Hatch Blasts President Obama’s Budget for FY2012 During Speech on Senate Floor
“This budget is, quite simply, an abdication of adult responsibility. And it is a particular abdication of the responsibility of the President of the United States, who takes an oath to preserve, protect, and defend our Constitution.”
WASHINGTON – During a speech on the Senate floor today, U.S. Senator Orrin Hatch (R-Utah), Ranking Member of the Senate Finance Committee, blasted President Obama’s proposed budget for FY2012 for failing to address the nation’s ongoing spending-fueled debt crisis.
The following are excerpts from his speech:
On the Budget’s Failure to Reduce the Deficit:
“The Administration is out there today touting its fiscal responsibility. Yet, its ten year deficit reduction target is smaller than this year’s deficit. The President’s much touted five-year freeze on discretionary spending, which will save $400 billion, is smaller than the Congressional Budget Office’s recent upward revision of the 2011 deficit. Spinning this budget as the fiscally responsible thing to do betrays a profound lack of respect for the intelligence of American citizens.”
On Turning a Blind Eye to the President’s Fiscal Commission Recommendations:
“It issued a report recommending over $4 trillion in cuts, including adjustments to entitlements. It offered controversial, but appropriately bold, proposals to get our nation back on the right track. The President and his team looked at those proposals and bravely decided to leave this problem to the next administration and future generations. Clearly, I am not a fan.”
On the $1.6 Trillion Job-Destroying Tax Hikes:
“Even with $1.6 trillion ¬— and possibly more — in job killing tax increases in this budget, it still comes nowhere close to reining in our deficits and debt. For years we have heard Democrats say that if the rich and businesses paid their fair share in taxes, we could balance the budget and reduce the debt. Well, they sure tested it out in this budget. They soak the so-called rich and American business with a fire hose, and yet we are still facing trillions in debt and hundreds of billions in deficits. After the despised Bush tax cuts expire and undermine small business job creation, according to the President’s own numbers we will still have to borrow an additional $7.2 trillion through 2021 to pay the bills that are coming due from the Obama Administration’s spending policies.”
On Propping Up the Obama Administration’s Ongoing Spending Spree:
“The President’s budget, with its massive new tax increases and permanent deficits, demonstrates yet again that our problem is spending. Our budget deficits are being driving by spending. Spending has not grown arithmetically. Spending has not grown geometrically. Spending has grown exponentially.”
A full copy of the speech, as prepared for delivery, follows:
United States Senator Orrin G. Hatch
Remarks, As Prepared for Delivery, before the United States Senate
The Fiscal Policy Choice Is Clear
February 14, 2011
Today the President released his budget for Fiscal Year 2012.
If this was his idea of a Valentine’s Day gift to the American people, he has an odd way of showing his affection.
It is the equivalent of taking your fiancé to dinner, asking her to marry you, and then leaving her to take care of the check, your maxed out credit cards, an underwater mortgage, and the bill for the ring.
This budget is, quite simply, an abdication of adult responsibility.
And it is a particular abdication of the responsibility of the President of the United States, who takes an oath to preserve, protect, and defend our Constitution.
Our economy is still dealing with the hangover of the 2008 economic collapse — the greatest fiscal crisis in several generations.
Our recovery has been sluggish — and it is not being helped by this Administration’s regulatory overload and Obamacare, which is set to kill 800,000 jobs.
Yet we can already see a still larger crisis approaching.
This is nothing short of an existential challenge.
Continued deficits and accumulated debt are a genuine threat to individual liberty, continued prosperity, and national security. Absent immediate action — and let me stress that this needs to be immediate action — we face a future where our union is less — not more — perfect, and where government will stand in the way of enterprising businesses and citizens whose only wish is the opportunity to thrive.
Yet the President’s response to this impending disaster is to vote present.
His response was to pass the buck.
With due respect, the budget released today is a sorry joke.
I would hate to be the White House staffers forced to spin this budget as a step in the right direction.
