Grassley: Blue Dog’s Comment on Ending Pay-go Raises Questions of Intellectual Honesty

M E M O R A N D U M

To: Reporters and Editors
Fr: Jill Gerber for Sen. Grassley, 202/224-6522
Re: Blue Dogs and pay-go
Da: Friday, Nov. 7, 2008

Sen. Chuck Grassley, ranking member and former chairman of the Committee on
Finance, which writes tax policy in the Senate, has long called for intellectually honest
budgeting and uniform pay-go rule application from the House Blue Dog Democrats.
He’s made a series of floor speeches and comments to that effect. Today, a member of
the House Blue Dogs was quoted as saying it would be unfair to apply pay-go rules to
President-elect Obama’s plans. Grassley made the following comment on that statement.

“A member of the so-called fiscally responsible Blue Dogs is already calling for
the end of pay-go, two months before the new President is sworn in. If the Blue Dogs
really believed in pay-go, they would seek to apply pay-go rules regardless of which
party controls the White House. Today’s comments might reveal what Blue Dogs have
secretly believed all along – that pay-go applies only to tax relief they don’t like. That’s
intellectually dishonest and raises the questions about whether they were sincere about
pay-go in the first place.

“In addition, I’d encourage the Blue Dogs to consider Republicans’ advice that
spending increases in one area should be paid for with spending decreases in other areas.
There is $700 billion in unspecified, increased non-defense discretionary spending in the
Democratic budget over the next ten years. Instead of increasing federal government
spending by $700 billion, the Blue Dogs and other Democrats should reduce this increase
in new spending. Now is not the time to greatly increase the federal deficit by massive
spending increases. It’s the time for Congress, including the Blue Dogs, and the new
administration, to find ways to curtail spending and live on a budget the same way the
American taxpayers are forced to do. If the Blue Dogs and other congressional
Democrats don’t reasonably restrain the spending spree that they’ve been discussing, they
are going to greatly increase the federal deficit.”

Following is the Dow Jones Newswires story with the Blue Dog Democrat’s
comments. Following that are Grassley’s speeches on pay-go’s selective application.

Budget Rules Will Test Obama Tax, Healthcare Agenda

By Martin Vaughan
Of DOW JONES NEWSWIRES

WASHINGTON (Dow Jones)--An early test for President-elect Barack Obama will be
whether he can bridge divisions in his own party over deficits and budget rules. His
success on this front is crucial to his ability to enact much of his domestic agenda,
including health care reform and tax cuts, budget watchers say.

At issue is a fundamental difference in the way the Obama campaign accounts for the
cost of extending tax cuts that are now in place, and the way that Democratic lawmakers
have accounted for those costs.

The accounting difference is no small potatoes. The non-partisan Tax Policy Center
estimated the net cost of all of Obama's tax proposals at $2.9 trillion over ten years, using
the budget rules Congress must use. But using the Obama campaign's preferred budget
assumptions, the same proposals taken together actually would raise money for the
Treasury on net - to the tune of about $627 billion over 10 years.

"What Obama is talking about doing is fundamentally inconsistent with how
Democrats have been budgeting for the past two years," said Robert Bixby, executive
director of the Concord Coalition, a group that advocates for balanced budgets.

The key difference is that Obama assumes that tax cuts enacted in 2001 and 2003, and
temporary protections from the alternative minimum tax, will be extended indefinitely.
His campaign advisors argued that extending these tax cuts should be assumed to have no
cost.

The Congressional Budget Office, by contrast, assumes only what is in current law.
Since the tax cuts expire in 2010, CBO and Democratic pay/go rules assume that there is
a cost to the government of extending them.

Those rules would put Obama $2.5 trillion in the hole, according to Tax Policy Center
figures, before he even begins on healthcare, new tax or spending proposals. That's
because Obama has proposed extending many of those tax cuts and indexing the AMT
for inflation.

