Hearing of the Senate Budget Committee

SEN. NICKLES: Thanks very much.

Senator Crapo.

SEN. MIKE CRAPO (R-ID): Thank you very much, Mr. Chairman.

Mr. Daniels, if you could leave that chart up for just a minute, I'd like to talk with you a little bit more about that. I think that the debate that we are having, that we see being framed misses the point to a certain extent. And that is that it seems to me that a lot of the discussion both in the media as well as here in the halls of Congress circles around whether we should try to balance the budget now, in other words to reduce the deficit as much as possible, or whether we should have tax relief as an effort to try to stimulate the economy. And the attack that I seem to hear is one that says, we can't have tax relief now because it would cause us to have too much in terms of deficit.

I'm remembering back to when we were debating President Clinton's proposals for tax increases. And we had the same kind of debate in reverse, we can't have a tax increase now because it'll -- actually it was framed in the context of those of us who oppose it saying we can't have a tax increase now because it'll stimulate more spending, not help us reduce the deficit. And in those days, we were showing figures that for every dollar of tax increase that we had had under previous proposals, spending in Washington went up by a dollar and-a- half or something like that. And the question we tried to focus on then which is the question I think we should focus on now is spending and whether that spending is justified and whether a tax relief, which is a form of spending of the federal revenue is justified in terms of stimulating the economy.

And here is the point that I want to focus on. It seems to me that you have hit the nail on the head by the chart that you put up here. For those that who are criticizing the current deficit -- and frankly, I'm one of those who think that maybe we can do a better job of reducing the deficit as we put this budget together. But for those who are criticizing the deficit that the president has proposed in his budget, they have to be ready to say what it is that they would do differently. Now, some have said, "Let's not do the tax cut." And that's where I see most of the focus of the debate today.

But if you look at your chart and if you look at the statistics that have been presented, just focusing this on the tax cut doesn't get to the issue. We just went through a debate and a series of votes on the floor in putting together last year's final appropriations budget where we had proposals to spend somewhere between $400 billion and $500 billion more than we ended up with ultimately in the budget that we put together. So you and I both know that there are those who want to spend a lot more in every one of these categories and others, if they can have the opportunity.

And again, that's the debate we ought to be having. Should we block all spending now and have a freeze and not do what we need to do for national defense, not do what we did to do to prosecute the war on terrorism, not do what we need to do in order to protect our homeland security and not do the things that have been talked about here and not have an economic stimulus package in the form of tax relief? Or should we have a different mixture of the entire package? The question I ask you is maybe just to elaborate further on the points that you were just making.

We all want to reduce the deficit and I, for one, don't think that it feels totally satisfactory to say that it's small in terms of historical circumstances. That's true but, frankly, I'd like to see the deficit be zero. You would too. What is going to be the impact on the deficit if we don't have the tax relief but we do then go back into the spending mode that we just fought off in the last few weeks here in the Senate?

MR. DANIELS: Senator, the irony is not lost on me that there are people in town I bumped into on Monday, Wednesday, Friday who are urging a lot more spending and when I see them on Tuesday, Thursday and Saturday, they're yelling at me about the deficit. And, you know, you can't have it both ways. Clearly, spending restraint, I would hope there'd be bipartisan support from those who share the president's priorities and from those who believe that a balanced budget should come ahead of some of his top priorities, even higher on the list. I'd hope there'd be bipartisan agreement. For goodness sake, let's control spending on the way. And the president suggested a common sense measure and a moderate 4 percent growth, which is a substantial deceleration from what we were really forced to propose, more like 9 percent in the year just passed.

SEN. CRAPO: Can I interrupt and ask you a quick -- I know our time is running out here. Would you agree then that for those who are saying that we don't do the job properly with regard to the deficit in the current president's proposal, that first and foremost, they need to say what it is that they would not do that would help bring that deficit down? And if that is they would like to stop the tax relief, they need to recognize what impact that will and won't have on the deficit and make a commitment that they won't replace that loss of proposed tax relief with increased spending? Would you agree that those are the -- that those who are making this argument would have at least to answer those questions?

MR. DANIELS: Well, I'm hoping that would happen. You know, the old question, where is the beef, came to my mind this morning because sometimes in these forums, beef is all we get, people beefing about the situation we're in but not willing to step forward and present an alternative plan. And I want to say a word of appreciation for Senator Hollings as I have often felt moved to do. First of all, he has drawn our attention back again to the long term fiscal problem we have, the unfunded liabilities, the true liabilities on the books of the federal government, which are much bigger than any one-year, two- year or five-year deficit we're looking at.

And secondly, he puts squarely the question, might it be wiser to raise taxes in the situation we're in? I don't mean to put a proposal in his mouth but he at least raised the question. That's an honest question. Now the president came out in a different place. He came out that, as perhaps your question suggested, that believing that higher taxes on a weak economy might be very counter productive, might even turn us back in a negative direction in terms of economic growth. He would prefer to move in the direction of growth and stimulus but that's -- even at the cost of somewhat higher deficit temporarily. That's an honest thing we ought to be debating. But it is incumbent on those who want to throw rocks at his priorities to tell us what theirs are.

SEN. CRAPO: It just seems to me that, whether the proposal is to increase taxes or to not have a tax reduction, that those who are weighing in on any of those proposals or something in between need to be prepared to also commit if the issue is the deficit that the increased tax revenue or the savings of tax revenue lost through stopping a tax cut would be dedicated to the deficit not to increased spending.

SEN. NICKLES: Senator Crapo, thank you very much.