Jeff Bingaman United States Senator from New Mexico

[Watch Bingaman deliver this speech]

Mr. President, yesterday the Senate voted on proceeding to an $857 billion package that would: extend all personal income tax rates for two years; substantially reduce the estate tax; and establish or extend a host of tax incentives for American families and businesses. This package should be evaluated on how it deals with our two biggest economic problems: strengthening recovery from the deepest economic downturn since the Great Depression, and setting us on a long-term course to achieve fiscal stability.

On the first issue, economic recovery, there is much in this package that I strongly support. We should protect 98% of American households from any tax increase. We should extend benefits to our fellow Americans unable to find jobs in this period of stubbornly high unemployment. And we should continue key business incentives like the Section 1603 program, which has provided a critical lifeline to our renewable energy industries. If the only economic imperative were recovery from the downturn, I would have voted for this package.

But as I said at the outset, this is not our only economic imperative. Our dire fiscal condition requires us to adopt a strategy that will dramatically reduce deficits in the coming years. And frankly, I'm disappointed by the plan's shortsightedness on this dimension. And therefore, I opposed the cloture motion.

If we are serious about addressing the deficit, we must admit that we cannot afford this package.

In 2001, I came to the floor to explain my opposition to enacting the so-called "Bush tax cuts." At the time, CBO was actually projecting budget surpluses. But as I explained then, I viewed the 2001 tax cuts as carrying a higher price tag than we could afford. The 2001 cuts, which were accelerated in 2003, reduced the stream of revenue to the federal government by an amount that virtually guaranteed the elimination of our anticipated budget surplus, and ensured that substantial deficits would once again become the norm in our federal budget.

The results – a federal debt that today nears $14 trillion – could have been avoided under the Bush tax structure only if there had been major cuts in spending at the same time.  But as we all know, no such cuts in spending were proposed by the President or adopted by the Congress.  In fact, in the years following the Bush tax cuts, spending increased greatly.  The Bush tax cuts were larger than we could afford when they were adopted.  Including interest costs, those tax cuts account for nearly 55% of the deficit projected for the end of the next decade. And once again, we cannot afford to extend them.

The nation's debt now stands at 62% of GDP. CBO says that if we continue on our current course, the debt will reach 90% by 2020, and 185% of GDP by 2035. This concern is not merely academic. Our growing deficit has stark consequences for our government's ability to meet essential priorities. At current levels, government revenue in 2025 will be enough only to cover interest on debt, Medicare, Medicaid and Social Security. And the threat to American prosperity is severe: By 2035, rising debt could reduce per-capita GDP by as much as 15%.

In recent weeks, we've had several expert commissions tell us that we need to get the debt under control – and they have offered thoughtful, practical proposals to do so. The National Commission on Fiscal Responsibility and Reform released a six-part plan that would achieve nearly $4 trillion in deficit reductions through 2020. Five of the six Senators on that Commission supported the plan. Two weeks earlier, a bipartisan commission headed by former CBO Director Alice Rivlin and my former colleague Pete Domenici issued their own report. Both bipartisan groups concluded that to be credible, any deficit reduction plan must impose limits on spending and increase revenue. For much of this Congress, the excuse for deferring serious action on deficits and debt has been "Let's wait and see what these commissions decide." Well, now these commissions have finished their tasks of issuing proposals. This bill is our first chance to begin considering their recommendations, and I see no evidence that we have done so.

I understand that we cannot tackle both tasks – stimulating the economy and reducing the deficit – with equal force at the same time. The decision, which I have supported, has been to focus first on stimulating the economy. But that focus does not excuse us from also taking the relatively easy first steps to reduce future deficits. I agree with the Committee for a Responsible Federal Budget, whose leaders argue that "the critical objective is to pair any stimulus for the short-term with a credible plan to reduce the debt in the medium- and long-term. We should be talking about what triggers to attach, how to pay for this new package over the decade, and what spending cuts and tax reforms to make." It is unfortunate that no such conversation has taken place.

And because the cost of this package is not offset, it has been larded up with wasteful provisions that will do little for the economy. Most problematic is the $129 billion this package would spend to extend tax cuts that benefit only the very highest-income American households and reduce the estate tax below 2009 rates. Proponents of this bill say because the economy is weak, now is not the time to allow the Bush tax cuts for the wealthiest households to expire. But a CBO report issued earlier this year tears down this argument. Examining 11 options to stimulate growth and job creation, CBO ranked extension of the 2001 and 2003 tax cuts dead last. CBO further found that extending the tax cuts for high-income households in particular would rate lower in effectiveness than extending all of the tax cuts because, and I quote, "higher-income households … would probably save a larger fraction of their increase in after-tax income." We know that a recovering economy needs more spending. If government spending is to facilitate the transition to recovery, then we should put money into hands of those who will spend it. But the wealthiest among us are likely to save most of any additional income they receive. This is not effective stimulus.