CBO cannot change its baseline to "build in" the cost of extending current tax cuts
unless Congress amends the 1985 Budget Act. More likely, observers said, is that House
and Senate Democrats will write their budgets in a way that exempts the 2001 and 2003
tax cuts, and AMT provisions, from pay/go rules.

Such a change might not be unwelcome to Democratic tax-writers who have been
saddled with coming up with revenue offsets to meet pay/go rules, one House aide said.
But it could be a hard sell with the budget chairmen, Rep. John Spratt, D-S.C., and Sen.
Kent Conrad, D-N.D.

"I don't think [the chairmen] will be real enthusiastic about doing any kind of baseline
changes," said Hazen Marshall, a partner at the Nickles Group and former Senate Budget
Committee staff director. "The question is, will the leadership or the White House prevail
upon them to change that view?"

Fiscally conservative House "Blue Dog" Democrats, who have pressed for pay/go
enforcement, will also have to be persuaded. Democratic leaders agreed to waive pay/go
rules in several instances over the past two years, but not before drawn-out squabbles
involving the Blue Dog coalition.

"Speaker Pelosi must find some accommodation for these two factions within her
Democratic caucus," said G. William Hoagland, a former aide to Senate Majority Leader
Bill Frist, R-Tenn., who is now Vice-President for Public Policy at CIGNA Corp.

"Or, and I don't think this would be a bad thing, Speaker Pelosi might have to reach
out to House Republicans to find a bipartisan majority on the future of pay-go rules in the
[next] Congress," Hoagland added in prepared remarks delivered Thursday at a
conference in Washington.

One tack Democrats might take is to argue that in light of the effects of the financial
crisis and the Bush administration's response - heaping on hundreds of billions in new
debt - yesterday's arguments about pay/go seem less important.

"I'm not sure the old rules are relevant anymore," Rep. Jim Cooper, D-Tenn., who is a
member of the House Blue Dog Coalition, said in an interview.

Cooper argued that Obama shouldn't have to live within the pay/go rules that
congressional Democrats sought to apply to President George W. Bush's proposals. "It
would be unfair to the new president to put him in a budget straitjacket," he said.

Cooper said Obama should convene a bipartisan group to develop a new approach to
budgeting and pay/go, that should also look at U.S. government obligations and debt that
is not currently counted in the CBO estimates.

"I think we've got to first get hold of the real numbers. We're not even close to the real
diagnosis," he said.

 -By Martin Vaughan, Dow Jones Newswires; 202-862-9244;
martin.vaughan@dowjones.com

Floor Statement of Senator Chuck Grassley:
Response to House Blue Dog Democrats on Their Requirement of Tax Increases for
Extensions of Expiring Tax Relief
Tuesday, June 17, 2008

We’ve been having a lot of discussion over whether extensions of expiring tax
relief must be offset with tax increases. I won’t rehash all elements of the debate here.
The general difference between Republicans and Democrats on this point is important.
Why? It is important because it is the hurdle to a bipartisan, sign-able bill on the AMT
patch and extenders.

I respect the Blue Dogs’ call for fiscal discipline. It is critically important in this
era of deficit spending. Revenues are not the problem. We are on a revenue path that is
above the historic average in terms of Federal revenues as a share of gross domestic
product. So, when the Blue Dogs bark about deficit reduction, we, on this side, will howl
with them. But the Blue Dogs continue to bite only on the tax side. When it comes to
spending cuts, we don’t hear much more than a whimper out of the Blue Dogs. On our
side, that tax hike-hungry dog won’t hunt.

We’re seeing the story of this Huckleberry Hound chart play out in recent
legislation. On the additional GI education benefits, the Blue Dogs held out for a tax
increase to offset the new spending. That objection is now history. We have another
popular new spending proposal, extension of unemployment benefits. The Blue Dogs
said no offset was required because it is quote “temporary” spending. Now we have the
AMT patch and extenders. Because it is current law tax relief, the Blue Dogs are
insisting on tax increases.

