Rand Paul: Compromise on Spending, Not Taxes

Senator-elect Rand Paul, R-Ky., on "Face the Nation," Sunday, Nov. 14, 2010.
Chris Usher/CBS
Newly-elected Tea Party Senator Rand Paul of Kentucky said he will not compromise with the Democrats on the issue of tax cuts, but that he will negotiate efforts to reduce federal spending.

"Really the compromise is where you find the reductions in spending. I don't think the compromise is in raising taxes," Paul said on CBS' "Face the Nation" Sunday.

This signals Paul's hardline stance on the issue, although as Senator-elect he will not arrive in Congress in time for the lame duck session that will convene Monday, when the House and Senate will vote on whether to extend the Bush tax cuts, which are set to expire by the end of the year. Paul will take office on January 3.

If he had a vote, Paul made it clear that he will not be for making a compromise, although both Democrats and Republicans have been working to come up with one.

President Barack Obama told "60 Minutes" correspondent Steve Kroft last week that there is "a basis for a conversation" over extending the Bush tax cuts.

"Hopefully we can agree on a set of facts that leads to a compromise," Mr. Obama told Kroft.

"I do sense some flexibility on the President's part, and we're happy to talk to him about it," Senate Minority Leader Mitch McConnell, R-Ky., said on "Face the Nation" last week, and he signaled a willingness to talk.

But Paul has been steadfast in his insistence that the Bush tax cuts should be extended permanently, including for the highest-income earners.

Sen. Chuck Schumer, D-N.Y., who also appeared on the program, said there is a compromise in the making.

Democrats originally called for extending the Bush tax cuts to people who make below $250,000 a year. Republicans want an extension for everyone, including highest-income earners. Schumer proposes to raise the cap from $250,000 to one million dollars.

"Everyone below a million dollars will get a tax cut, but the millionaires and billionaires won't. I think they shouldn't get it for three reasons. They're the only group whose income has substantially gone up in the last decade. Middle class incomes have declined. Second, they're not likely to spend it. They have plenty of money anyway. It won't boost the economy. And third, we have a big deficit problem. We have a great jobs problem. Better to put the money into deficit reduction, creating jobs, than give it to the millionaires and billionaires.

"I think that's a good compromise," Schumer said.

"I heard Sen. McConnell talking about small business [last week on Face the Nation]. Under his plan, people like Warren Buffett, Bill Gates, Rex Tillerson, the head of Exxon Mobil, would get the tax break. They are not small businesses. And the plan I've proposed would encompass virtually all small businesses."

When asked by host Bob Scheiffer about specific revenue-raising options suggested by last week's report by the president's National Commission on Fiscal Responsibility and Reform, such as a hike in the gasoline tax, Paul said, "I don't think I want to raise taxes right now."

"I think the best thing is to make the tax cuts permanent. And the reason is people are talking as if this is something new. Businesses have predicated and made their business plans based on these tax cuts now for five, six, seven, eight years. And so if you abruptly change that, you're changing the business model."

But when asked if he could support a temporary extension, Paul replied, "If that's all we can get, that's better than nothing."

When President George W. Bush signed the 2001 law to institute new tax rates, it had a sunset clause to revert to 2001 rates at the end of 2010.

Paul doesn't want to go back. "The way I see it, is that you want the private sector to have more money," he said. "I want to expand the private sector because we have a serious recession. So I want to leave more money in the private sector. I want to shrink the ineffective sector of the economy, which is the government."

[White House senior adviser David Axelrod said Sunday that the President objects to "permanent" tax cuts for the wealthy, but is silent on the possibility of extending current tax rates for the short term.]

The Tea Party senator wants instead to focus on reducing spending because he sees the federal government as too big and too ineffective.

"[The government] now consume at the federal level 25 percent of the gross domestic product. Historically we were at 20 percent. So we've taken 5 percent away from the private sector," Paul said.

[According to the Bureau of Economic Analysis, the percentage of GDP for the 3rd quarter of 2010 attributed to government consumption expenditures and gross investment was 20.5%, and has been in the range of 20.3-20.8% since the 3rd quarter of 2008.]

The leaders of President Obama's commission to reduce the federal deficit released preliminary recommendations Wednesday, calling for $200-billion cuts in discretionary federal spending and raising taxes by about $100 billion between now and 2015. Co-chairmen Erskine Bowles, President Bill Clinton's former chief of staff, and former Sen. Alan Simpson, R-Wy., also said spending should eventually be brought down to 21 percent of the gross domestic product. But the recommendations have been met with responses ranging from "tepid" to "unacceptable," goading both Democrats and Republicans.

When asked if he could support raising Social Security taxes for higher-wage earners, Paul said he preferred instituting means testing for higher-income recipients of Social Security and Medicare benefits. He said instead of sending a government check to someone who makes $200,000 a year in retirement income, don't tax them.

"Let's just not send the money to them. You don't want to tax them though, because they are creating jobs. You don't want to take more money out of the private sector."

Paul also said he wants to cut the federal work force by 10 percent.

"The federal employees unions are pretty strong, but you have to do it," Paul said. "I think you should shrink the federal work force and make their pay more comparable. Right now the total compensation for government workers versus private workers is almost two to one."

[Paul's claim that federal workers earn twice as much as private workers comes from an August USA Today article that cited Bureau of Economic Analysis data. But the Bureau notes that comparing compensation of all federal and private workers does not lead to an accurate account, since skill and education levels of federal workers tend to be higher. The BEA lists a number of factors that explain the disparity, and a Politifact article aimed to analyze USA Today's claims.]