[Congressional Record Volume 157, Number 96 (Thursday, June 30, 2011)]
[Senate]
[Pages S4278-S4281]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                               THE BUDGET

  Mrs. SHAHEEN. Mr. President, I come to the floor this afternoon to 
lend my voice to the others who have been here--my colleagues--to talk 
about the need to come to the table and come up with an agreement 
around how we are going to deal with raising the debt limit by the 
August 2 deadline and include some sort of package to address our debt 
and our deficits.
  I listened carefully to my colleague and friend from Indiana, and I 
think we agree on a lot of what he said. I certainly agree that both 
sides of the aisle have been working hard to look at ways we can 
address this issue. I agree we need Presidential leadership to address 
this challenge we are facing. That is why I was so pleased to see the 
President come out yesterday and say, very strongly, that in order to 
address this, we are going to have to put revenues on the table, make 
sure they are in the mix, because we cannot get there without looking 
at revenues, with just looking at cuts to the budget.
  So I think there is a lot of agreement. But every negotiation I have

[[Page S4279]]

been part of means that every side has to give a little. So drawing a 
line in the sand and saying: We are not going to look at revenues at 
the same time we are looking at spending cuts is not the way for us to 
solve this challenge.
  Now, we all know that negotiations are ongoing between the President 
and leadership in both the House and the Senate. They are looking at 
all kinds of measures to reduce the deficit and raise the legal debt 
limit. There is no doubt we have to address the long-term debt and 
deficits. I repeatedly called for a bipartisan package that includes 
reforms to everything that is deficit related. So that means domestic, 
defense, and mandatory spending, as well as looking at revenues. I 
support including deficit-reduction measures in the vote to raise the 
debt limit. I believe that reducing the deficit is important to 
strengthening the long-term health of our economy.
  But that being said, failure to increase the debt limit would do 
exactly the opposite. It would devastate the economy. To be clear, 
raising the debt limit does not mean spending more. It means meeting 
our existing obligations--obligations made by both parties over many 
years. Failure to raise the debt limit means default. It means, for the 
first time in the history of the United States of America, we would not 
pay our creditors, and that disruption would cause the worldwide 
economy to have devastating consequences--consequences that would be 
incredibly expensive to American taxpayers.
  I think Warren Buffett said it very well when he said: If Congress 
did that, it would be the ``most asinine act ever.''
  Fed Chairman Ben Bernanke said it would cause severe disruptions in 
the financial markets, it would slow our economic recovery, and make 
the deficit problem worse.
  The U.S. Chamber of Commerce said it absolutely must be done, the 
debt limit must be raised.
  Economist and former Reagan adviser Larry Kudlow said default would 
be ``catastrophic.''
  All these experts have pointed out that the disruption to world 
financial markets would plunge us into another financial crisis, and 
America would lose the trust of world investors, which would result in 
higher borrowing costs for the government, and that would ultimately be 
borne by taxpayers.
  It would also mean higher interest rates for consumers, making it 
more expensive to buy a house, pay for college, or even pay your credit 
card bill.
  In a recent report, the nonpartisan Congressional Research Service 
estimated that if we do not raise the debt limit, the Federal 
Government would have to eliminate all spending on discretionary 
programs, cut nearly 70 percent of spending for programs such as Social 
Security and Medicare, or increase taxes by more than 60 percent. That 
is not just speculation. That is what will happen if we fail to raise 
the debt limit.
  We should not be playing politics with this issue. We all have a 
stake in making sure this gets done. That is why it makes no sense to 
me that the leadership on the other side of the aisle is refusing to 
entertain any discussion about eliminating any tax loopholes.
  I think it is important to highlight some of those tax loopholes, and 
there are two I want to talk about that have been mentioned on the 
floor in the last couple of days. I would think we could all agree that 
these are the kinds of tax loopholes we ought to be closing.
  First, we have a special deduction for yacht owners. If the yacht is 
big enough, like the yacht shown in this picture I have in the 
Chamber--so if it has beds and a bathroom and a kitchen--then yacht 