As with the GI benefits package, we’ll meet the Blue Dogs’ challenge. We’ll put
our money where our mouth is. The budget resolution, written by the Democratic
Majority, and supported by the Blue Dogs, contains $300 billion in non-discretionary
appropriations spending above the baseline. This is brand new extra spending not
subject to pay-go. The AMT patch and extenders bill loses approximately $110-$120
billion in revenue over 10 years.

After being challenged by the Blue Dogs to offer up a spending cut, I did so last
week. Instead of raising taxes, I said, let’s look at the new non-defense discretionary
spending built into the budget. We could let that new undefined future spending expire
by an amount necessary to make the AMT patch and extenders bill deficit neutral. Many
on the other side say it is harmless to let defined current law tax relief expire. If that is
true, then it ought to be easier to let undefined future spending expire.

After meeting the dollar amount in the spending cut challenge, some in the Blue
Dog coalition still complained. They said we had to define the spending to be cut.
That’s a bit curious because the spending is future non-defense discretionary spending.
Over the next 10 years, appropriators will spend this new extra money in future
appropriations laws. Those bills have not been written yet. So, I don’t know how I
respond with any more specificity. I’ve provided the amount and the source of funds.
Last time I checked a dollar of spending cut is the same as a dollar of foregone revenue.
If we apply that basic math to taxes and spending, we might achieve fiscal discipline.

For six years, for 2001, and 2003 through 2006, the budget resolution provided the
necessary resources to allow the Finance Committee, usually in a bipartisan manner, to
realistically address the demands of tax policy. I’m disappointed to say this year, like last
year, is different.

The people spoke in November 2006, and for this year and last year, the Democrats are in
the majority and in control the Congressional budget process. As Ranking Republican on
the Finance Committee, like last year, I was not consulted, at any point by our
distinguished Chairman on this year’s budget resolution. Unfortunately, after reviewing
the resolution conference agreement, it is clear that it does not realistically address the tax
policy needs of the Finance Committee.

I’m going to take a look at what the budget means for American taxpayers in two timeframes.
The first will be the near-term implications. The second will be the long-term
implications.

I divide the near-term and long-term along the time-line of the start of the next
President’s term. That date, of course, is January 20, 2009. So, the near term period
starts today and ends with the entry of the new Administration. The long-term period
starts with the entry of the new Administration.

Let’s take a look at what this budget says to the American taxpayer in the near-term.
For the hard-working American taxpayer, the news is not all bad. I compliment the
distinguished chairman for preserving the un-offset AMT patch for this year in the
budget. He had to concede a new point of order to the House, but my guess is that there
will be 60 votes to waive it when the AMT patch is brought up.

The problem 26 million families face is the uncertainty of action on the AMT patch for
this year. I have a chart here. It is the estimated tax voucher. Many of the 26 million
families facing the AMT technically should be adjusting their withholding upward or
filing this 1040 ES form with a check for a portion of the AMT they owe.

As a matter of fact, many of these 26 million families should’ve filed the 1040 ES over a
month ago, on April 15th. That’s when the first quarter’s estimated tax payment was
due. That’s what the tax law says now.

It’s all a problem because the House Democratic Leadership won’t send us an un-offset
AMT patch bill. Why won’t the House Democratic Leadership send us an un-offset
AMT patch bill?

Here’s the problem. The House Blue Dog Democrats will not support an un-offset AMT
patch bill. Now, why do the Blue Dogs matter? The answer is the Blue Dogs are a
growing presence in the House. Most of the seats that shifted from the Republican
column to the Democratic column in the 2006 election are occupied by Blue Dogs. The
Democratic-leaning Washington punditry and Democratic Leadership have gloated about
the “trifecta” in House Special Congressional elections this year. By trifecta, I’m
referring to the three House races that have switched from Republican to Democrat this
year. All three of those members have joined or intend to join the Blue Dog coalition.

Lord knows, we’ve heard a lot of gloating from the other side about these three new socalled
conservative Democrats. We’ve also heard from a lot of Republicans crying in
their favorite beverages about this outcome.

