Wednesday, May 6, 2009

Senator Mike Johanns' Remarks On The President's Budget Proposals

On March 23, 2009, Senator Mike Johanns discussed budget proposals put forth by the President and their impact on families across the country during a speech on the floor of the U.S. Senate. Audio of the remarks is available upon request. Highlights of the prepared remarks as well as the full text of Senator Johanns' speech as prepared for delivery are below:

Fast Facts:
• This budget proposal goes on a spending frenzy with a record-setting price tag of $3.6 trillion for FY 2010.
• In addition, this budget goes on a taxing spree, raising taxes by $1.9 trillion.
• Also, this budget is a borrowing nightmare, doubling the public debt in five years and nearly tripling it in ten years. (The public debt goes from $5.8 trillion in 2009 to $17.3 trillion in 2019.)
• The cap-and-trade proposal would increase the cost of producing an acre of corn by anywhere from $40-80 per acre. ($3 to $7 billion tax increase over 10 years on the 9 million acres of corn planted in Nebraska.)
• It would take a family of four making $50,000 a year 2 and a half weeks to earn enough money to pay for the approximate $2,300 net energy tax that would result from passing cap-and-trade legislation.
• That same family with a $100,000 mortgage could make about 3 months of mortgage payments or 8 months of groceries with the estimated $2,300 energy tax.

Senator Mike Johanns Remarks As Prepared for Delivery:

"Mr. President, I rise today to speak about the President's budget outline.

"For too long Washington has promised too much without a plan to pay for much of it. The result is that we face a financial crisis unlike any in a generation. The lesson is that we must not over promise and overspend. Americans are making tough decisions in their daily lives that members of their government still refuse to make. Unfortunately, the President's budget is an example of this pattern. The President's budget fails to chart our country on a path towards prosperity. It exercises far too little restraint and does not even attempt to tackle the massive fiscal imbalance facing future generations.

"The budget we have before us - regretfully - is a spending frenzy, a taxing spree, and a borrowing nightmare as big as any that our country has ever seen. President Obama's first budget can most definitely be characterized as unprecedented and historic on many levels. However, a budget that breaks the record for spending the most, taxing the most and borrowing the most of any budget in history is not the type of record that the American people can afford to see broken.

"Let's take a look at the massive tax increase. With a price tag of $1.9 trillion, it winds up to be the largest tax increase in history. Incredulously, however, not one penny goes towards deficit reduction. How is it possible that the budget contains the largest tax increase in history, yet not one cent of that increased revenue goes towards paying off our country's obligations? I will tell you why; because the budget gobbles up that tax revenue for more spending. When that revenue isn't enough to fund all of the new government expansion, the President's budget just keeps on spending. There is so much bloated spending that CBO released an estimate Friday projecting a deficit of nearly one trillion dollars every year for the next ten years.

"Our country is faced with an unprecedented deficit, so can anyone answer whether it is really sound fiscal policy to tax more just to spend more? At a time when we must do something to pay off our debt and reduce deficits, the budget ignores these problems. It taxes and spends - inching ever closer to bankrupting our country.

"One of the specific tax increases found in the President's budget is a proposal to enact a cap-and-trade regime. Estimates predict that by enacting this policy, each household will see an increase of $3,100 a year in higher energy costs. But not to worry, the President said that he is using the money raised from a cap and trade program to make the Work Opportunity Tax Credit permanent. This credit would provide families with $800 more a year. So let's do the math: A tax increase of $3,100 offset by $800. This is still a net tax increase of $2,300!

"Just think, it would take a family of four who makes $50,000 a year 2-and-a-half weeks to earn enough money to pay this new tax. That same family with a $100,000 mortgage could make about 3 months of mortgage payments - or buy eight months of groceries - with $2,300.

"Beyond the consumer, the cap and trade program will have a devastating effect on the farmers in my state. One study found that enacting cap and trade would raise the cost of producing an acre of corn by anywhere from $40 to $80 dollars per acre. Well, folks in Nebraska produce about 9 million acres of corn each year. So, we are looking at a $3 to $7 billion dollar tax increase over 10 years. This would be devastating to my state and would put many small farmers out of business.

"The President's budget also contains harmful tax increases on small businesses - the job engine of our economy. According to the latest figures, small businesses create over 74 percent of all new private sector jobs; employ over half of the labor force; and contribute half of our nation's output. The last thing that our country needs when unemployment is projected to reach as high as 10 percent is a tax on the very segment of our economy that creates the majority of new jobs. It goes against all logic to encourage output, productivity and job creation in one breath and then penalize that same success with tax increases.

"The small businesses located in the towns across Nebraska cannot afford one penny in extra taxes. When I talk with folks back home, I hear how they are juggling their electric bill, health care costs and making payroll while trying not to layoff any of their workers. Why would they believe that their government wants them to succeed if Congress turns around and slaps a crippling tax increase on them during their most trying time?

"Beyond the staggering tax increases contained in the budget, the spending is also the most we have seen in history. The price tag is $3.6 trillion for 2010. Let me repeat that, $3.6 trillion.

"To further illustrate the massive spending and subsequent borrowing that we will have to undertake, I have a chart regarding public debt that I would like to share. Last year, the debt held by the public as a percentage of GDP was roughly 40 percent. As my chart depicts, by 2019, this debt rises to 82%. If you do the math, this is more than a 100% increase. Let's look at the pure dollar amount - the President's budget would double the debt held by the public in five years and nearly triple it in ten years. It goes from $5.8 trillion in 2009 to $17.3 trillion in 2019.

"Let's imagine for a second if the average citizen behaved like the government did. They would sign up for credit card after credit card after credit card, max them all out without making a single payment or scaling back their spending and then send IOUs to the company. Even our creditors have come forward with doubts regarding our spending behavior. China, within the last few weeks, has expressed concern that our country's deficit spending will dilute the value of their holdings. The chief China economist for JP Morgan - Frank Gong - put it this way, 'Inside China there has been a lot of debate about whether they should continue to buy treasuries.'

"China is already the number one foreign holder of U.S. debt. If they stop financing our spending, what then?
Who will be Uncle Sam's banker when our IOUs finally catch up to us?

"I am extremely worried that the result of all of this runaway spending is a lower standard of living; inflation spiraling out of control; and less economic opportunity for future generations. What if future generations won't have the ability to get a home loan to buy that first house or a student loan to attend the same college that their Mom and Dad went to because there is no credit available? Isn't our goal to provide a better life for our grandchildren and their grandchildren than the one we have?

"In conclusion, let me say that none of us has a crystal ball to tell us exactly what to do to fix the economy. I realize that the President is in a very, very difficult situation. But, I do know that trying to lead the country out of this mess with bigger government, runaway spending, massive debt and tax increases isn't the way to go. Future generations deserve better.

"Making the tough decisions has to start somewhere and I am disappointed that the President's budget passes the buck for another day. I look forward to working with my colleagues as we debate our nation's budget next week. I sincerely hope there is a genuine commitment to tackle some of the concerns I outlined today.

"I yield the floor and note the absence of a quorum."

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