Kent Conrad

Mr. CONRAD

Mr. CONRAD. Yes--no, this is not from the President. This is from Macroeconomic Advisers, which is under contract to the White House and under contract to CBO.

Mr. CONRAD. Let me complete this thought, and I will be happy to talk about this chart or your chart or other charts. In the 1980s, we tried the big tax cut, the big deficits. In the 1990s, we tried the alternative, which was to eliminate deficits and to have restraint, to reduce spending, actually increase revenues. I have a chart that shows the long-term spending revenue. This is a very important debate to have. The red line shows spending from 1981 projected out to 2018. The red line is spending as a percentage of GDP, which the Senator from Utah indicated is an appropriate way to judge these things. I agree entirely. The blue line is the revenue line. In the 1980s, we had an enormous gap with big budget deficits. Spending went up to over 23 percent of gross domestic product. In 1993, we passed a plan to bring down spending and to raise revenue. We did them both. The economy was weak. When we did that plan, we were told by the other side it would crater the economy. We were told: You are going to increase deficits; you are going to decrease economic growth. I can remember the debate in the Senate so well, being told it would crater the economy. They were wrong. We raised revenue, we cut spending, and we helped a surge of economic growth unprecedented in our history, the longest period of sustained economic growth in U.S. history, the lowest unemployment in 30 years, the lowest inflation in 30 years. We turned deficits into surpluses, and we did it the old-fashioned way; we got revenue above expenditures. Now look at what happened. Our friends are showing the chart. It is true, revenue collapsed. Part of that is the tax cuts. It is true that spending has gone up. Why has spending gone up? Where did the spending go? In 2001, 73 percent of the increase in spending went to national defense. We all supported it. Fifteen percent of the increased spending went to homeland security. We all supported it. And 7 percent went to New York City relief. We had to rebuild New York. We all supported it. In 2002, 55 percent of the increase went to national defense, 21 percent to homeland security, 19 percent to rebuilding New York; 95 percent of the spending increase in those 2 years was national defense, homeland security, rebuilding New York. In 2003, 73 percent is defense, 15 percent is homeland security, and 88 percent of the spending increase went for the purposes of homeland defense and national defense. That is where the money has gone. We all supported it. The question is, How are we going to pay for it? What my colleagues are proposing is to keep the revenue line down below the spending line for the entire rest of this decade. The reason that is so dangerous, in this Senator's opinion, is this decade is like no other in our economic history. What is coming is not a projection. What is coming is the retirement of the baby boom generation that is going to double the number of people eligible for Social Security and Medicare. It will explode the cost to the Federal Government of those two programs. Those programs right now are throwing off big cash surpluses in their trust funds, but in the next decade they start to go cash negative. When they do, that is the very time the President's tax cut, which is the red bar--the trust fund is green, and blue is Medicare-Social Security surplus, the red is the President's tax cut--the very time the costs explode, the costs of tax cuts explode, leading to deficits totally unsustainable. We just got released today the results of the Federal Open Market Committee meeting of January 28 and 29. There is a lag before the releasing of the results of the meeting. Here is what the report says: A number of members expressed the hope that the legislation would not encompass provisions that would lead to permanently large Federal deficits with negative consequences for the economy over the longer term. That is precisely what is wrong with the President's plan and wrong with the budget plan from the committee. It is going to lead to large budget deficits over time. That is going to hurt economic growth. Don't take my word for it. The deficits in the budget resolution are right here. They are large and continuing. The President's own documents go out to 2050 and they show these are the good times. Even though they are record budget deficits now, his own documents, page 43 of ``analytical perspectives,'' show the deficits now are the good times because, as you go forward and adopt the President's policy, the cost of the tax cuts explodes at the very time the cost of the retirement of the baby boomers explodes and you have deficits of such enormous size: 10 percent, 11 percent of GDP, 2 \1/2\ times what they are today. That is totally unsustainable. The conclusion of many economists is those tax cuts will actually hurt economic growth. It is the dead weight of those deficits and debt that will hurt economic growth. The fundamental reason is the President's tax cuts are not offset by spending reductions. He is not proposing offsetting them by spending reductions. He is proposing increases in spending. I do not fault him for that. He is talking about increasing defense--we have to do it; increasing homeland security--we have to do it. But we have to pay for it. If we do not, on the eve of the retirement of the baby boom generation we will saddle this country with so much deficit and so much debt that it will serve as a dead weight on this economy and it will inhibit, it will limit, it will reduce the pool of societal savings, and it will reduce the amount of money available for investment. I am not going to take longer. I could go on, on this subject, for a long time. But I am happy to respond to an inquiry from my colleague.