There is one comparison that puts this sharply into perspective. Last month, the President announced that because of concerns about the deficit he will freeze all civilian federal salaries, at a savings of about $2.5 billion per year. I stated at the time that I supported his decisions. But we erase those savings nearly three times over with this package's reduction in the estate tax from the 2009 parameters. Is it not enough to reinstate the 2009 parameters, which exempt $7 million in assets per couple and tax amounts above that at 45%? Under this package, the exemption is dialed up to $10 million per couple and the rate reduced to 35%. So instead of reaching only 1 out of 400 Americans, this plan will subject only 1 out of 1000 estates to any tax whatsoever. So while a GS3 clerk at a USDA office in Albuquerque will have her salary frozen in the name of fiscal responsibility, the heirs of a $50 million estate save $5.35 million. This unwarranted generosity costs our Treasury an added $7 billion a year. Americans are right to question how we can possibly be serious about reducing the deficit when we are ready to give wealthy heirs a windfall, with no benefit whatsoever to the economic recovery.  Do we really believe the question of "What's another $7 billion" is merely a rhetorical one?

Those who rate our debt do not view this rhetorically. In fact, after yesterday's vote, Moody's announced that the plan before us could endanger our vaunted Triple-A credit rating.

I am also troubled that this package makes the tax code permanently temporary – and falsely assumes that we will be able to achieve a different outcome in two years' time.

The cover of today's Wall Street Journal points this out, in a story "'Temporary' Tax Code Puts Nation in a Lasting Bind." The piece opens: "Welcome to the world of the temporary tax code." Mr. President, I ask unanimous consent that the text of this article be entered into the Record following my remarks.

A main argument being used in support of this temporary extension is that it is the only proposal we can get the Republicans to agree to. But I am concerned that this framework will make it more difficult to muster the political courage to reduce the deficit when these tax provisions again expire in two years.

The reason?  Democrats are trying to ensure that all but the wealthiest 2% of taxpayers do not see their taxes go up on January 1. But we are told that Republicans are willing to accept tax increases on middle class Americans in order to protect the very highest income Americans. And so, the logic goes, while we don't agree with Republican demands, their willingness to punish 98% of Americans to get their way gives us no choice but to accept this quote "deal."

Frankly, that argument assumes a less generous view of our Republican colleagues then I am willing to embrace. I agree with President Obama that neither Democrats nor Republicans want to see taxes increase on January 1 on the overwhelming majority of Americans. To avoid that result, I believe Republicans would be willing to support a more responsible tax proposal along the lines of the tax proposals put forward by Senators Baucus and Schumer that I voted for last week. Those proposals would have shielded all families from any tax increase on their first $250,000 or $1 million in income. The fact that not a single Republican supported either proposal results from their expectation – apparently accurate – that if they remained intransigent, Democrats would give in to their demands. But those demands, reflected in the bill now before us, do not acknowledge the serious problem of the deficits. Retaining Bush tax rates on income over $1 million, reducing the estate tax to the level it was in 1931, and continuing the full ethanol subsidy of 45 cents per gallon are examples of provisions that do little to stimulate the economy but abdicate our responsibility to address our dangerous deficit.  Some say that in two years, when the economy has recovered, we will be able to stop another extension of the Bush tax cuts for the wealthiest income Americans. I question the wisdom in that argument. Having achieved all of these wishes now will only embolden the Republican minority to adopt a similar hard line stand on extending the Bush tax cuts when the issue arises again in two years.

Failing to extend provisions with proven effectiveness merely because they were originated with the Recovery Act is terribly misguided.

Finally, I wish to note my deep disappointment with political posturing that has led to the cancellation of nearly every innovation under the Recovery Act. Even though it is the largest revenue measure to be considered in the 110th Congress, this package was negotiated behind closed doors. And I am informed that the Republican leaders demanded that no provision enacted under the Recovery Act be extended. Now I can understand that certain Recovery Act provisions might not warrant extension.  But this opposition is purely political, driven by a desire to deny merit to the Recovery Act, which added 2.7% to third-quarter GDP growth and raised employment by 2.7 million to 3.7 million jobs. And so the package chokes off the Build America Bonds program, which has provided crucial support for municipal governments during a period of sustained challenges in raising funds to meet infrastructure needs.  The package also ends a provision that Senators Crapo, Grassley, and I fought to include in ARRA, which raises the bank qualified limit, last adjusted in 1986, for small municipalities that sell debt to community banks – and which has significantly reduced rural governments' borrowing costs while creating jobs and needed infrastructure improvements for thousands of communities.

And because of the other side's reflexive anti-Recovery Act position, this bill relies intentionally upon outmoded, ineffective incentives for clean energy deployment. We fail to extend the advanced energy project or 48C credit, which allows qualifying companies to claim a credit for 30% of the cost of creating, expanding, or re-equipping facilities to manufacture clean energy technologies. The credit's vast oversubscription is a powerful demonstration of the potential for clean energy manufacturing in our country. But it, too, is allowed to die – which is all the more appalling given that the ethanol blenders' credit is extended again at 45 cents, even though the House negotiators and industry reached a consensus on reducing the credit by 20%. Had we done the same, we could have used the savings to implement a suite of energy incentives that would dramatically improve energy efficiency, reduce emissions, and enhance domestic manufacturing competitiveness. And I have filed an amendment with Senator Snowe to do just that. Unfortunately, this bill is closed to amendments.

Mr. President, in spite of its positive provisions to strengthen the economic recovery, the bill moves us in the wrong direction with regard to our other major problem of budget deficits. On that issue, it will start the 112th Congress off on the wrong track. For those reasons, I oppose going forward with this bill.