I think all Americans owe a huge "thank you" to all of the House
Republicans and the 11 courageous Democrats who cast their votes
for freedom and opposed the stimulus bill last night.
I'm here to discuss the very real problems facing our economy
and how we can secure prosperity for years to come. Americans are
very concerned about the direction of our country. I've never seen
people more anxious. They are worried about the economy, but even
more worried about the reckless spending and government intrusion
into our culture and free markets.
Our economy is in trouble. The unemployment rate is now over 7
percent and climbing. Stock markets have plunged, jeopardizing the
retirement income of seniors. Nearly a million homes were
repossessed last year. And in the last week thousands of
Americans have lost their jobs at some of our nation's most
recognized companies, including Home Depot, Microsoft, and
In the midst of these difficult and uncertain times, Americans
understandably voted for change. Frustrated with runaway
spending, Wall Street bailouts, and soaring energy prices, they
voted for Barack Obama, a candidate who promised to lower taxes,
cut spending, increase domestic energy, and create millions of
I like President Obama very much. We were elected to the
Senate at the same time and we've worked together on a number of
common goals. I believe he wants to do what is best for our
country. But our economy needs more than hope and empty
promises. And with his first major piece of legislation, we have
learned more about President Obama's real agenda than we did after
an entire year of debates and speeches.
The stimulus bill that is being championed by President Obama,
which was passed by Democrats in the House last night, is the worst
piece of economic legislation Congress has considered in a
hundred years. Not since the passage in 1909 of the 16th
Amendment--which cleared the way for a federal income tax--has
the United States seriously entertained a policy so comprehensively
hostile to economic freedom, or so arrogantly indifferent to
The bill, if it were a country, would have the 15th largest
economy in the world--right in between Australia and Mexico,
greater than the gross domestic products of Saudi Arabia and
Iran put together. And the American people will be forced to borrow
100 percent of the unprecedented $1.2 trillion price tag, including
interest. The stimulus bill will cost well over $1 billion for
every page it is printed on and $400,000 for every job it
hopes to create or save.
But after the accolades from the newspaper editorials have
been printed and politicians finish slapping themselves on the
back for "doing something," there will be little to show for all
this new spending. That's because this bill is based on hope, not
reality. Democrats have spared no expense to show how much they
care, but in doing so they have sacrificed common sense.
Proponents argue that we are facing a once-in-a-lifetime
economic crisis and that only an immediate and overwhelming
stimulus can ignite the economy, create jobs, and spur growth. That
very well may be true, but the spending bill passed yesterday in
the House is just that: a spending bill, not an economic stimulus
The Democrat bill takes money--actually, it borrows
money--and decides where it should go. It does virtually nothing to
stimulate the economy while it wastes billions of taxpayer dollars.
It's a hodge-podge of long-supported pet projects that the normal
budget process would have thrown out. Using the troubled economy as
their motive, Democrats have opened the floodgates for all
sorts of outrageous wasteful spending. Here are just a few examples
from the Senate's bill, which we will debate next week:
- $400 million for researching sexually transmitted
- $200 million for bike and pedestrian trails and off-road
- $200 million to force the military to buy environmentally
friendly electric cars,
- $34 million to renovate the Department of Commerce
- $75 million for a program to end smoking, which if successful
will bankrupt the children's health program Democrats are about to
And those are just some of the ridiculous things they have
written into the bill. With over 600 pages of bill text and
committee reports that were just released to the Senate yesterday,
we have just begun to uncover the waste.
Of the $825 billion in the bill that is being sold as an
infrastructure investment, only $30 billion will actually go to
build highways, about $40 billion for upgrades to our
telecommunications and electricity infrastructure, and about $20
billion in business tax cuts. These are the only three components
of the bill that might arguably stimulate the economy and
create jobs, if only temporarily.
Altogether, only 11 percent of the so-called American Recovery
and Reinvestment Act of 2009 will have anything to do with either
recovery or reinvestment.
And rest assured, unlike the oceans at President Obama's
command, the elevated spending levels in this bill will never
The tax side of the bill is little better. Think of it this way:
If nearly every Democrat in Congress supports a tax cut, it's not
really a tax cut. And, indeed, the text of the Democrats' plan
reveals $212 billion of smoke-and-mirrors gimmicks: temporary cuts
and rebates exactly like those that failed to stimulate the economy
last year, and eco-shakedown tax credits.
