Weekly Senate Budget Republican Recap 7/15/2011

“No nation can sustain this level of debt, nor can any nation ever raise enough taxes to cover this level of spending. The course we are on is not merely unsustainable, it is unimaginable. We’ve spent and borrowed all we can. There is only one sound answer: control spending and grow the economy. For America to regain prosperity, Washington must regain discipline… And yet still, Senate Democrats will not produce a budget—and the White House will not put together an honest plan with real spending cuts… We were not elected to preside over the financial decline of America. We were not elected to shut down the committees, to shut down debate, to cede our constitutional responsibility to secret meetings and closed-door negotiations.” – Ranking Member Sessions announcing that he would raise a procedural objection to the first appropriations bill of the year in order to uphold the legal requirement that a budget must first be adopted

$2 Trillion: A Fraction Of The Spending Cuts in GOP Budgets

Friday afternoon, Ranking Member Sessions released a statement to put the deficit negotiations in perspective. He explained that the amount of cuts now on the table in a deficit reduction deal represented only a fraction of the cuts in GOP Budgets – and the cuts that would ultimately be needed to restore fiscal balance: “Whatever the White House ultimately produces, we must remember that $2 trillion in spending cuts is only a small fraction of the spending cuts contained in Republican budget plans this year—for instance $6 trillion in the House-passed budget. $2 trillion or so in spending cuts may be the ceiling for Washington Democrats, but it is in fact only a four percent reduction in spending over 10 years at a time when spending is projected to increase 57 percent.”

Sessions also explained President Obama has “not been a partner in deficit reduction, but an obstacle.” The statement noted that “in his first two years in office, President Obama increased non-defense discretionary spending 24 percent, spent $8.5 trillion, and already added almost $4 trillion to the gross federal debt… He must, for the first time since taking office, present to the American people a plan with specific, immediate, and lasting spending cuts. President Obama is the CEO of the federal government and is in the best position to streamline operations and reduce expenditures.”


40 Senators Back Crucial Budget Vote; Sessions’ Amendment Would Strengthen Law

In the first appropriations bill of the fiscal year—a bipartisan military construction bill that passed the Republican House (411-5)—40 GOP Senators nonetheless voted to prevent consideration of the bill (with four not voting) and to sustain a budgetary point of order raised by Sen. Sessions. Republicans took the floor throughout the day to argue that the law must be upheld: no appropriations bills without a budget. They argued that in order to defend the interests of our military, and protect the economy from grave danger, the Senate must perform its duty and pass a budget that sets priorities and guards the national interest.

In a landmark outcome, the vote laid down a floor of no less than 40 votes for future budgetary points of order, but Senators’ remarks underscored a key point regarding the debt ceiling: It’s not just a divide over taxes. Democrats in the White House and the Senate have consistently refused to put a single concrete, meaningful spending cut on paper. When the president attempted this with his February budget, his rhetoric about “living within our means” quickly crashed into mathematical reality. Democrats have not since repeated the act of putting a fiscal vision on paper. But the numbers tell the story: We’ve spent more than $8 trillion dollars since the President took office and borrowed almost half of it.

GOP Senators also emphasized the need for an open, honest process. A number of the speakers today have cosponsored either Sen. Sessions’ proposal to increase the vote threshold for the point of order to 60 votes or his proposal requiring 7 days to publicly consider any debt limit legislation. Sessions, on Face the Nation last Sunday and in the weeks prior, has been warning against an 11th hour debt limit deal thrust upon Congress to vote on before senators have had ample time to review and analyze it.

In Sessions’ speech, he stated: “It’s easy to claim deficit reduction as a priority—but if they were actually to put a plan on paper it would become all too clear that their desire is for larger taxes and only meager cuts. Numbers don’t lie. Their rhetoric creates the appearance of savings that simply don’t exist. But while the White House and Senate Democrats may think their strategy is clever, I don’t think the American people are amused.”

A video montage of all the Republican senators that spoke Thursday on the Senate floor may be viewed here. Here are video excerpts of each individual Senators’ speech: Sen. Bob Corker; Sen. Marco Rubio; Sen. Rand Paul; Sen. Mike Lee; Sen. John Cornyn; Sen. Pat Toomey; Sen. Ron Johnson; Sen. John Thune; and Sen. John Barrasso

Sessions also announced his legislation (video here) to require a 60-vote threshold to waive a budgetary point of order. Under current law, a 303(c) point of order can be raised against any appropriations bill for a given fiscal year if a concurrent budget resolution has not been adopted for that year, requiring a majority of present Senators to waive it. Sessions’ legislation would increase the threshold to 60 votes. This would have the effect of making it far more difficult for the Senate to ignore its statutory obligation to pass a budget. The original cosponsors of the Sessions legislation are Sens. David Vitter (R-LA), Orrin Hatch (R-UT), Bob Corker (R-TN), and John Cornyn (R-TX).

Democrats’ Phantom Budget Cuts Less—And Taxes More—Than Advertised

More than 800 days since passing a budget as required by law—and still refusing to even make one public this year—Senate Democrats recently shared a copy of their phantom budget proposal with the Washington Post. Stunningly, they asserted a fifty-fifty split between tax hikes and spending cuts. They claimed a meager $2 trillion spending reduction and a burdensome $2 trillion tax hike. (By contrast, the House GOP budget cuts $6 trillion in excess spending without increasing taxes). But, properly viewed, the phantom Senate budget is even more shocking than that: it may call for nearly twice the amount of tax increases to real spending cuts.

