The U.S. Senate voted down the Cut, Cap, and Balance Act of 2011 today, three days after the House approved that Republican budget-cutting plan. All members of the Democratic caucus present, including Iowa’s Tom Harkin, voted for a motion to table the motion to proceed with considering the bill (roll call). All Senate Republicans present, including Iowa’s Chuck Grassley, voted against the motion to table. Tabling the bill in effect kills it for this session of Congress.

After the jump I’ve posted the floor statement Grassley submitted yesterday in support of the Cut, Cap, and Balance Act. He argued that raising taxes would neither increase federal government revenues nor reduce the federal deficit. He described Cut, Cap, and Balance as “the only plan that has been put forth to address our deficit and debt problem” and claimed it would “impose budget caps to get our spending down to a manageable level compared to our gross domestic product.” This piece by Michael Linden and Michael Ettlinger points out that the “last time federal spending dipped below 18 percent of GDP was 1966.” Click through for a chart showing how severe spending cuts would have to be to bring fiscal year 2016 spending down to 18 percent of GDP. Robert Greenstein of the Center on Budget and Policy Priorities described this bill as “one of the most ideologically extreme pieces of major budget legislation to come before Congress in years, if not decades.”

I’ve also posted below Harkin’s floor statement opposing Cut, Cap, and Balance. He reminded colleagues that President Ronald Reagan warned Congress against refusing to raise the debt ceiling, and that Reagan supported “corrective income tax increases in 1982 and 1984” when he realized that “his 1981 tax cuts were resulting in large deficits.” Harkin also claimed the Republican bill would defund Medicare by putting “the federal government in a fiscal straightjacket, allowed to spend no more than in the mid-1960s, before Medicare.”

Floor Statement of Senator Chuck Grassley

Cut, Cap and Balance Act of 2011

Thursday, July 21, 2011

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.

July 21, 2011

Harkin Invokes 1987 Reagan Default Warning in Senate Floor Speech

Urges Senate Defeat of “Cut, Cap and Kill Medicare” Measure

As Prepared for Delivery

WASHINGTON, D.C. – Senator Tom Harkin (D-IA) continued a series of floor speeches on the economy and the middle class in America today by invoking a warning from then-President Ronald Reagan about the risk of defaulting on our debt obligations.  Harkin urged the Senate to defeat a House measure he called “Cut, Cap and Kill Medicare” and instead find a balanced approach to deficit control.  To view previous Harkin floor speeches on the economy, click here.

“I urge my colleagues to vote against this destructive legislation,” said Harkin.  “Instead, at this eleventh hour, let us put ideology aside.  Let us come together in a spirit of compromise, for the good of the country, to pass a balanced package of spending cuts and revenue increases to bring federal deficits under control.”

The full text of his remarks, as prepared for delivery, is as follows.

“Mr. President, why are Republicans refusing to agree to raise the debt ceiling – something we have done 89 times since the 1930s, including seven times during the presidency of George W. Bush, and 18 times under President Reagan?

“In September of 1987, President Reagan used his weekly radio address to urge Congress to increase the debt ceiling.  He said:  “Unfortunately, Congress consistently brings the Government to the edge of default before facing its responsibility. This brinkmanship threatens the holders of government bonds and those who rely on Social Security and veterans benefits. Interest rates would skyrocket, instability would occur in financial markets, and the Federal deficit would soar.”

“President Reagan continues:  “The United States has a special responsibility to itself and the world to meet its obligations. It means we have a well-earned reputation for reliability and credibility-two things that set us apart from much of the world.”

“Mr. President, today’s Republicans, who constantly invoke President Reagan as a role model and a kind of patron saint, would do well to heed his words.

“I also remind my colleagues that when President Reagan realized that his 1981 tax cuts were resulting in large deficits, he supported corrective income tax increases in 1982 and 1984.  In stark contrast to President Reagan’s example, today’s Republicans reject any compromise that requires raising any new revenues from the wealthy.

“Mr. President, nobody is talking about raising income tax rates.  We are talking about eliminating tax expenditures – special-interest tax breaks that Senator Coburn has described as “corporate welfare.”  As the distinguished chair of the Senate Budget Committee, Senator Conrad, pointed out this morning, tax expenditures now total more than $1 trillion, more than all discretionary appropriations in the Federal budget.  The wealthiest one-percent of Americans reap a whopping 26 percent of the benefits from these tax expenditures.  

“So, Mr. President, many Congressional Republicans are perfectly willing – indeed, they are eager – to slash Medicare, Social Security, Medicaid, education, and other programs that undergird the middle class.  But they have made it clear that they would rather default on the debt than agree to a compromise that requires shared sacrifice from the most privileged people in this country.  

