Mr. Chairman: History walks with us today as we begin this work. History offers us not a single example of a nation that has ever spent, borrowed and taxed its way to prosperity, but it offers us many, many examples of nations that have spent, borrowed and taxed their way to economic ruin and bankruptcy. And history is screaming this warning at us: nations that bankrupt themselves aren’t around very long, because before we can provide for the common defense and promote the general welfare, we have to be able to pay for it – and the ability of our nation to do so is now in grave danger.
Throughout these hearings, economists from every part of the spectrum have warned us that if we have just a few precious years left to avoid a sovereign debt crisis and potentially the financial collapse of the United States Government.
Fortunately, history also offers us lessons of what to do and what not to do.
We know what not to do. Herbert Hoover responded to the recession of 1929 by increasing federal spending by a staggering 60 percent in just four years. He began by imposing the Smoot-Hawley Tariff Act – a steep tax on some 20,000 imported products – and ended by boosting the Federal Income Tax from 23 to 65 percent. Franklin Roosevelt amplified and expanded these policies and in 1939, the unemployment rate was just as high as when he started. We had lost an entire decade.
In 1945, Harry Truman abolished the excess profits tax. He slashed federal income taxes. In 1946, Truman cut the federal budget from $85 billion down to $30 billion in a single year. He fired ten million federal employees. (It was called war demobilization). The Keynesians at the time predicted 25 percent unemployment and a renewed depression. Instead, his policies produced the post-war economic boom.
We have more recent examples. During his administration, Bill Clinton reduced federal spending by a miraculous three percent of GDP. He dared to touch the third rail of entitlement spending and produced the most important and fundamental reform of the welfare state in our century. He signed what amounted to the biggest capital gains tax cut in history on home appreciation. He produced the only four budget surpluses in the last 40 years and a period of pronounced economic prosperity.
True, George W. Bush reduced taxes but at the same time he recklessly increased federal spending – boosting it by 2.5 percent of GDP. He re-introduced the discredited folly of stimulus spending. He approved the biggest expansion of entitlement spending since the Great Society. He produced massive budget deficits. If entitlement and stimulus programs, crushing deficits and massive spending increases were the road to prosperity, the Bush Administration should have produced a new Golden Age for the economy.
Let’s put partisanship aside today and concentrate on policy. In the mid-1990’s, a Republican Congress and a Democratic President, following precisely the policies outlined in the measure before us today – balanced the budget, reformed entitlement spending, placed us on a path to pay off the entire national debt and produced a period of economic expansion and prosperity.
This budget turns us away from policies that we KNOW do not work toward policies that we KNOW do work. It brings federal spending back under control, it puts Medicare and Medicaid on a sound financial foundation, it produces a million new private sector jobs next year through economic expansion and places our nation on a path so that when my children retire, the retirement systems they’ll have paid into all their lives will be safe and secure and their nation will be debt free and prosperous.