owners can claim it as a second home, and they can get the same 
mortgage interest deduction on their taxes that we give to middle-class 
homeowners.
  I think this is a clear abuse of the Tax Code. The mortgage deduction 
provision is meant to increase home ownership, not yacht ownership. 
There are as many as a half million yachts in the United States that 
qualify for this exemption, and the yacht industry actually includes 
this tax loophole in their marketing.
  Now, the second loophole that, again, has been mentioned before on 
the Senate floor is a tax break for racehorse owners. The current Tax 
Code allows racehorse owners to depreciate the cost of their horses at 
an accelerated rate.
  Yachts and racehorses, these are tax breaks that just do not make 
sense. We all know we are grappling with a truly historic long-term 
deficit. To continue to ignore the revenue side of that deficit is 
irresponsible. Our Tax Code is riddled with hundreds of arbitrary tax 
breaks just like the one for racehorses and the one for yachts. In 
fact, we give away more in tax breaks in a year than we take in through 
individual and corporate income taxes. These tax breaks are, too often, 
granted based on who has the most clout in Congress rather than based 
on what is best for the economy or what is fair for people in this 
country.
  So the result is that some businesses are paying nearly the full 
corporate tax rate while others are paying almost nothing. We need a 
fairer system. We need a tax system that drives innovation and keeps 
our economy competitive on the global stage.
  Do we really want to continue supporting tax breaks for yachts and 
racehorses? If we want to eliminate waste in government, isn't this 
exactly the kind of spending we should be targeting?
  Lastly, we must consider the price of refusing to deal with these tax 
breaks, of refusing to say we are going to look at these kinds of tax 
breaks because we know that meaningful deficit reform will mean 
trillions of dollars in changes. In avoiding revenues, Republicans 
have, instead, proposed steep cuts that are dangerous both to the 
health of the American people and to the strength of our economy.
  Eliminating funding for basic women's health care, ending Medicare as 
we know it, dangerous cuts to nursing home care, slashing Pell grants 
that will help train the next generation of engineers, stopping the 
development of new energy technologies, and halting efforts to retool 
the economy to compete in the 21st century--these are the alternatives 
that Republicans are proposing to save tax breaks for yachts and 
racehorses.
  We know we need to continue these kinds of basic services and 
investments in the economy. The President's bipartisan commission has 
said it, the business community has said it, and Americans know it. We 
also know that finding a compromise on the debt limit is critical if we 
want to avoid plunging our economy back into chaos. We know that many 
of these tax breaks just do not make sense.
  So I urge my colleagues, let's look at the facts. Let's work together 
for what we all know needs to happen--reduce the deficit, raise the 
debt limit, and keep America working.
  I ask unanimous consent that Senator Jack Reed from Rhode Island be 
the next speaker on our side.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Rhode Island.
  Mr. REED. I ask unanimous consent to speak as in morning business.
  The PRESIDING OFFICER. We are in morning business. The Senator is 
recognized.
  Mr. REED. Mr. President, the bills from a decade of ineffective tax 
cuts and unpaid wars and a recession fueled by lax regulation have come 
due. I did not support the policies that generated these bills, but 
pretending these bills do not have to be paid is not an option. Indeed, 
playing chicken, literally, with the full faith and credit of the U.S. 
Government is a recipe for disaster. If the U.S. defaults on its debt, 
every single expert tells us, it will have a huge and immediate impact 
on the lives of every American all across this country, from the 
poorest to the most well off. And particularly for those who are 
struggling, it will be devastating at a time when they can least afford 
it. Not only could it cause a stoppage of Social Security and veterans' 
benefits checks, but, more systemically, it would undermine our 
Nation's opportunity to build a more lasting and more prosperous 
recovery.
  We have seen some progress, but it is not enough. This step, if we 
default, would seriously undermine our ability to function as an 
economy and would seriously, perhaps decisively affect our ability to 
mount and continue to mount a reasonably recovery. We are still 
recovering from the worst depression since the 1930s. Much of it is 
based on the policies I mentioned previously: two unfunded wars, the 
expansion of an

