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Guest Commentary: April 17, 2001
What Is a Budget About?
The Honorable Phil Gramm (R-TX)
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What is a budget about? I am sure people think this is dull business, but actually of all the votes we cast every year, this is the most important because it is the one time we define our vision for the future of America. Each year our two great political parties on the floor of the Senate and in the House try to define through their budget what kind of vision they have for the future of America.
I believe if you listen very carefully, you ultimately reach the conclusion that there are two competing visions and that the two visions really come down to the following: Do we want more Government, or do we want more opportunity? Do we want to tighten the belt on the family, or do we want to tighten the belt on the Government? Given that we have this surplus because people have paid more in taxes than we need to fund the Government, should we use this money to let the Government grow? Or, should we give some of this money back to the people who have earned it?
That is what this debate is about. Don't be confused. Despite all the talk about debt and deficits, this debate is not about debt and it is not about deficits. It is about spending versus tax cuts. We want to give a substantial amount of money, but a responsible amount of money, back to the people who paid the taxes to begin with -- and the Democrats want to spend it.
But it really boils down to a simple question, that is: Do you believe the Government can take this surplus of tax revenues and spend it better than you could spend it if you got to keep it?
Under the President's tax cut, the average family in my State making $51,000 a year, two-wage earners with two children, will get about $1,600 in tax relief. At some point in the debate, I am sure our colleagues will say: Look, that is not a whole lot of money. In my State, $1,600 is a lot of money. It is the difference between owning your own home and living in somebody else's house. It is the difference between your children going to college or going to work. It is the difference between having a retirement program and not having one. The real question is, if Government kept the money and spent it, could they spend it better than you could spend the $1,600 if you got to keep it?
Let me begin talking about the President's tax cut. Every time we hear the President's tax cut discussed, we hear the term "huge" or "massive." Why not? It is $1.6 trillion. I have a few constituents who know what $1 million is. I have two constituents who know what a billion dollars is -- Mr. Perot and Mr. Dell.
Nobody knows what a trillion dollars is, so obviously it is huge. What I would like to do is, using some figures from the National Taxpayers Union that are very relevant to the debate, let's convert it into English. Out of every dollar we are going to send to Washington in the next 10 years, how much would the Bush tax cut give you back, how many pennies for every dollar we are going to send to Washington in the next 10 years?
The answer, 6.2 cents. So this tax cut, basically, will give back 6.2 cents out of every dollar that taxpayers are going to send to Washington in the next 10 years -- that sounds like a fairly modest tax cut, and it is.
Compare it to the Kennedy tax cut -- the proposal that John Kennedy, as President, sent to Congress -- a tax cut, by the way, that cut rates across the board. We now hear from our colleagues that when we cut the bottom rate twice as much as the top rate, then it is skewed to the rich. But John Kennedy submitted his tax plan, he had an across-the-board rate cut. In fact, when the question was raised, he said, "A rising tide lifts all boats."
When you look at his tax cut and ask how many pennies out of every dollar in revenue were collected in the 10 years after it was adopted, you find that it gave back 12.6 cents out of every dollar. It was over twice as big as the Bush tax cut. The Reagan tax cut, in 1981, gave back 18.7 cents out of every dollar collected. It was three times as big as the Bush tax cut.
So the first point I want to make is, when you look at the tax cut in terms of how much taxes people are paying, the Bush tax cut is actually a quite modest and responsible tax cut. It is half as big as what President Kennedy proposed in 1961, and it is one-third the size that Reagan proposed in 1981. And it is 2001 and it is time for another tax cut.
Many of my colleagues are saying it is not big enough. My response to that is, let's do it, and if the economy gets stronger, we can cut taxes again next year. This doesn't have to be the last tax cut of the first Bush term. But this, by historic standards, is a modest tax cut. That is the first point I want to be sure everybody understands.
The second point is, this is a tax cut that America not only needs, but that we can afford. Let me remind everybody, last year -- in the last 6 months-- we increased spending by $561 billion over 10 years. This surplus has literally been burning a hole in our pockets. Even the Chairman of the Federal Reserve Bank, Alan Greenspan, who is very loathe to criticize Congress, raised the issue about what has happened to spending in the last 2 years and expressed alarm and concern about it. If you listen to our Democrat colleagues, you would get the idea that President Bush is just slashing spending.
The plain truth is, the Bush budget takes every penny we have spent in the last 6 months in the biggest spending spree in American history and uses that as the beginning point and raises spending by 4 percent. How, based on that, can anybody argue that the President is cutting spending? In fact, he adds $1 trillion of new spending in the next 10 years over the current level. But even after you spend that $1 trillion, we are looking at a $5.6 trillion surplus over the next 10 years, according to the Congressional Budget Office. If we take out the amount of money that is committed to Social Security and Medicare, we have $3.1 trillion left in what we call on-budget surplus, and then President Bush has proposed that roughly half of that money, that surplus, go to his tax cut. This is a modest tax cut by historic standards -- half the size of the Kennedy proposal, a third of the size of the Reagan proposal, and it is also a tax cut that we can afford.
Now, we cannot afford it if you are going to let the Democrats spend this money. That is true. You can't spend it and give it back. We choose to give it back; they choose to spend it.
Note: This column has been adapted from a speech Sen. Gramm delivered on the floor of the Senate, April 2, 2001.
 How to contact Senator Phil Gramm (R-Texas)
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