Mr. CONRAD. I yield myself such time as I may consume. Mr. President, the reason I inquired of the Senator what his chart depicted was that he has only shown the tax cut advocated by the President that has already been implemented. He did not show the additional effect of the tax cut the President has proposed, which is even larger than the one that has already been implemented. He showed on his chart that 25 percent of the $5.6 trillion surplus went to the President's first tax cut. He does not talk about the additional tax cut that costs $1.9 trillion when you add the associated interest costs. Second point: On the Senator's chart he attributes the additional interest cost of the tax cut to spending. Any fair allocation of the additional interest costs from the tax cut has to be attributed to the tax cut, not to spending. Those two things change the picture quite dramatically. What we see is, over the decade, if you take the President's tax cuts already implemented and the tax cuts proposed, and attribute the interest costs of the tax cuts to the tax cuts, the biggest culprit in the disappearance of the surplus, and in fact, moving to deficit, is the tax cuts. The Senator makes a very important point on what will work. The Senator believes the additional tax cuts the President has proposed will help grow the economy. I don't believe it. Not only don't I believe it, but a whole group of economists do not believe it. This chart is the work of Macroeconomic Advisors. These folks are under contract to the White House, they are under contract to the Congressional Budget Office to do macroeconomic analysis. What they have concluded is the President's plan will give a short boost--this is the green line--if you do nothing; the black line is if you do the President's policy. After 2004, they say the President's plan will actually reduce growth from what we would have if we did nothing. Why? Because they say, as Chairman Greenspan has said, you will get a crowding out effect because the President's tax cuts are not financed by cutting spending, they are financed by borrowing the money. You cannot borrow your way to prosperity. What happens when you borrow the money is you reduce the pool of societal savings; you reduce the amount of money available for investment; you reduce economic growth. Let's talk about real world tests of that theory. In the 1980s, we had a real world test of the notion of running deficits and having tax cuts and that would spur the economy. Let me finish, and I will be more than happy to yield.

Mr. CONRAD. If I could inquire of the Senator, if the additional proposed tax increase by the President were added to that chart, can the Senator tell us then what one would see in terms of the calculation of the disappearance of the surplus and what is the primary culprit?

Mr. CONRAD. That is the tax increase already passed and implemented?

Mr. CONRAD. On the previous chart, if you could go back to that for a moment, might I just ask, is the President's additional proposed tax increase included in that chart?

Mr. CONRAD. Will the Senator yield for a question?

Mr. CONRAD. Might I revise my request. There are only 7 minutes; we take 7 minutes off the amendment and give an additional 8 minutes off the resolution so the Senator from Montana would have 15 minutes.

Mr. CONRAD. Just to comment, first, I respect very much my colleagues, Senator Breaux, Senator Snowe, Senator Voinovich, and Senator Baucus for offering this amendment. They come from a centrist tradition of the Senate of which I was long a member before I got into this position, and it is really no longer appropriate for me to be part of that group. I have enormous respect for them. I thank them. The Senator from Montana is seeking 15 minutes off the amendment.

Mr. CONRAD. Mr. President, I ask unanimous consent that the time yielded to Senators Breaux, Snowe, and Voinovich be taken from the amendment time rather than the resolution time.

Mr. CONRAD. I yield 15 minutes to the Senator from Ohio.

