July 11,2001

Grassley on the Tax Cut, Budget Surplus and Medicare Trust Fund

Statement by Senator Chuck Grassley, of Iowa
Ranking Member, Senate Committee on Finance
News Conference on the Tax Cut, Budget Surplus and Medicare Trust Fund
Wednesday, July 11, 2001

They say all is fair in love and war. Apparently, the same goes for the politics of taxes and
the nation’s entitlement systems for retired Americans. It’s good for public policymaking to fall
under the political microscope and be dissected by different points of view. But during the last
week, the art of debate has turned into blatant demagoguery.

Predictably, big spenders in Congress were opposed to trimming tax revenue this year. It
means there’s less for new government spending. But it’s plain old wrong to mislead Americans into
believing that we can’t provide the kind of substantial tax relief we did with strong, bipartisan
support and at the same time protect Medicare.

There were three main reasons for the tax relief package that earned the bipartisan backing
of 62 senators.

Americans are over-taxed. Federal tax receipts are at the highest post-World War II levels.
Tax cuts clear the path to economic growth. Cutting taxes improves the quality of life of Americans
working hard to make ends meet. It leaves families with more money to spend on school clothes,
car payments, and home improvements and repairs.

Tax cuts change expectations for workers and investors in the long term. Businesses can
grow and create jobs. Given the current state of the economy, just think where we’d be today if we
had not passed the historic tax cut this spring. We’d all be talking about the need to cut taxes to
stimulate the economy. Instead, people across the country are looking forward to rebate checks this
summer. They know they’ll have a lighter tax load in the years ahead.

There was also a big enough tax surplus. With it, we made the tax code more fair with the
increased child credit and its added refundability, marriage tax relief, the education tax provisions,
and the IRA and pension provisions. We provided the greatest reduction in overall tax burden for
lower-income taxpayers. Altogether, this tax relief package makes our tax system more progressive.

Bottom line, the carefully constructed tax legislation enacted last month rests on a solid
foundation. It shouldn’t be dismissed, obfuscated or distorted by budget demagoguery.

This month, the charge has been made that supporters of the tax cut are raiders of the
Medicare trust fund. In my book, honesty is the best policy. And the truth is, no one is stealing
money from the trust fund. Trust fund balances have not been changed one thin dime because of the
bipartisan tax bill just enacted. The Medicare trust fund can only be reduced by payments for
Medicare benefits. That’s the way it should be. Both Republicans and Democrats have endorsed
that principle.

We’re going to strengthen and improve the Medicare program for beneficiaries. The Senate
added $300 billion to the budget resolution to update the program and add a prescription drug
benefit. The budget surplus remains big enough for the tax cut and Medicare legislation. The
challenge for lawmakers is to hold down excessive spending. What we’ve seen during the last week
is dangerous. It’s politicking getting in the way of policymaking. Earlier this spring, 48 Democratic
senators voted for a tax relief bill that was just $100 billion less over ten years compared to the tax
bill ultimately enacted. A majority of Democrats supported tax relief that was about the same
magnitude as the final bill. So why are some Democratic senators pointing fingers at the
Republicans and other supporters of the tax cut?

Ensuring the viability of Medicare is one of Congress’ most important responsibilities.

Misleading charges and demagoguery about the budget and tax policy get in the way of the serious
debate that we need to have right now. It’s time to improve the Medicare program and add a
prescription drug benefit. And that’s going to take a strong dose of non-partisan treatment that puts
public policy over political gain.