“Mr. President, the legislation before us would enshrine in our Constitution a requirement that two-thirds supermajorities in both the House and Senate approve any measure to increase revenue.  As a practical matter, this would permanently lock in the benefits of current tax breaks for the wealthy, like the outrageous 15 percent tax rate for hedge-fund billionaires.  And by building a firewall to protect tax breaks for the wealthiest Americans, this legislation would shift even more of the burden of deficit-reduction on the backs of middle class Americans.

“Where did Republicans come up with this idea of capping federal spending at 18 percent of GDP?  This is not just an arbitrary number.  It is a number with a purpose.  The last time federal spending was at 18 percent of GDP was in 1966, when Medicare was just starting.  The most elementary budget arithmetic dictates that you cannot limit the federal budget to 18 percent of GDP and continue to sustain Medicare – not unless you are willing to cut the rest of the federal discretionary budget by nearly 50 percent.  

“This new assault on Medicare comes hard on the heels of the Republican budget – the Ryan budget.  And what is the centerpiece of that budget?  Its plan to dismantle Medicare and replace it with a voucher program that will require seniors to pay an additional $6,400 out of pocket each year.

“So Republicans have now opened two fronts in their assault on Medicare.  The Republican budget takes a direct, open approach:  It simply dismantles Medicare.

“And, now, this so-called balanced budget amendment takes an indirect approach.  In future years, it would defund Medicare.  It would put the federal government in a fiscal straightjacket, allowed to spend no more than in the mid-1960s, before Medicare.

“This legislation is also a direct threat to Social Security, another program that is vitally important to the middle class. Social Security is the bedrock of the American retirement system, ensuring that seniors are able to enjoy their golden years without falling into poverty or moving back in with their kids.

“Unfortunately, as private savings and pensions have declined, Social Security’s modest benefit of around $14,000 a year has become the largest source of retirement income for two-thirds of our seniors.

Social Security remains rock-solid financially for the next quarter of a century.  But we need to make modest changes to ensure its long-term viability. The most sensible approach is to remove the cap on payroll taxes for those making over $106,800,which in conjunction with some other modest changeswould shore up the system for the next 75 years.

“However, as I said, the legislation now before us would require a supermajority vote in both houses of Congress in order to raise any additional revenue.  This would rule out the most obvious reform needed to ensure the long-term viability of Social Security.  This would almost certainly lead to sweeping benefit cuts, endangering the retirement security of our middle class.

“And that is exactly Republicans’ goal: To radically downsize or dismantle not just Medicare and Social Security, but the entire Federal government.

“I cannot emphasize too strongly that Republicans in Congress are rejecting any notion of shared sacrifice.  They demand that we dismantle Medicare and slash Social Security, education, infrastructure and other things that undergird the middle class.  They shred the safety net for the most vulnerable people in our society.  But they insist on shielding the wealthiest people in our society from contributing even one dollar to deficit reduction.

“Mr. President, I have a broader objection to the misguided legislation that is before us, today.  Why are politicians and policy-makers here in Washington so obsessed with the budget deficit, to the exclusion of other priorities?  I can assure you that the rest of America, beyond the Beltway, is concerned with a far more urgent deficit – the jobs deficit.  

“Members from both parties are demanding extraordinary funding cuts, trillions of dollars in cuts, with little concern as to the adverse impact on jobs.  But this is exactly the wrong approach.  It is the economic equivalent of applying leeches and draining blood from a sick patient, which is guaranteed to make him weaker, and may prove fatal.

“The fact is, in the short term, the Federal government should maintain robust funding for roads, bridges, schools and other infrastructure investments . . . as well as things like education, public health, and research . . . that keep millions of Americans employed and inject demand into our still-fragile economy.

“Deficit reduction is hugely important.  But our greatest challenge is the fragile economy and the jobs crisis, and the fact that our middle class is under siege.  Indeed, the middle class is being dismantled as fast as big corporations can ship our manufacturing jobs overseas.  People are losing their savings, health care, and pensions – and, in many cases, even their homes.  Now they fear that drastic budget cuts will destroy jobs, undermine their retirement security, and further damage the economy.    

Instead of this Republican plan, which is being sold through fear and fatalism, we need a budget that reflects the hopes and aspirations of the American people.  And we need to realize that there can be no real economic recovery, and there can be no return to fiscal balance, without the recovery of our middle class.  That is why our urgent, No. 1 priority must be helping to create jobs and putting people back to work.        

“It is time for a course correction.  We must stop the mindless march to austerity and retrenchment.  Smart countries, in tough economic times, do not just turn a chainsaw on themselves.

“I urge my colleagues to vote against this destructive legislation.  Instead, at this eleventh hour, let us put ideology aside.  Let us come together in a spirit of compromise, for the good of the country, to pass a balanced package of spending cuts and revenue increases to bring federal deficits under control.”