Mr. President, on August 2nd, our nation will be unable to borrow money to meet our current obligations. We’ve known for a while that this time was coming. Our annual deficits have been near $1.5 trillion for the past two years, and will be that large this year. With deficits of that size, no one should be surprised that we’ve hit the debt ceiling.
Which raises the question: What has the President offered to confront this looming crisis? What has the Senate Democratic Majority done to address our deficit crisis? Well, the answer is simple. Not much. Last year, President Obama virtually ignored his own deficit-reduction commission. This year, he offered a budget for 2012 that would increase spending, increase taxes and add trillions to our debt. His budget was so ill-conceived and out of touch that it was defeated here in the Senate by a vote of 97-0. Not a single Senator voted for President Obama’s budget. Every member of the President’s party said no to his budget.
For most of this year, President Obama said we should raise the debt ceiling without taking any measures to address our long-term deficits and debt. It was the position of this administration that Congress should simply rubber stamp another debt ceiling hike with no plan in place to reduce our deficits. That plan was voted on in the House and was soundly rejected. All Republicans and nearly half of the Democrats in the House voted against increasing the debt ceiling without deficit reduction.
The President then gave a budget speech in April. I presume he recognized the inadequacy of his budget proposal. He outlined a budget framework that would reduce budget deficits by $4 trillion over 12 years. But he still hasn’t presented an actual budget to go with it. The Director of the Congressional Budget Office, Mr. Elmendorf, was asked if he could estimate the budget impact of this new framework. The CBO director state clearly, “We don’t estimate speeches. We need much more specificity than was provided in that speech for us to do our analysis.”
We’ve heard a lot from the White House about the need to come up with a plan, but the White House itself has never offered a single debt-ceiling proposal for a vote. And the Senate Democratic Leadership has also seriously shirked its responsibility. They haven’t put forward a budget for more than 800 days. Every family in America that works hard and sacrifices to pay their bills ought to be ashamed at the failure of the U.S. Senate to offer a budget.
In sharp contrast, members of the House fulfilled their responsibility and passed a budget earlier this year. The Democrats have done nothing with it but demagogue it. While they can’t find time to compile their own budget, they’ve sure found time to make speeches about the House budget. While members on the other side come to the floor to oppose and demagogue the Cut, Cap and Balance plan, they’ve offered no plan of their own. While there is now a framework from the so-called gang of six, their plan also lacks any specificity.
Perhaps that’s the political strategy the other side has chosen. Voters and the American people can’t be upset with a position you’ve taken if you haven’t taken any. This strategy may be politically expedient, but it will drive our economy and our country off a cliff. The strategy of placing a higher priority on the next election rather than the economic and fiscal situation facing our county is how we got in this mess.
Based on the lack of proposals put forth by the other side, one could assume that they’re perfectly content borrowing 40 cents for every dollar we spend. Are they pleased with deficits of $1.5 trillion annually? They must be, because they haven’t offered a plan to reduce these deficits.
On top of that, they have argued for tax increases. They must believe we have a revenue problem. According to their arguments, the American people are not handing over enough of their money to satisfy the needs of Washington to spend. The reason the economy isn’t growing and jobs aren’t being created is because Washington isn’t spending enough money. Remember, just two years ago they passed the $800 billion so-called stimulus as a means to keep unemployment below 8 percent. So, we borrowed the money and spent it on government programs.
And where is the U.S. economy today? Unemployment is at 9.2 percent. More than 14 million Americans are out of work. And now the national debt is more than $14.3 trillion. This experiment proved that government spending does not stimulate private sector job growth. Government doesn’t create wealth. Government consumes wealth. The only jobs created by the government are government jobs. They don’t add value to the economy; they are a cost to the economy.
The fact is, we’re in this hole today because of our spending problem. Historically, spending has averaged about 20 percent of our gross domestic product. Today, and in recent years, spending has been near 25 percent of gross domestic product. This level of spending cannot be sustained, particularly when revenue has historically been around 18 percent of gross domestic product.
For my colleagues who think we can reduce deficits by increasing taxes, you need to understand that it doesn’t work. Professor Vedder of Ohio University has studied tax increases and spending for more than two decades. In the late 1980s, he co-authored, with Lowell Galloway also of Ohio University, a research paper for the congressional Joint Economic Committee that found that every new dollar of new taxes led to more than one dollar of new spending by Congress. Professor Vedder has now updated his study. Specifically, he found that “Over the entire post World War II era through 2009, each dollar of new tax revenue was associated with $1.17 in new spending.”
History proves tax increases result in spending increases. We know that increasing taxes is not going to reduce the deficit. Instead of going to the bottom line, tax increases are a license for Washington to spend even more.
History also shows that tax increases don’t increase revenues. Everybody thinks that if you raise the marginal tax rates, you will bring in more revenue. But the taxpayers, workers, and investors of this country are smarter than we are. Regardless of the rate, over the past 40 years, revenue has averaged about 18 percent of gross domestic product. Higher tax rates just provide incentives for taxpayers to invest and earn money in ways that reduce their tax liability.
You cannot tax your way out of this problem. We have a spending problem, not a revenue problem. That’s why I’m supporting the only plan that has been put forth to address our deficit and debt problem. The Cut, Cap and Balance plan passed the House with bipartisan support from 234 members. This plan is the only plan offered to cut spending in the near term. We need to halt and reverse the trend of the last two years when government spending increased by 22 percent, not even counting the failed stimulus program. It will also impose budget caps to get our spending down to a manageable level compared to our gross domestic product. Finally, it would impose a balanced budget amendment to our Constitution. It only makes sense to impose a requirement that we live within in our means. Washington proves again and again that it needs this kind of discipline.
I’d say to my colleagues, if you don’t support this plan, then offer your own plan. You know the debt limit must be increased. But you also know we must take action to reduce the future levels of deficits and begin to bring our debt down. Where is your plan to do that? Where is your budget resolution? How will you meet these responsibilities of elected office?
The trajectory of our debt is alarming. It will soon undermine our economy and our economic growth. If we do nothing, our children and grandchildren will have fewer economic opportunities than we have had. This is a moral issue. Without a plan to put our fiscal situation on a better path, the next generations will have a lower quality of life than the one we’ve experienced. We can’t let that happen.
We must take action to correct our course. I urge my colleagues to support the Cut, Cap and Balance plan.
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