[[Page S4280]]

entitlement program that was unpaid for, deep tax cuts that were unpaid 
for--all of it put on the tab, and the tab is coming due. But now to 
suggest that we walk away from our obligation to provide at least the 
legal means to pay our debt is irresponsible.
  My colleagues on the other side of the aisle like to talk about 
taking a scalpel to wasteful spending and about the primacy of severely 
curtailing investments in our society. They continue to talk about an 
economic philosophy that I think has been disproven by the last several 
years, particularly from 2000, when President Bush and the Republican 
Congress inherited a projected multitrillion-dollar surplus and turned 
it into a huge deficit under the premise that these types of cuts in 
taxes, these types of policies would stimulate jobs.
  In fact, there has been talk that we are now focusing on cutting 
spending on Medicare and Medicaid, which is so central to all 
Americans. It is difficult also to imagine that they are asking for 
these cuts at a time when so many families throughout this country are 
struggling--struggling to stay in their homes, struggling simply to pay 
their bills each week, struggling to ensure their children can continue 
on with their education. All of this needs a government that supports 
these Americans, not reneging on commitments we have made, particularly 
commitments we have made financially to essentially pay for the 
obligations that have been run up, particularly beginning in 2000 and 
continuing through the Bush administration.
  We all understand we have to reach a principled compromise, but in 
that compromise, as so many of my colleagues have suggested, an 
exclusive focus on cutting expenditures will not get us there, I think, 
simply based on the arithmetic, but more than that, it will impose huge 
burdens on families who are struggling, and it will continue to reward 
the most prosperous in this Nation. I do not think that is the right 
way to do it or the fair way to do it.
  The priorities I have heard expressed on the other side are to 
continue to talk about very deep tax cuts, at a time when we have the 
lowest revenues we have had in decades, and then talk about cutting 
expenditures--education, health care, and, indeed, under their proposed 
budget, Medicare and Medicaid, which is so central to so many people.
  We know we have to focus on not just expenditures but also revenue, 
and we also have to begin the very difficult and arduous task of 
entitlement reform. We began that in the last Congress. In fact, I 
think it is ironic, as I recall the debate on the affordable care act, 
that most of the amendments my colleagues on the other side were 
offering were to send back to committee proposed changes in Medicare 
that would have reduced costs and, I would argue, would actually have 
improved quality. That was their focus. Now their focus has suddenly 
shifted to how we must cut Medicare and Medicaid.
  What we have to do is provide the same kind of reasonable, balanced 
approach that took place in the 1990s. Again, without any Republican 
support in 1993 and 1994 but with a Democratic President and Democratic 
votes, we were able to begin to balance the budget. It was a multiyear 
process. It required difficult choices. But we have to continue to 
pursue that path of a balanced, reasonable response to this problem.
  As I said before, one of the issues that is so central to this 
country is not directly related just to the issue of the deficit, it is 
also related to jobs. They are obviously closely interrelated. The more 
jobs we have, the more people who are participating in the economy, the 
better our fiscal position is in Washington.
  Sadly, what we saw, particularly at the tail end of the Bush 
administration, was a collapse in our jobs market. The U.S. economy 
lost 8.7 million private sector jobs in 2008 and 2009. We experienced--
under the Bush administration principally--25 consecutive months of job 
losses. That, again, has contributed to these huge deficits. If people 
do not work, they do not contribute to the taxes. If people do not 
work, they are likely to get unemployment benefits. People who lose 
part of their wages may qualify for other programs.
  Since the President has come to office, we have seen a rebound. We 
have not seen the full, robust recovery we need, but we have seen a 
rebound. We gained 2.081 million jobs, a little over 2 million jobs in 
2010 and 2011. We have experienced 15 consecutive months of private 
