Johanns Responds To Calls For New PAYGO Rules

Senator Mike Johanns responded today in a speech on the Senate floor to President Obama's call for fiscal restraint in the form of Paygo. Johanns certainly agrees we must pay for what we spend, but points out that new Paygo rules will not cut our deficit or our debt. He spoke in defense of middle class families and the massive tax increases they will be forced to pay if the out-of-control federal borrowing and spending is not brought under control. Following are Senator Johanns' remarks as prepared for delivery:


Senator Mike Johanns Remarks On Paygo and Middle Class Families (As Prepared for Delivery):


"I rise to speak about the President's announcement a few hours ago regarding PAYGO. Today, the President said, "Paying for what you spend is basic common sense. Perhaps that's why, here in Washington, it has been so elusive." I could not agree more.


"But I must ask -- where was this basic common sense when he proposed to add $10 trillion to the national debt in his Fiscal Year 2010 budget submission? Where was this basic common sense when he signed a bill earlier this year that adds $1 trillion to the debt in this year alone? Where was this new-found fiscal discipline when he proposed a massive universal health care proposal with just a "down payment" of approximately $650 billion?


"The President's announcement undoubtedly was meant to quell rising fears about the amount of spending and borrowing that his Administration has undertaken. But do the President's words today in any way address the mountain of debt and increased taxes he proposed and supported just a few weeks ago within the budget? The answer is no.


"Today's announcement does absolutely nothing to decrease the crushing debt we have accumulated. In fact this President has significantly added to our debt, causing it to rise to an unprecedented level. Let me repeat that. The President's announcement does absolutely nothing to address our record spending and borrowing. This is like maxing out the credit card and then promising not to use it any more but offering absolutely no plan to pay-off the balance.


"The President rightly pointed out today, "The debate of the day drowns out those who speak of what we may face tomorrow." So, let's look at what we face tomorrow......because of the unpaid credit card balance.


"It is important to dissect the rhetoric and speak to Americans who have been promised something that cannot be delivered. Remember that those in the so-called middle class have been told they will be shielded from tax increases. They are about to have the rug pulled out from under them by the President's explosive growth in spending and borrowing.

"If Congress continues to follow President Obama's unlimited spending spree and tries to balance the budget at the same time, the middle class is going to get hammered with increased taxes. This is the Elephant in the room that no one in the Obama Administration wants to discuss for fear of the actual consequences. But the American people deserve an open discussion about the real life consequences of big government and the runaway freight train of spending and borrowing.

"Supporters of the current budget claim that only individuals earning more than $200,000 will see their taxes go up and that there will be no middle class tax increase. Yet, such a tax on higher income earners still results in an average annual deficit hovering around one trillion dollars per year for the next ten years.


"Our national revenue simply cannot keep up with the bloated spending in the budget, resulting in a shortfall. To illustrate, this is equivalent to a Lincoln, Nebraska high school teacher earning $33,000 per year, but spending $58,000 year after year after year.

"So is the Obama Administration going to continue this spending increase with only the revenue from the so-called rich? How can they continue running annual deficits with no end in sight? They can't. Inevitably, the spending spree and exploding deficits will land squarely on the middle class in the form of higher taxes.


"The reality is that the Obama Administration can't continue the unprecedented level of spending while holding harmless the middle class. If you don't believe me, listen to leading economists.

"Martin Sullivan, a former economic aide to President Reagan who backed President Obama last fall, said, quote, 'You just simply can't tax the rich enough to make this all up.' He goes on to say, 'Just for getting the budget to a sustainable level, there needs to be a broad-based tax increase.'

"Leonard Burman, director of the liberal Tax Policy Center, said, 'there's no way we're going to be able to pay for government 10, 20 years from now without coming up with a new revenue source.'

"Finally, economist Paul Krugman, a New York Times columnist, wrote, and again I'm quoting, 'I, at least, find it hard to see how the federal government can meet its long-term obligations without some tax increases on the middle class.'

"All of these experts echo the point I am making: You can't tax the rich enough to pay for all of the spending. Inevitably the middle class will fall victim to massive taxation.


"I'll put this into more tangible terms by examining how much the tax rate would need to rise to make up for only this year's projected budget deficit. The deficit - for this year alone - is $1.8 trillion. This doesn't even take into consideration the more than $12 trillion dollar public debt we currently owe.

"Here is what would happen to your tax rate. The rates for the top four tax brackets would skyrocket from the current rates of 35 percent, 33 percent, 28 percent, and 25 percent to an alarming 90 percent across the board! Just imagine, people would have to work until Thanksgiving just to pay their taxes!

"Some may say that it is fine to tax the rich, because they can 'afford' to pay more in taxes. Yet, those making up the third and fourth brackets from the top can hardly be categorized as rich.

"Let's look at who actually falls into these middle income brackets. Currently, for tax year 2008, people who fall under the 25 percent bracket earn roughly between $32,000 and $78,000. Does anyone really believe that someone making $32,000 dollars is rich? The average salary in Nebraska is $35,000 dollars, I don't know how anyone could even suggest that only wealthy people fall within these tax brackets. The average Nebraskan might have something to say about whether they are wealthy.

"Let's look at the next bracket, those taxed at 28 percent. The income levels for this bracket are roughly between $78,000 and $164,000 dollars for singles. For married couples, it is $131,000 to $200,000. This means that a landscape architect in Nebraska making $75,000 a year married to an emergency room nurse making $59,000 a year would fall into a 90 percent tax rate. If you asked this couple, I am quite confident they would not describe themselves as wealthy.

"Taxing the middle class to the tune of 90 percent would have a disastrous effect on our economy. There is some notion in America that we, the people, should be the masters of our own economic success. If you tax someone at a 90 percent rate, you take away the economic incentive to be innovative and to strive for greater success. Eventually you end up with slim to no productivity or competitiveness.


"Yet, the Obama Administration keeps spending like it is monopoly money. Their spending binge has put us on an unsustainable course. Complying with PAYGO alone won't even come close to fixing it.


"Maybe Congress would benefit from being coached by the same credit card counselors who help Americans when they are drowning in debt. I'll bet those counselors would have some stern words for the United States Congress and the President.


"My point is simple: This is not the right direction for our country. We must start to make spending decisions today that paint a realistic and candid picture of the impact on the middle class, and if it is the purpose of our nation to hold them harmless we must cut spending and smart size our government. Working families across our nation and in my state deserve an honest debate. It is time for Washington to take responsibility - the people in my home state demand it.


"I often say that Nebraskans have great wisdom to convey. I couldn't agree more with a gentleman from North Platte who said this in a letter: 'It's important to remember that while government consumes wealth, transfers wealth and sets the ground rules for the generation of wealth, it is the private individuals that create it.'

"As a final note, the President today rightly acknowledged, 'The reckless fiscal policies of the past have left us in a very deep hole. Digging our way out will take time, and patience, and tough choices.' Again, I could not agree more. However, instituting pay-go does nothing to cut the deficit or the debt, it simply attempts to hold the line which the President's budget fails to do. It is far from revolutionary.


"So, while the President is saying when you find yourself in a massive hole, stop digging. The more appropriate question might be - how are we going to start to fill this gaping hole? The country needs leadership, not the empty rhetoric we heard today. The President's speech today sought to subdue the fears of many regarding our country's exploding deficits. Yet people should not be fooled into thinking that PAYGO is the Holy Grail for solving our spending and borrowing woes.


"While PAYGO is a useful tool, when you look at the hard facts, you realize that President Obama's speech today is simply too little, too late. The horse is already out of the barn, and the President is just thinking about closing the barn door.


"Thank you, Mr. President."