The United States is demanding a Churchill on the issue of deficits and debt.
But the Administration has delivered us a Chamberlain.
Let me break this down.
The Administration is going to reduce the deficit by $1.1 trillion over ten years.
That sounds like a mighty big number.
And I am sure that the White House has some consultants who have told them that the American people can be duped into thinking that this represents meaningful deficit reduction.
Let me be clear.
This is not meaningful deficit reduction.
The Administration wants to reduce the deficit by $1.1 trillion over ten years.
And what does the Administration project the deficit will be for this fiscal year?
$1.65 trillion. At 10.9 percent of the gross domestic product, this is the largest deficit as a share of the economy since World War II.
But it is consistent with the way Democrats have behaved since taking over Washington.
In 2010, the deficit was $1.3 trillion.
And in 2009?
So let’s put this in perspective.
The Administration is out there today touting its fiscal responsibility.
Yet, its ten year deficit reduction target is smaller than this year’s deficit.
The President’s much touted five-year freeze on discretionary spending, which will save $400 billion, is smaller than the Congressional Budget Office’s recent upward revision of the 2011 deficit.
Spinning this budget as the fiscally responsible thing to do betrays a profound lack of respect for the intelligence of American citizens.
This budget contains $53 billion for construction of high speed rail in Florida, California, and several other states.
If there is a bigger big government boondoggle out there, I am not aware of it.
But the Vice President, in promoting this spending spree, tells Americans that they need to get a grip.
With due respect, the American people’s grip on the situation is just fine.
They understand something that apparently has eluded the best and the brightest over on Pennsylvania Avenue.
We . . . . are . . . . out . . . . of . . . . money.
The well that has been financing the New Deal, and the New Frontier, and the Great Society, and the stimulus, and Obamacare has finally run dry.
It is past time that we stop playing politics with the deficit and debt and make the tough choices that are necessary to put America’s finances back on solid ground.
Yet, there is no effort in this budget to take care of our long term fiscal problems.
Not even The Washington Post was able to spin this one.
This is a $3.7 trillion budget.
And what is the future of our deficit and debt?
This is what the Post had to say.
After next year, the deficit will begin to fall, “settling around $600 billion a year through 2018, when it would once again begin to climb as a growing number of retirees tapped into Social Security and Medicare.”
The new normal under this budget is one of permanent budget deficits long after President Obama has returned to private life.
He will be out working on his presidential library, while Americans are left holding the bag for his spending policies.
He may not want to admit it, but the most fitting volume for his presidential library might be The Road to Serfdom.
How exactly does the Administration propose to pay for Social Security and Medicare and national defense under this budget?
The bottom line?
This budget amounts to gross negligence.
Even the progressive blogger Ezra Klein concludes that when reading this budget, it’s almost like the Fiscal Commission never happened.
The President’s Fiscal Commission.
It issued a report recommending over $4 trillion in cuts, including adjustments to entitlements.
It offered controversial, but appropriately bold, proposals to get our nation back on the right track.
The President and his team looked at those proposals and bravely decided to leave this problem to the next administration and future generations.
Clearly, I am not a fan.
But there is one useful item to consider in this budget.
It is what Progressives might call a teachable moment.
To achieve these paltry deficit reduction numbers, the Administration had to resort to massive tax increases.
As the Post concludes, the tax hikes in this bill will be over $1.6 trillion over 10 years.
And here is the point that people need to be reminded of.
Even with $1.6 trillion ¬— and possibly more — in job killing tax increases in this budget, it still comes nowhere close to reining in our deficits and debt.
For years we have heard Democrats say that if the rich and businesses paid their fair share in taxes, we could balance the budget and reduce the debt.
Well, they sure tested it out in this budget.
They soak the so-called rich and American business with a fire hose, and yet we are still facing trillions in debt and hundreds of billions in deficits.
After the despised Bush tax cuts expire and undermine small business job creation, according to the President’s own numbers we will still have to borrow an additional $7.2 trillion through 2021 to pay the bills that are coming due from the Obama Administration’s spending policies.