The Blue Dogs have had a heavy hand in this budget and are the leading obstacle to
getting an un-offset AMT patch bill done. So, if the Blue Dogs are representing
themselves as strict agents of fiscal responsibility, it is a fair question to ask about their
definition of fiscal responsibility.

So, let’s take a look. I have a chart here. The chart contains a depiction of perhaps the
most famous blue dog. I’m referring to Huckleberry Hound. Here he is. As the most
famous Blue Dog, Huckleberry Hound is showing us the definition of fiscal
responsibility from his Blue Dog perspective. Huckleberry Hound barks “fiscal
responsibility.” American taxpayers should beware Huckleberry Hound’s bite is “higher
taxes.” With respect to spending cuts, all we get is a whimper. It is “no spending cuts.”

Maybe I’m being too tough on Huckleberry Hound and his Blue Dog friends. But I’ve as
yet to see the empowered Blue Dogs propose spending cuts for deficit reduction. All I’ve
seen is higher taxes. Like their liberal brethren, Blue Dog Democrats only look to the
American taxpayer to fund new spending. We’re seeing it, once again, on the war
supplemental bill. Why couldn’t they find a spending cut to pay-for the popular vets
benefits package? Why always go to tax increases?

The reason I point this out is that this group of House members is holding up our ability
to pass an AMT patch bill in a form that can pass the Senate and be signed by the
President. The Blue Dogs’ bark of fiscal responsibility is stalling relief for 26 million
AMT families. The Blue Dogs insist on getting their bite of $62 billion in new taxes as a
condition to sparing these 26 million families from the AMT. I agree with the Blue Dogs
on the importance of fiscal responsibility. And I stepped up to the plate over the years
with plenty of revenue raisers. Just ask the K Street crowd. They’ll let you know. I
stepped up to the plate with spending cut reforms on the farm bill. But, the Blue Dogs
whimper when it comes to spending cuts. They only look at the taxpayers for fiscal
responsibility.

And this obsession with raising taxes, most pointedly advanced by the Blue Dogs, is a
theme that runs through this budget.

I’m going to look to turn to the short-term tax legislative agenda and examine how the
budget squares with what we need to do.

As a farmer, I’d like to think we country folks can teach city folks a lesson or two. The
first chart involves the method a lot of us farmers use to get our water. You’ll see a well
in this chart. Here’s the top of the well. You can see it is a long well and there’s some
water way down there at the bottom. But most of the well is dry.

Now, what we’re told by those who drew up the budget is that the tax writing committees
will find the money. We’ll find the money, they say, to pay for all this time-sensitive tax
business. These are all pending matters. They’re pieces of legislation, on both sides, we
say we want to get done before this session ends.

The offset well shows about $58 billion in known, identified, and scored revenue raisers
the Senate Democratic Caucus supports. I used this chart about several months ago. I’ve
updated it to assume the farm bill will become law. As a rule of thumb, the Finance
Committee tax staff have developed about $1 billion per month in new offsets. That
figure of $1 billion per month is in line with the historical average. How reliable is that
average and can we count on it?

As a farmer, I know something about the predictability of well water. You hope you’ll
get rain and it’ll give you a decent level of well water. And as a former Chairman and
now Ranking Member of the Finance Committee, I know something about revenue
raisers. I’ve been there and done that.

When I was Chairman of the Finance Committee, I aggressively lead efforts to identify
and enact sensible revenue raisers aimed at closing the tax gap and shutting down tax
shelters. And as Ranking Member, I continue to look for ways to shut off unintended tax
benefits. So I consider myself to be a credible authority on what is realistic when it
comes to revenue raisers. From 2001 through 2006, Congress enacted over 100 offsets
with combined revenue scores of $1.7 billion over 1 year, $51.5 billion over 5 years, and
$157.9 billion over 10 years.

So if you look at recent history, we can realistically figure the tax staff will find about $1
billion a month. Right now, all we can find that is specified, drafted, and scored is $58
billion.