Based on information leaked to the Washington Post, real spending cuts in Democrats’ phantom budget are 30% below the advertised amounts.

  • The $2 trillion in spending reductions includes $600 billion in reduced interest payments on a lower amount of federal government debt. While reducing the deficit does reduce interest payments, those savings should not be counted as spending reductions because they do not reduce the size and scope of the federal government. Counting interest savings as spending cuts is simply a gimmick that makes it look like the actual cuts are greater than they are (particularly when the reduced interest payments are the result of increased taxes).
  • At best, Sen. Conrad’s budget should only be credited with reducing spending by $1.4 trillion—an amount that is only about 4 percent of projected non-interest outlays over the next ten years.

At the same time, tax hikes in the Democrat Senate budget may be 40% above the advertised amounts.

· We don’t know what tax base is used as the measure for the net $2 trillion in tax increases. Recent deficit reduction schemes, like the president’s February budget and the president’s Fiscal Commission, have assumed the expiration of the 2001 and 2003 tax cuts for individuals and small businesses earning more than $250,000 per year and the reversion of estate taxes to 2009 rates and exemption levels. These hidden tax increases add some $800 billion to the revenue base and may well be omitted from the advertised net $2 trillion tax hike.

· Sen. Conrad’s budget may raise taxes relative to current policy by some $2.8 trillion over ten years—tax hikes would thus be twice the spending cuts.

· The top marginal tax rate for individuals would approach 50% when the effects of PEP/Pease, health care “reform” payroll and investment tax increases, and the proposed phaseout of itemized deductions are taken into account.

Further, the spending cuts are not focused on the areas of greatest waste or growth:

· Approximately $900 billion of the $1.4 trillion (64%) in spending cuts come from the Pentagon.

· Only $80 billion of the $1.4 trillion (6%) of the spending cuts come from the federal government’s enormous health care programs, which are projected to take up increasing shares of government spending in coming decades.

On the latest ‘phantom’ budget, a Wall Street Journal editorial read:

“Democrats have had a field day assailing Paul Ryan’s House GOP budget. But even with yesterday’s sketchy outline on the Senate floor, Democrats still haven’t laid out any specific plan to cut spending, much less reduce the debt. What we get instead are vague promises that spending cuts are on the table, along with the certainty of higher taxes.

We doubt Mr. Conrad’s plan will even make it to the Senate floor, because Democrats running for re-election are terrified they’d have to vote for it. But if their plan is so desirable, if it’s time to eat our peas, why not eat them in public and on the record? Readers know the answer to that one.”

Note: When presented at a meeting of the Democrat caucus, the draft budget plan received broad support. To view a letter from Ranking Member Sessions and other Republican Senators urging Majority Leader Reid to make the Democrat budget public, please click here. This week, Sessions also called on the White House to end its use of budget gimmicks designed to hide its tax and spend agenda from the American people. Sessions said:

“News that the cuts offered by the White House are not real, but instead rely on gimmicks and tricks, is upsetting but not surprising; this has been the scheme all along. The president offered a budget in February that would double our nation’s debt while declaring that it would ‘not add more to the debt.’ He delivered a speech in April saying that he had a new deficit reduction plan to reduce our debt by $4 trillion while, in reality, his plan would grow the debt $2.2 trillion beyond the CBO baseline over the next ten years. Democrats in Washington have shut down the entire budget process and failed to put an honest plan on paper.”

Should Needed Spending Reductions Be “Balanced” With Tax Hikes?

In response to the report that the Senate Democrats’ (as yet unseen) budget plan would contain more tax hikes than spending cuts, the Budget Committee’s Republican staff on Sunday released a background document on the best way to grow the economy and reduce deficits. Some highlights:

Tax Hikes Won’t Work, Aren’t Needed

  • To close this year’s $1.4 trillion deficit through tax increases alone, individual and corporate rates would have to more than double overnight.
  • Even if all of the income of those earning more than $1 million were confiscated at a 100 percent marginal rate—with the unlikely assumption that taxpayers wouldn’t change their behavior—the federal deficit would still be at levels sharply above historic averages.
  • Even if current tax rates were extended for everyone, revenues are projected to return to historical norms by 2014. CBO projects that revenue will continue to rise above its historical average an additional 0.4 percent to 18.4 percent of GDP by 2021.

Spending Cuts Are Proven To Be More Successful At Deficit Reduction

  • Federal government spending, currently at 24.1 percent of GDP, is projected to remain stubbornly high—and far above the 40-year historical average of 20.8 percent. By 2035, 1 out of every 3 dollars of goods and services produced in this country will be consumed by the federal government.
  • Empirical evidence shows overwhelmingly that nations that reduce deficits through spending cuts are more successful in lowering debt and growing the economy than countries that rely on tax increases.
  • o According to Harvard economist Alberto Alesina, spending cuts are much more effective than tax increases in stabilizing the debt and avoiding economic downturns. In fact, in several episodes, spending cuts adopted to reduce deficits have been associated with economic expansions rather than recessions.

    o A Goldman Sachs report found that decisive budgetary adjustments that focused on reducing government spending have (i) been successful in correcting fiscal imbalances; (ii) typically boosted growth; and (iii) resulted in improved bond and equity market performance. Tax-driven fiscal adjustments, by contrast, typically fail to correct fiscal imbalances and are damaging to economic growth and competitiveness.