As these facts become known and Republicans begin to question
the wisdom of the plan, the American people are being given their
first glimpse behind the curtain of our new, post-partisan
Any doubters of the bare-knuckled partisanship at the heart of
the Democrats' trillion-dollar catastrophe would do well to
ask a simple question: Cui bono? Who benefits from this
Who indeed? Alternative energy companies, public employee
unions, teachers unions, university faculty and
administrators, welfare recipients, ACORN-style "community
organizers," politicians who spend the money, federal
bureaucrats who allocate it, and the lawyers and
lobbyists who will influence every dime behind the scenes. In other
words, this bill is a massive transfer of wealth not from the rich
to the poor, but from middle-class families and small businesses to
favored Democratic constituencies below and above them
on the socio-economic ladder.
This bill is not a stimulus, ladies and gentlemen; it is a
mugging. It is a fraud. Conservatives who fear proponents of this
bill want to inch our economy closer to European-style socialism
are kidding themselves. The proponents of this bill want to strap a
big rocket on the back of our economy and launch it all the way to
This massive spending bill is fatally flawed. It will not rescue
our economy; it will strangle it. That is why this bill must be
stopped dead in its tracks. It cannot be fixed in the Senate by
adding a few tax cuts or taking away a little spending. It must be
Fortunately, there is another way. A better way. A way that will
actually stimulate the economy, spur investment, and create jobs. A
way that will permanently keep billions of
dollars--immediately--in the private sector: in the hands of
Americans who buy goods, provide services, start businesses, and
Call it "The American Option." It is not innovative or
particularly clever. In fact, it's only 11 pages. But it will work.
And it is based on proven American principles of freedom and the
opportunity to succeed. The plan--developed by scholars J. D.
Foster and William Beach here at The Heritage Foundation--is
the best anyone has proposed since the recession first took hold. I
have adopted the plan and will offer it on the Senate floor next
week as a substitute.
The idea is simple: first, make the temporary tax cuts of 2001
and 2003--now set to expire in 2011--permanent. Short-term
tax relief, of the sort envisioned by the Democrats' plan does not
stimulate economic growth.
It's the difference between a $1,000 gift one month, which you
might put away or use to pay off some credit card debt, and a
$1,000-a-month raise, which might get you thinking about buying a
house or a new car or taking a summer vacation or starting a new
To encourage people to take risks and create new jobs, we must
make tax relief for families and small businesses permanent.
Recessions are caused by uncertainty that keeps investors on the
sidelines. By making low taxes permanent, plans and decisions can
be made with an eye toward the future.
With the 2011 tax-bomb defused, our plan will cut income tax
rates across the board compared to current law. The top marginal
rate--the one paid by most of the small businesses that create new
jobs-- will fall from 35 percent to 25 percent. It simplifies the
code to include only two other brackets, 15 and 10 percent.
These marginal rate reductions would be permanent and give
the private sector maximum predictability as it decides how to
best spend its recovered income. This is a matter of fairness. No
American family should be forced to pay the federal government
more than 25 percent of the fruits of their hard labor.
Just as we cut taxes for families and small businesses, we
need to cut them for corporations as well, from 35 percent to 25
percent. And we shouldn't be afraid to say so. Our corporate tax
rate is one of the highest in the world, driving investment
and jobs overseas. Lowering this key rate will unlock trillions of
dollars to be invested in America instead of abroad.
And rather than giving large companies loopholes and
targeted tax benefits--which only encourage them to spend money on
the lobbyists who secure such goodies--Congress should get out of
the business of picking winners and losers in the market and simply
cut everyone's taxes and let the best company win. My plan will
make businesses compete for consumers, not Congressmen.
To further simplify and improve the code, our plan would
- permanently repeal the alternative minimum tax once and
- permanently maintain the capital gains and
dividends taxes at 15 percent;
- permanently kill the Death Tax for estates under $5
million, and cut the tax rate to 15 percent for those above;
- permanently extend the $1,000-per-child tax credit;
- permanently repeal the marriage tax penalty;
- permanently limit itemized deductions to home mortgage
interest and charitable contributions.
The Heritage Center for Data Analysis widely respected economic
forecasting model projects this plan would create nearly 500,000
jobs this year, 1.3 million next year, 7.5 million by 2013, and a
total of nearly 18 million jobs over the next decade.
The Democrats are forced to rely on hope to save or create just
3 million jobs as a result of their plan. When pressed, they refuse
to stand behind these numbers. But with our plan--the American
Option--long-term, broad-based tax cuts will spur the American
economy to create 7.5 million jobs in five years and nearly 18
million jobs in just ten years. That is an average of over 2
million new jobs a year.
Instead of taking a trillion dollars out of the economy so
politicians can spread it around to special interests, the
American Option will keep a trillion more dollars in the hands
of American workers and businesses. Instead of growing government,
where waste and corruption run rampant, we grow the private sector,
where innovation flourishes. Instead of giving the power and
control of our economy to politicians and bureaucrats, we give
Americans and small businesses the freedom to spend and invest
their own money.