The revenue raising well shows about $58 billion in available defined and scored offsets.
Defenders of the resolution will say a virtual cornucopia of revenue raisers are there from
the tax gap and shutting down offshore tax scams. I take a back seat to no one on
reducing the tax gap and shutting down offshore tax shelters. I’ve got the scars to show
from my efforts over the years. But the defined and scored tax gap proposals are
included. Likewise, a proposal targeted at tax haven countries and other offshore
activities is included.

The well has about $58 billion of offset water. This budget anticipates Congress that will
be thirsty for this limited group of offsets. On the thirst or “demand” side, you’ll see the
bucket will be busy.

On the demand side, I’ve talked about next year’s AMT patch. There’s $74 billion for
the patch for next year. There’s $16 billion for tax provisions that ran out at the start of
this year. That estimate, by the way, is probably pretty low. Then there’s $29 billion for
next year’s extenders. There’s $15 billion for the energy tax bill. Finally, there’s $5
billion for the FAA re-authorization bill.

The pending, time-sensitive tax business totals $139 billion. Subtract that from the
offsets and we’re short about $80 billion.

I haven’t even included the demands from the myriad reserve funds. Since we know,
from almost a decade of fiscal history, that the Democratic Leadership can’t propose
spending cuts, we know the new reserve fund spending will be paid for with tax
increases. It’s been shown to be the case since the Democrats took power in January
2007. As I said earlier, the Blue Dogs are leading proponents of this tax and spend
practice.

So, it doesn’t add up. The budget plan for tax legislative business is out of balance. It’s
out of balance by $80 billion. Even if the Senate were to adopt some of the new tax hikes
the House has come up with, we’d be substantially out of balance. I might add that I’ve
included in the Senate offset accounting proposals the House has rejected. So, I think
this is a conservative estimate.

What’s going to happen? How do we bridge the $80 billion gap? Either the tax relief is
not going to happen or we’ll add that to the deficit. That is a frightening proposition. I’d
hope that the shortfall would be confined to the short-term, but that’s not the case. Over
the long-term, it gets much worse.

Let’s take a look at the budget’s assumptions about revenue over the long-term. Over the
five year budget window, going out to 2012, keeping existing policies in place will have
a revenue effect of over $1.2 trillion. This includes AMT relief, extension of the
bipartisan 2001 and 2003 tax relief, and extending other broadly supported expiring
provisions. In the aggregate, this budget appears to provide $340 billion in new
resources for extending these policies over the 5-year window.

Look further, and you’ll find a complicated obstacle course to making any of this tax
relief happen. To me, the conditional tax relief language is almost bait and switch.
Senator Gregg has described in great detail how this mechanism would work. To me, it
is as convoluted as a Rube Goldberg type of invention. Here’s a chart. The chart shows
a Rube Goldberg potato peeler invention. If you want to peel potatoes, I’d tell Rube
Goldberg to use a potato peeler. If you really mean to deliver tax relief, I’d tell the
Democratic Majority, write it into the resolution. Make it clear. Don’t use this Rube
Goldberg mechanism.

Suffice it to say that the supposed $340 billion in tax relief targeted for 2011 and beyond
assumes it will not be used for future spending. Does anybody really believe that this
Democratic majority will not spend future tax relief if given the chance? If your answer
is yes, then I’ve got a few bridges in Iowa you may be interested in buying.

Under this budget $1.3 trillion in expiring entitlement spending is assumed to continue.
It’s right in the CBO outlook. That’s right, Mr. and Mrs. Taxpayer, your taxes will go up
by almost $1.2 trillion unless Congress raises taxes to offset the revenue loss. When it
comes to expiring entitlement spending, it’s a different story. No requirement for
Congress to do any heavy lifting. This emphasis on higher taxes and higher spending is
reinforced by pay-go. So, that’s this budget’s notion of fiscal responsibility:
unrestrained spending is good; higher taxes are good.

