that as deficits go up, contrary to what some have said, it does affect long-term interest rates. It does have a negative impact on the economy, unless attended. It is not just the view of the Chairman of the Federal Reserve, but the Committee for Economic Development, which is made up of some of the most prominent business leaders in the country, has looked at these budget proposals, and this is what their conclusion is: No. 1, current budget projections seriously understate the problem; No. 2, while slower economic growth has caused much of the immediate deterioration in the deficit, the deficits in later years reflect our tax-and-spending choices; No. 3, deficits do matter; And No. 4, the aging of our population compounds the problem. The other day in the New York Times, some of our most able former colleagues and former members of administrations, both Republican and Democrat, put out this op-ed. This is former Senator Kerrey, former Senator Nunn, both Democrats, former Senator Rudman, a prominent Republican, Pete Peterson who was in the Cabinet of a Republican administration, Robert Rubin, former Secretary of the Treasury, and Paul Volcker, the distinguished former head of the Federal Reserve. They asked the question: Will Congress stand up for fiscal responsibility? They said in this article: Tax cuts are the primary focus of this year's budget debate. To speed enactment, Congress is planning to use a special fast-track procedure called reconciliation. While determining the size of the tax cut to be given fast-track protection in the budget is sometimes dismissed as a procedural matter, it is not. Whatever its size, a tax cut that receives this protection is almost certain to be enacted in later tax legislation. Given the rapidly deteriorating long-term fiscal outlook, neither proposal-- Neither the House nor the Senate proposal-- is fiscally responsible. It is illogical to begin turning back toward balanced budgets by enacting a tax cut that will only make the long-term outlook worse. Furthermore, the proposed tax cuts are not useful for short-term fiscal stimulus, since only a small portion would take effect this year. Nor would they spur long-term economic growth. In fact, tax cuts financed by perpetual deficits will eventually slow the economy. When our friends say this is a growth package, it is not a growth package. This is a package that undermines long-term growth. We have six of our most distinguished colleagues, former Senators and former members of the Cabinet, on a bipartisan basis telling us that is the case. We do not have to just look to the Chairman of the Federal Reserve or former Cabinet members or former Senators; we can look at the people who have been hired by the White House to tell them the effect of their policies. This is what they said. They showed that the policy being proposed will give a short-term bump, but after 2004, we will get less economic growth than if we did nothing. We would be better off to do nothing than to adopt this policy because it explodes deficits and debt. The deadweight of those deficits and debt will hurt long-term economic growth. We have another distinguished economist, the head of Economy.com, who did this analysis of two competing proposals, what the Democrats proposed and what the President proposed. This is their conclusion. The Democratic plan will give almost twice as much economic growth in 2003 and 2004 and not do the long-term harm of the President's proposal because we do not explode the deficits and debt in the way the President's plan and the budget plan before us does. If we just want to look at reality, since we pursued this course, since we have gone to this notion of borrow and spend, here is what has happened. We have lost 2.6 million jobs.

Mr. CONRAD. What is interesting is that, right now, we would not be eligible to join the European Union because our deficit is in excess of what is required for a member state to join the European Union. We would be disqualified. We are headed for a circumstance in which we would not be qualified for decades to come. The fundamental reason is contained on this chart, I say to my colleague. This, to me, is the single most important thing to understand. This chart shows the Social Security surplus, Social Security trust fund, the green bar. The blue bar is the Medicare trust fund. The red bar is the cost of the proposed and already-enacted tax cuts. What one can see is that right now we are running big surpluses in the Medicare and Social Security trust funds. In fact, the tax cuts right now, in this part of the time period, are less than the trust fund surpluses. Look what happens when the baby boomers start to retire and those trust funds go cash negative. It is at the very time that the cost of the President's tax cuts explode. What does that do? That leads us into deep deficits and debt. I don't want anybody to conclude from this that this Senator doesn't favor some tax cuts because I do. I think they are necessary right now to stimulate the economy, give lift to the economy. But we have to balance the need for short-term additional stimulus both by way of spending and tax cuts, with the long-term need to return to fiscal balance and to prepare for retirement of the baby boom generation. What is being done here does neither because only 5 percent of the cost of the President's proposed tax cuts in the stimulus package are effective this year, when we need the stimulus, when the economy is weak. Ninety-five percent of the cost is in future years, when it is only going to explode deficits and debt. It will lead to a weakened economic position and will fundamentally alter this country's ability to meet its obligations.

Mr. CONRAD. That is correct. If this were in dollar terms, I could not put it on a chart. The sea of red ink that would follow would not fit on any chart that I am allowed to use on the Senate floor.

Mr. CONRAD. Yes.