This budget should be a turning point in our debate about deficit and debt reduction.
Tax increases simply cannot get us there.
Unfortunately, the message that tax increases lead to deficit reduction is the Democrats’ good word.
Over the past decade, I have participated in many discussions about spending and tax policy.
As my colleague from Iowa, Senator Grassley, has noted, Democrats basically have two talking points.
First, all of the good fiscal history of the 1990’s was derived from the partisan tax increase bill of 1993.
And second, all of the bad fiscal history taking place within the past 10 years is owing to the bipartisan tax relief plans originally enacted during the last administration and continued under the present administration.
The Democrats’ platform does have the virtue of simplicity.
Higher taxes — good.
Lower taxes — bad.
This record needs to be corrected. Regular viewers of CSPAN 2 have probably heard others on
my side do so before.
But it bears repeating, particularly in light of today’s budget, that higher taxes will not right our fiscal ship.
The myth that higher taxes lead to lower deficits is a persistent one.
This is the mainstream account of the Clinton tax hikes.
According to this theory, the positive fiscal history of the 1990’s resulted from the 1993 tax increases.
It is a simple enough argument.
According to the other side, by raising taxes and taking more money out of the economy, the government successfully reduced the deficit.
Yet, as you can see from this chart, the Clinton administration’s own Office of Management and Budget concluded that the 1993 tax increase accounted for only 13 percent of deficit reduction between 1990 and 2000.
As a percentage of deficit reduction, the 1993 tax increase ranks behind other factors such as defense cuts and interest savings.
The message here is simple
Tax increases did not drive deficit reduction.
It may seem counterintuitive, but raising taxes does not necessarily mean that revenues collected by the government, as a percentage of GDP, will increase.
Consider this chart, which compares changes in federal revenues as a percentage of GDP for two key four-year periods. Each of these four-year periods was preceded by a major tax policy change.
The first four year period occurred after the 1993 tax increase was enacted.
The second four year period occurred after the Jobs and Growth Tax Relief Reconciliation Act of 2003 was enacted.
The Jobs and Growth Reconciliation Act was the second of the major tax relief bills enacted during the last administration. It featured reductions on tax rates of capital gains and dividends.
Let’s take a look at the first of those four year periods in each case.
One year after the 1993 hike, we see increased revenues.
One year after the 2003 tax cut, revenues drop.
But take a look at the second through fourth years following the adoption of each bill.
You’ll see that the trend of the first year reverses itself in the second year after the tax hike.
As the policies in both bills had time to take effect, the revenue patterns are clear. The positive change in revenue was generally greater after the tax cut bill than it was after the tax increase bill.
There is no doubt that our deficits are a serious issue. They threaten the future of our nation. It is irresponsible, however, to say that our dire fiscal situation is the result of the government not extracting enough money from the people who actually earn it.
The President’s budget, with its massive new tax increases and permanent deficits, demonstrates yet again that our problem is spending.
Our budget deficits are being driving by spending.
Spending has not grown arithmetically.
Spending has not grown geometrically.
Spending has grown exponentially.
Over the past few years, while Democrats exercised complete control over Washington, non-defense discretionary spending has grown by 24 percent. As I’ve said before, that figure does not even include the bloated stimulus bill, enacted in early 2009.
Yet these deficits continue to grow in spite of increased revenues.
On January 26, CBO published its Budget and Economic Outlook for Fiscal Years 2011 through 2021. I am going to quote from that report. By CBO’s estimates, federal revenues in 2011 will be $123 billion (or 6 percent) more than total revenues recorded two years ago, in 2009.
This increase in federal revenues for 2011 includes the net effect from a one-year across-the-board reduction in payroll taxes.
The important fact here is that revenues have increased over the past two years, and the deficit has still increased. Our deficit and debt problems are not being driven by tax relief.
Despite this evidence, many of my friends on the other side still see raising taxes as the best and only solution.