Over the five years, the budget assumes a dramatic tax increase – at least $1.2 trillion. In
2011, the bipartisan tax relief plans will expire. Some folks will call these provisions the
Bush tax cuts. I suppose that term, “Bush tax cuts,” arises from polling by the campaign
outfits on the other side. It is true President Bush signed both bills, but the bipartisan
compromises occurred in the Finance Committee. In 2011, President Bush will have
been gone from office for a couple of years. You can call this package of tax relief for
virtually every American the Bush tax cuts, but for the taxpayer, it will be a tax increase.

I’d like to run through a couple of examples. The first involves a family of four. There’s
the husband, his wife, and their two children. This family makes $50,000 in income.
That’s right about the national median household income today.

For example, the Census Bureau stated that, for 2006, the national median household
income was $48,200. Under the Democratic Leadership’s budget, this family will face a
tax increase of $2,300 per year. That’s a loss in their paychecks of about $200 per
month. It’s a hit on their yearly budget of $2,300. Where I’m from, that’s a lot of
money.

I’ll give you another example. This one involves a single mom with her two children.
She earns $30,000 a year. In 2011, under this budget, she and her family run straight into
a brick tax wall. That’s a brick wall of $1,100 per year of taxes. That’s almost $100 a
month out of this family’s budget.

Now, some on the other side will say they only excluded top rate taxpayers and other
high-income folks from tax relief. Don’t believe it. The facts are otherwise. Low
income folks, including millions of seniors, pay no tax on their dividend or capital gain
income. If this budget stands, even with the Baucus amendment, millions of these lowincome
taxpayers, especially seniors, will pay a 10% rate on capital gains and could pay
as high as a 15% rate on dividends.

Nationally, over 24,000,000 families and individuals reported dividend income. In Iowa,
for instance, over 299,000 families and individuals claimed dividend income on their
returns. There are not 299,000 millionaire families and individuals in Iowa. Nationally,
we’re talking about over 9,000,000 families and individuals who reported capital gains
income. In Iowa, we’re talking about over 127,000 families and individuals.

There are many marginal rates, other than the top rate, that would rise if this budget
stands, even with the Baucus amendment. The 25% rate, which for 2007, starts at
$31,850 for singles and $63,700 for married couples, would rise 3 points to 28%. The
28% rate would rise 3 points to 31%. The 33% rate would rise to 36%. The top rate
would rise from its current 35% level to 39.6%. To sum up, even with the Baucus
amendment added to this budget, there would be marginal rate increases on millions of
taxpayers. Those marginal rate increases would reach taxpayers with taxable incomes as
low as $31,850 for singles and $63,700 for married couples.

Now, what I just described is accurate only if the Democratic Leadership intends to
follow the letter and spirit of the Baucus amendment. If you look at last year’s track
record, the House neutered the effect of the amendment in the conference agreement.

They created a Rube Goldberg type of mechanism to impede the amendment. As I
pointed out a few minutes go, that mechanism is back. Of course, after the budget
conference report was agreed to all talk and action around the amendment ceased.
So I wouldn’t put much stock in the follow-through on the Baucus amendment. The
distinguished chairman points out that since last year’s budget, we passed tax relief of
$50 billion for last year’s AMT patch. He’ll also point to the stimulus package passed
earlier this year. The senior senator from North Dakota is correct that those tax relief
packages did pass. He uses that assertion to counter the assertion from our side that there
is a $1.2 trillion tax increase in this budget. The distinguished chairman omits a critical
fact in his assertion, however. The un-offset AMT patch passed only because Senate
Republicans and the Administration insisted that we not use the AMT problem as a
money machine for current and future spending. If the Democratic Caucus had prevailed,
the AMT patch would have been offset. Likewise, on the stimulus bill. There was
bipartisan consensus that economic stimulus should not be a tax increase.

When you step back from the differences across the aisle on this budget, you probably
won’t be surprised to find similar differences among the presidential candidates.