The evidence in support of this legislation is not theoretical
but historical, unlike the Keynesian arguments in favor of the
Democrats' debt plan. John F. Kennedy's 1964 tax reductions led to
9 million new private sector jobs in five years. Ronald
Reagan's 1981 tax cuts led to 7 million in the same time frame. And
five years on, the 2001 and 2003 tax cuts have led to the creation
of 4 million and 6 million jobs, respectively.
Every time the United States has cut marginal tax rates,
millions of jobs have been created--jobs that lifted the unemployed
into the workforce, the working poor into the middle class,
and the middle class into long-term economic security.
Similar stories can be told of Great Britain rescued by
Margaret Thatcher in the 1980s and Israel's economic reforms under
Finance Minister Benjamin Netanyahu.
President Obama's own chief economist, Christina Romer, has
shown that tax cuts do truly stimulate economic activity, to
the tune of $3 of increased output for every dollar of tax
On the other hand, the world's great experiments in spending
one's way out of a recession have three textbook examples. The
first is Franklin Roosevelt's response to the Great Depression. The
New Deal began in 1933 with unemployment around 25 percent and
effectively ended with the establishment of FDR's "war economy" in
1940, with unemployment still hovering around 20 percent.
The second example is from the 1970s, when huge Keynesian
deficits in the United States neither spurred economic growth nor
The third example is Japan's so-called Lost Decade, in which the
Japanese government tried in vain for ten years to spend its way
out of a national real estate and investment market collapse.
Every discredited idea from these three monuments to
economic mismanagement can be found in the fine print of the
Democrats' trillion-dollar socialist experiment--massive public
spending, skyrocketing deficits, inevitable tax increases, and
the disastrous, unintended consequences of hurried and arbitrary
meddling in the economy.
That leads me to one final and overarching point, a point the
mainstream media refuses to understand and elite liberal
institutions refuse to acknowledge. It is the point conservatives
must make if we ever hope to rescue our economy from this bill and
regain our national majority.
That point is very simple, and we must repeat it every day on
the floor of the Senate, from the well of the House, around
household dinner tables and office water coolers. Any time a
pundit, a politician, or anyone else says that this recession
is the fault of the free market, that President Obama has inherited
the problems of a conservative ideology, conservatives of every
stripe can answer with force and facts:
Conservatism has nothing to apologize for.
It was not conservatism that foisted Fannie Mae and Freddie Mac
onto the national credit market. It was not conservatism that shook
down the nation's banking system with the Community Reinvestment
Act. It was not conservatism that asked for, lied about, and then
wasted $350 billion for the Troubled Asset Relief Program. Nor
did conservatism sign on to the second tranche of the TARP funds
now in the hands of our notoriously irresponsible new Treasury
Secretary. It was not conservatism that used taxpayer funds to bail
out the perpetrators of the Wall Street meltdown. It wasn't
conservatism that led our financial industry to make these
reckless loans, and it certainly wasn't conservatism that made
that industry ask for the taxpayers to foot the bill for their
idiocy. It wasn't conservatism that bailed out an auto industry
bankrupted by its inability to manage costs and strangled by the
barnacles of unionism.
Every problem now plaguing our economy can be directly traced to
some government policy that was passed over the vehement objections
and prescient warnings of principled conservatives. The same
scenario is playing out with the Obama spending bill, but the
result is not pre-ordained.
This is not a moment for Republicans to rally simply in the
interests of party unity or to give the Democrats a run for their
money. This is not a time to merely fight the good fight. This is a
fight we can still win. The Democrat plan will not work, it will
hurt our economy, it will kill jobs, it will lengthen and deepen
the recession, and it will delay any hope of recovery.
We should all be encouraged by the movement among congressional
Republicans against this bill. But it is not enough to expose the
dangerous flaws of the Democrats' plan. That is why I am proposing
It is not simply a viable alternative, it is the American Option
to rescue our economy from an inexorable slide toward European
social-democracy. With a troubled economy, mounting national debt
and an entitlement crisis ready to explode, conservatives must
offer bold and proven solutions to secure America's future. We
cannot simply derail the Liberal Express, we must show our fellow
countrymen a better path. There is nothing wrong with our
economy that a free people cannot solve. All we need is the freedom
to take back from Washington control of our economic destiny.
The policy approach I have outlined can work, and if
implemented, will work. How do I know? Because liberating people to
pursue their own happiness and fortune is the only thing that
Thank you very much, and may God bless America.
The Honorable Jim DeMint (R-SC) is
chairman of the Senate Steering Committee, a caucus of Senate