They want to fund out-of-control spending by taking even more money from the people who actually earn it.
Proponents of this approach know that the confiscation of what has been lawfully earned can be a hard sell.
That’s the reason they resort to clever rhetoric, telling us that paying taxes is inherently patriotic.
Or we hear talking points about some people not paying their fair share.
These sound bites might sound good to the base, but they are not grounded in reality.
CBO has published a booklet entitled The Long-Term Budget Outlook. In its most recent version CBO confirmed that [f]ederal revenues have fluctuated between 15 percent and 21 percent of GDP over the past 40 years, averaging about 18 percent.
Because of the recession, revenues dipped to around 15 percent recently. But that should not deceive us into thinking taxes are abnormally low. Using current-law assumptions, CBO projected revenues to reach 23 percent of GDP by 2035.
Arguably, those current-law assumptions are unrealistic, since they assumed the bipartisan tax relief enacted in 2001 and 2003 would expire, along with relief from the Alternative Minimum Tax, at the end of last year.
Yet, CBO evaluated an alternative, more realistic, fiscal scenario. In that scenario, CBO assumed that most of the tax relief enacted in 2001 and 2003 would be extended through 2020. It still assumed that tax relief would expire for so-called high-income taxpayers. But CBO did anticipate that AMT relief would continue, along with other deviations from current law.
Even using this alternative fiscal scenario, CBO found that revenues as a percentage of GDP would increase to just over 19 percent in 2020 and stay at that level for several years.
That is to say, in this scenario, the level of taxation would still be above the 40 year historical average of about 18 percent of GDP.
I want to briefly return to the January CBO analysis that I referred to earlier.
That analysis, which assumes that most of the components of the tax package enacted at the end of 2010 will continue to be extended, along with the modified estate and gift provisions also in that same legislation, calculates that annual government revenues will steadily increase going forward, but will still average about 18 percent of GDP through 2021.
I’ve spent the past few minutes discussing CBO projections of various policy scenarios.
I’m sure this presentation has made for some very gripping television.
But the point I am trying to convey is a critical one.
The fiscal reality is that taxes are not abnormally low.
Continuing current tax policy yields federal revenues at about the historical average of GDP for the past 40 years.
Increasing taxes on anyone, even so called high-earners, will push government revenues above the 40 years historical average, as a percentage of GDP.
I know there are many who would still support raising taxes above this historical level.
The President made clear today that he certainly does.
But it is important to heed the words of the CBO before we raise taxes.
In its Long-Term Budget Outlook, CBO had this to say about a scenario where the bipartisan tax relief of 2001 and 2003 expired, along with AMT relief.
According to CBO, “Marginal tax rates on income from labor and capital would rise considerably under the extended-baseline scenario. The increase in the marginal tax rate on labor would reduce people’s incentive to work, and the increase in the marginal tax rate on capital would reduce their incentive to save.”
The basic point I’m making is that tax hikes aren’t like finding a pot of gold at the end of a rainbow. That money comes from somewhere, and there will be consequences to redistributing it.
Moreover, as we saw in the budget released today, even spiking taxes by over $1.6 trillion will not help us to balance our books.
Abnormally high spending drove the deficits of the past.
It is driving the deficits of today.
And it will drive the deficits of the future.
Some folks, in response to the question of whether the President is triangulating after the drubbing his party took in November, have answered no.
He’s just being himself.
You can say that again.
He supported big government as a community organizer.
He supported it as a Senator.
He supported it as a presidential candidate.
And he supports it today.
But the stakes are higher now.
He is the nation’s chief executive, and ultimately the President is responsible for guiding our nation through the treacherous waters of an impending fiscal crisis.
These are not easy shoals to navigate.
Yet, the statesman cannot shirk his duty.
As Senator Henry Clay once put it, I would rather be right than be President.
Some things are bigger than the next election, and getting our deficits under control is one of those things.
The American people know that President Obama’s budget is not right.
And we know that the American people will not stop demanding real leadership on this issue.
I yield the floor.
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