Generally, the candidates on the other side have proposed to take heavily from the
taxpayer under the guise of fiscal responsibility. This is true when they’re talking about
ending the bipartisan tax relief plans of 2001 and 2003. It’s true when they’re talking
about the same loophole closers for a myriad number of expansions of existing
entitlements or creating new ones. Nowhere is there discussion of reining in spending.
So, the tax side of the federal ledger is the only route to fiscal responsibility from the
perspective of the candidates on the other side.

I’ll give you one telling example. One Democratic candidate has proposed to repeal the
bipartisan tax relief plans for taxpayers earning above $250,000. This proposal raises
$226 billion over 5 years and 10 years. A key fact is that the source of that revenue
peters out over the next few years because under current law the tax relief sunsets at the
end of 2010.

Like the Democratic leadership’s budget, the candidates on the other side over-subscribe
the revenue sources from proposals that are popular with the Democratic base.
The deficiency can only be made up in three ways. One, other undefined sources of
revenue would need to be tapped. Taxpayers should rightly be worried about that
avenue. Two, the proposed spending plan would need to be abandoned or curtailed.
There is not much history, on the Democratic side, of this avenue being taken. Third, add
to the deficit for the cost of the new programs. Unfortunately, this avenue has been taken
far too many times.

We’ll hear a lot of criticisms of the Republican candidate, Senator McCain, from those on
the other side. They’ll argue, like the President’s budget, a continuation of current law
levels of taxation “costs” the Federal Government too much revenue. They’ll argue that
the spending increases they propose are more important than the restrained levels of the
President’s budget. And they’ll argue that, despite the record tax hikes in their budget,
entitlement reform is a matter for another day.

But, in fact, Senator McCain’s plan intends to keep the revenue take where it as a share
of the economy. You see revenues average about 18.3 percent of the economy. The
state of the economy affects revenues more than anything else. There are dips when we
have been in recession and peaks when growth was high. Our side cares about keeping
the revenue line at a reasonable level. We don’t see the merits of an imperative behind a
growing role for government in the economy.

The other side disagrees. They implicitly or explicitly reject our premise that the of
government needs to be kept in check. That view is best expressed in an editorial, dated
October 22, 2007, from the New York Times. The lead paragraph says it best. I quote:
“President Bush considers himself a champion tax cutter, but all the leading Republican
presidential candidates are eager to outdo him. Their zeal is misguided. This country’s
meager tax take puts its economic prospects at risk and leaves the government ill
equipped to face the challenges from globalization.”

The bottom line is the New York Times directly states the view behind this budget and the
position of the Democratic candidates. From this perspective, the historical level of
taxation is not appropriate as a measure. The New York Times implies that the Federal
Government must grow as a percentage of our economy, by at least 5-8 points.

If we were to follow the path suggested by the Times, the government’s share of our
economy would grow by one-third. One-third. The Democratic Leadership’s budget
takes some big steps on that path. So do the campaign proposals of the Democratic
Presidential candidates.

Our Republican Conference takes a different view. America is a leading market
economy. American prosperity and economic strength in our view is derived from a
vigorous private sector that affords all Americans the opportunity to work hard, save, and
invest more of their money. A growing economy is the best policy objective. It makes
fiscal sense as well. Fiscal history shows that, despite criticisms to the contrary, the
bipartisan tax relief plans drove revenue back up after the economic shocks we suffered
in the early part of this decade.

I’m referring to the stock market bubble, corporate scandals, and 9-11 terror attacks.
Revenues bounced back when the economy bounced back. The revenue outperformed
CBO projections by a significant margin.

Folks on our side, including our Presidential candidate, do not take this data lightly. We
believe the bias ought to be against growing the government, not the other way around.
This fall, the American People will be making a big choice about the future. Folks talk a
lot about change. Voters are focusing on change.

America sits in a global economy that is rapidly changing. If, by change, Americans
want to raise revenues sufficient to grow the government by one-third, then this budget
sets forth the path. If, by change, Americans want to keep the of government in
check, keep taxes low, and provide our citizens with the freedom and opportunity to
respond to the changing world, then this budget is not the right path. The choice is clear.

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