Mr. CONRAD. The Senator is correct. We had actually been in the happy circumstance of not only running a balanced budget, but running a surplus. In fact, we had stopped the practice of taking Social Security trust fund surpluses to fund other functions of Government. It was critically important that we do that because we are getting close to the retirement of the baby boom generation. Some of our colleagues say to us that, you know, deficits don't really matter anymore. What a profoundly wrong notion that is. Obviously, deficits matter. When the Federal Government is compelled to borrow money, that puts us into competition with others who want to borrow money, that drives up the cost of interest rates, and that slows the economy. That is why when I reviewed this budget, it is not an economic growth budget, it is a budget that will hurt long-term economic growth because of the deadweight of these deficits and debt. That is not just my opinion. I will get to the point in the presentation where we talk about others who are economists who have been hired by the White House, by the CBO, to tell us the implications of what is being done; and what they have concluded is that this will hurt economic growth because it is all being financed by borrowed money. What does that mean? When the Federal Government borrows money, we are in competition with the private sector, and that reduces the pool of societal savings. That is a dissavings. When you reduce the pool of societal savings, that reduces the amount of money available for investment and that hurts long-term economic growth. It is not just this Senator who says that. Interestingly enough, the CBO is headed by a man chosen by our colleagues on the other side, who came directly from the White House. He has done seven long-term models looking at the effect of this budget. In four of the seven, he said deficits would be even worse as a result of this budget proposal. In three he found it would be better, but only on the assumption that Americans, over the next decade, would work harder in preparation for the massive tax increases that will inevitably flow from the adoption of this kind of a budget. I hope people understand where this is all headed because it is as clear as it can be. Nobody can vote today and say they didn't know. Nobody can vote today and not have their record reviewed and have people look back and say these people led us down a path of deficits and debt that fundamentally weakened the country. This is a chart from the President's own budget document. This comes from his analytical perspectives, page 43. This is his long-term outlook. We never escape from deficit under the President's plan-- never--according to his own estimates. In fact, we are in the sweet spot now. You can see that the deficits here are the smallest they are going to be. Yet these are record deficits. It may look like a small amount of red, but it is the most red we have ever experienced, and it is going to get worse. Under the President's own analysis of his plan, it gets worse because the cost of the tax cuts explode at the very time the cost of the Government explodes because of the retirement of the baby boom generation.

Mr. CONRAD. I am happy to yield.

Mr. CONRAD. I am happy to.

Mr. CONRAD. Late next year and ask for even more expansion of debt because this budget resolution is one constructed on deficits and debt. It is a testimony to deficits and debt. It can only get worse. It is interesting, the effect on the rest of the budget. For example, the interest costs, we were told 2 years ago the interest costs to the Federal Government over this next decade would be $622 billion. Instead, because of the failed fiscal plan, the interest costs alone will be $2.3 trillion. That is an increase in interest costs of $1.7 trillion. Obviously, we have to pay it because we have borrowed it, and we owe it. But those are dollars that can't buy a single tank. They can't buy a single weapons system. They can't buy a single airplane. They can't educate a child. They can't house the homeless. They can't do any of the other things the Federal Government has responsibility for. They can't pay down debt. Those are dollars that are just used to service the debt we are running up.

Mr. CONRAD. That is correct.

Mr. CONRAD. I am happy to yield.

Mr. CONRAD. I would be happy to answer my colleague by saying this: This process and this budget, to me, is totally disconnected from reality. In fact, I have never seen a greater disconnect with reality than is represented by this budget. Here we are, with record budget deficits, approaching $500 to $600 billion this year, and what we do is increase spending under this resolution, cut the revenue, plunging the country deeper into deficits, when we are at war, the cost of which we do not know, and when we are on the eve of the retirement of the baby boom generation. Let me just say, this fiscal turnaround that we have seen--when people ask us, well, where did the money go? Here is where it went. Over the period in question, 36 percent went to the tax cuts--both those already passed and those proposed. The second biggest reason for the disappearance of the surplus is the additional spending caused by the attack on the country and the war; that is, the increased defense spending and the increased homeland security spending. The third biggest reason is that revenue is coming in below expectation, apart from the tax cut; that is, the tax cut is the biggest single reason. The third biggest reason--close to the second-- is that revenue is coming in below what was anticipated. And the smallest reason, over the 10-year period, is the economic downturn at 9 percent. The result of all this is that the budget before us--after many of the Members of this body pledged not to take Social Security for other purposes--this is the total amount of Social Security surplus over this period: $2.7 trillion. This budget takes $2,698,000,000,000 from the Social Security trust fund surpluses and uses it for other purposes, uses it to fund the tax cut, uses it to pay for other things. This budget has deficits. Some have said they are small and short term. Here is what they are. They are not small, and they are not short term. This year we now anticipate a deficit on an operating basis of $558 billion, by far the biggest we have ever had. You see throughout the rest of the decade, we never get below $300 billion in deficits. Again, that is not counting Social Security, not taking Social Security and using it to pay for other things.

Mr. CONRAD. I yield 15 minutes to the Senator from North Dakota.

Mr. CONRAD. Mr. President, I thank the Senator from Florida, Mr. Nelson. He is a very valuable member of the Budget Committee. He has been steadfast and resolute on fiscal responsibility. As he has made clear, he does not believe this budget represents that. The truth is, it does not. This is a budget that is going to explode the deficits and debt of the United States at a time of already record deficits. It takes $1.3 trillion away in revenue and increases expenditures by $1.1 trillion. There can only be one result, and that is more red ink, more deficits, more debt, and a threatening of the economic security of the Nation. How much time does my colleague from North Dakota need?

Mr. CONRAD. Mr. President, I yield an additional few minutes to the Senator.

Mr. CONRAD. Mr. President, I yield 12 minutes to the Senator from Florida.

Mr. CONRAD. Mr. President, I thank the Senator from Illinois. Does the Senator from Florida seek time?

Mr. CONRAD. I yield 10 minutes to the Senator from Illinois.

Mr. CONRAD. All but two on your side voted against it. Is the Senator seeking time?