sector job creation--not enough, but we have reversed the collapse and 
25 months of job decline by creating jobs and continuing on a sustained 
basis as a result of difficult decisions that were made by President 
Obama and the Democratic Congress in the Recovery Act.
  My home State of Rhode Island has been particularly hard hit by the 
policies we saw in the first part of this decade. We have the third 
highest unemployment rate at 10.9 percent. We have seen a significant 
foreclosure problem. We have seen very crippling impacts on the working 
families of Rhode Island.
  Now we hear that the only solution we have and the best way to 
correct jobs is to continue to do what was done under the Bush 
administration: Let's just cut taxes, particularly for the wealthiest 
Americans. The evidence suggests that does not produce the kinds of 
jobs--not even the kinds of jobs we have seen in the last 15 months. 
The economy did not add a single new job during the 3 years under the 
Bush tax cuts. The economy had 132 million jobs in June 2001 when we 
passed--against my opposition--the Bush tax cuts. That was the month it 
was first signed into law. Three years later, in June 2004, there were 
just 131.4 million jobs. We actually lost some jobs.
  If you take a step back and look at the course of the entire Bush 
Presidency, from January 2001 through January 2009, there was a decline 
in the number of private sector jobs of approximately 650,000. That is 
over the course of the whole administration. In fact, the only net job 
creation that occurred was in the public sector. Nearly 1.75 million 
government jobs were created over the course of the Bush Presidency.
  Revenue as a percentage of our economy, as a percentage of GDP, was 
14.9 percent in 2010. It is the lowest level since 1950 when it dropped 
to 14.4 percent. By comparison, government revenue was averaging about 
18 percent over the previous 30 years. So you see, under the Bush 
policies, which essentially my colleagues want to emulate, 
reconstitute, no job growth and a significant decline in revenue.
  At a time when revenue as a percentage of GDP is the lowest it has 
been in 60 years, now we are talking about further tax cuts in the 
Republican budget, but we are certainly talking--my colleagues are 
talking about maintaining the current taxes. Frankly, there are so many 
tax expenditures that my colleagues talked about that are not worthy of 
retention, that are loopholes that we can, in fact, eliminate, and we 
should. Some examples: tax break for people who breed alpacas; 
deductions for film and TV production; favorable tax depreciation for 
racehorse owners, horse breeders tax credit; an exemption for wooden 
practice arrows used by children; NASCAR motorsport racing facility tax 
credit; withholding tax breaks on horse and dog track winnings. The 
list can go on and on.
  The PRESIDING OFFICER. The Senator has used his 10 minutes.
  Mr. REED. Mr. President, I ask unanimous consent for 1 additional 
minute.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. REED. I thank the Senator from Illinois for his deference.
  We understand we have to make tough choices. They have to include 
expenditure cuts. We have already started with the continuing 
resolution of the last year where we reduced spending significantly. 
But we have to have revenue on the table. As Federal Reserve Chairman 
Bernanke said:

       [ . . . ] a sharp fiscal consolidation focused on the very 
     near term could be self-defeating if it were to undercut the 
     still-fragile economy.

  We need to create jobs. We need to balance deficit reduction with job 
creation. We need to put everything on the table, and we need to 
recognize that the consequences of default on our debt will be 
staggering, felt by every American. One figure that continues to be 
impressed upon me is the fact that for every 1 percent increase in the 
interest rate over the 10-year period, we increase our deficit by over 
$1 trillion.

[[Page S4281]]

I think the first response to a default would be a rise in the interest 
rates we have to pay for our debt.
  I would urge progress on the efforts to have a comprehensive 
solution.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Illinois is recognized.
  Mr. KIRK. Mr. President, I ask unanimous consent to speak as in 
morning business.
  The PRESIDING OFFICER. The Senate is in morning business. The Senator 
is recognized.

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