Mr. CONRAD. Mr. President, how much time is the Senator seeking?

Mr. CONRAD. I thank the Senator. Amendment No. 339

Mr. CONRAD. I am happy to yield 10 minutes to the Senator from Louisiana. If he would like additional time, we will do that as well.

Mr. CONRAD. I thank the Senator from Wisconsin. I thank him very much for his patience. Again, I want to express my regret that we are forced into this circumstance of limiting time on such a consequential subject. But the rules unfortunately dictate the circumstance we are in, and the unwillingness of the other side to give us an extended time for discussion; instead to be locked into the budget discussion, which is regrettable. The Senator from Louisiana has also been extraordinarily patient, not just today but for several days. He has an amendment that is one of the most consequential to come before the body on this subject. So I apologize to the Senator from Louisiana. He has been, as always, a gentleman. How much time would the Senator seek?

Mr. CONRAD. Mr. President, I agree completely with the Senator from Connecticut. I deeply regret the decision was not made to spend this day discussing the war. I said this morning, I find it very difficult to understand, as much as I value the budget and the budget process, after spending my entire time in the Senate on the Budget Committee. That is not, frankly, the focus of the attention of the American people today. The war is the focus of the attention of the American people today and we should have spent this entire day on the war. We should have put off the budget discussion and the budget debate until later. The majority refused to do that. The majority insisted the budget was the priority and we would have limited time to discuss the war. That is a mistake. It is not right. That is where we are. The Senator from Wisconsin is seeking time, and I yield 3 minutes to the Senator from Wisconsin. (The remarks of Mr. Kohl are printed in today's Record in the debate on S. Res. 95.)

Mr. CONRAD. I yield 2 minutes to the Senator from Iowa.

Mr. CONRAD. I yield 4 minutes to the Senator from Connecticut, who has been very patiently waiting.

Mr. CONRAD. I yield to the Senator from Connecticut. How much time is the Senator seeking?

Mr. CONRAD. I am more than pleased to yield 2 minutes to the Senator from Maryland.

Mr. CONRAD. I am happy to yield.

Mr. CONRAD. I thank the Senator. I say to my colleagues on our side, if I may, please understand that when they say there is 4\1/2\ hours left, there is 4\1/2\ hours left in total. Even though they have given back all of their time, because there are three amendments pending, they get half of the time on each of those amendments. So we do not have 4\1/2\ hours. We have much less than that left potentially. We have significant amendments to debate. I know there are colleagues who would like to speak, still, on the war resolution. We will attempt to accommodate them. But my intention is to give them 2 minutes each because otherwise we are not going to have time to debate very consequential amendments with respect to reducing the size of the tax cut, with respect to the transportation infrastructure amendment that is very significant, with respect to other amendments that are pending, Senator Harkin's IDEA amendment, and others. So we are going to have to use a lot of discipline and forbearance for people to have an opportunity to debate very consequential items and discuss the war.

Mr. CONRAD. If the majority leader will yield, let me attempt to make a clarification because I do not think we want a misunderstanding on this question. The majority side has yielded back all of their time. I have something like 4\1/2\ hours remaining on this side. But the way the rules work, there are three pending amendments, and the Republican side gets half on each of those amendments. My understanding is--and I think it is the appropriate inclusion here--that time on the war resolution from your side would come off your amendment time, not off my time.

Mr. CONRAD. Mr. President, the Senator yesterday said he took it from the Finance Committee jurisdiction for mandatory spending. That is what the record shows. That is where it comes from.

Mr. CONRAD. Mr. President, the Kyl amendment would move up the time of making permanent the elimination of the estate tax by 1 year. That costs $46 billion. The Senator has proposed paying for it by cutting the Finance Committee jurisdiction. That means cutting Medicare, Medicaid, Temporary Assistance for Needy Families, the State Health Improvement Program, and the earned-income tax credit. This is the wrong way to go. We ought to reform the estate tax, not repeal it. I hope my colleagues will resist the Kyl amendment.